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New laws threaten Sh1 trillion co-op movement

The Sh1 trillion savings and credit co-operative societies (saccos) could be plunged into turbulent waters if a new Bill that seeks to amend legislation governing the sector sails through Parliament.

The amendments contained in the Statute Law (Miscellaneous Amendments) (No.2) Bill, 2018 intend to introduce a new class of members known as Social Impact Members (SIM), who would be exempted from payment to societies in respect of their membership.

The recently published Bill, now in Parliament, seeks to amend the sacco Societies’ Act 2008 and Co-operative Societies Act Cap 490. Co-operative leaders fear that the miscellaneous amendment Bill might pass without any changes, despite input from the stakeholders.

Co-operative Alliance of Kenya (CAK) chief executive officer Daniel Marube said yesterday that SIM will have more rights in the management of saccos than ordinary members who only enjoy one vote each.

Players in the sector dismissed the new Bill, saying it will create a new order in the management of the 12,000 registered saccos controlling more than Sh1 trillion in assets. Out of the 12,000, only half are in business but those audited so far are 3,600 with an asset base of Sh800 billion.

The co-operative movement which controls 35 per cent of the national savings has 14 million members and 22,000 societies and is rated position one in Africa and seventh globally.

Contacted yesterday, the office of the Commissioner for Co-operatives disowned the new changes saying they were not properly thought through. Unlike today where the Cabinet Secretary in charge of the co-operative movement is not involved in approval of the resolutions passed by members, in the current Bill the CS will approve a resolution of the annual general meeting of a co-operative society under Section 17 (2).

If assented to, the Bill will allow creation of a special fund to be managed by four and well-educated investment committee members appointed by the special impact members.

A sacco society may establish a fund to be known as the Special Fund that will tap funds from the social impact members. The fund will be managed by a four-member Investment Committee who will be appointed by the SIM. The committee will determine the amount of contributions into the Special Fund by social impact members.

“ The social impact members shall only vote on resolutions relating to the special fund, the investment committee, the special fund trustee and the matters incidental thereto. The members of the society, other than social impact members shall not be entitled to vote on matters reserved for the social impact members,” states the Bill.

Commissioner for Cooperatives Mary Mungai said the new Bill is not well-thought-out and if allowed to pass without input by the key stakeholders in the movement, “The Bill in its current nature will flout the cooperative principles and thus create parallel governance structures which every other time will carry out their roles in crisis,” said Mungai.

Once the social impact members are allowed in, Mungai said, they will literally take over from the members who have sweated for long to build and sustain Saccos. Most of the Saccos were formed according to particular sub-sectors of the economy, for example, coffee, tea, cotton, sugarcane, dairy, sand and other common interest groups. The special trustee will be the in charge of advancing loans and other monies from the sacco.

However, profits accrued from the money advanced will not be paid into the general account of the sacco but to the special fund and thus benefit the SIM only. Mungai warned the model could kill the saving culture in the country.

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