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Ministry warns Saccos against classification

The Ministry of Industry, Trade and Co-operatives have warned savings and credit cooperative societies (SACCOs) against the classification of members.

Commissioner for Cooperative Development Mary Mungai said the ongoing classification of members distorts the seven principles of co-operatives. “We have been discouraging the grouping of members in the Saccos as it violates the principles of the co-operativeS stipulated in Section 4 of the Co-operative Act Cap 490.

Based on the principles all members are equal and are entitled to equal rights,” she said. State Department of Co-operatives yesterday confirmed that several Saccos in the country have amended their by-laws to enable them to classify members.

This attempt to classify members could have prompted the drafting of the new proposals to amend the co-operative laws contained in the controversial Statute Law (Miscellaneous Amendments) (No.2) Bill. The Bill will go for third reading in Parliament today.

“A good number of the credit unions have revised their by-laws thus being able to categorise members. Some Saccos already have class A and B, with class B being new members who originally were not affiliated to a particular Sacco,” the department says.

Mungai said the department’s advice is for Saccos to stop the classification and instead subject all members to equal treatment. Experts in the sector say the classification created a leeway for people behind the drafting of the amendments in the Miscellaneous Bill.

“You are likely to find a Sacco with 50,000 core members who are classified as Class A and 150,000 members as class B.  The class B is liquid than the core members,” she added.

Kenya Union of Savings and Credit Co-operatives Ltd (KUSCCO) Managing director George Ototo conceded that Saccos as part of expanding their outreach has been registering members from other sectors but under the Open Common Bond (OCB) initiative.

The Saccos’ management in the last decade amended their by-laws to introduce a new initiative – an open common bond that allows members from diverse economic sectors to join the membership.

Before the introduction of OCB, Saccos had members only drawn from specific sectors of the economy, for example, tea, coffee, finance, education, health and agriculture.  But the trend changed after the introduction of open common bond a few years ago.

Co-operative leaders’ fears that passing of the Bill in its current form is likely to make Sacco’s avenues for economic crimes such as terrorism and piracy. The new changes, which are facing stiff opposition, include the introduction of a new class of super members – Social Impact Members – who will be exempted from payment in respect of membership of the society.

Other changes include the creation of a special fund, investment committee, special fund trustee and special fund investment policy.

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