Regulator Picks Expert To Protect Sacco Members From Market Abuse

Deposit Taking Sacco

The existing regulatory framework overseeing the operations of deposit-taking Saccos in Kenya has not been effective in its roles. Incidents of mismanagement, fraud and bad loans and have led to inflated charges, delays in reimbursement of deposits, careless lending and debt collection to members of the Sacco.

With over $5 billion members savings, Saccos Sector Regulatory Authority (SASRA), in collaboration with the National Treasury, has picked industry expert Gianfranco Vento to develop the market conduct policy as well as the legal and regulatory framework for Sacco societies in Kenya to cushion members from loses.

“Lack of adequate emphasis on market conduct regulations has amplified challenges relating to low savings and over-indebtedness, and undermines steps taken to make the DT Sacco subsector more accessible to improve financial inclusion,” said John Mwaka, SASRA chief executive.

Delay in reimbursement of member deposits upon expiry of the mandatory 60-day notice requirement, exorbitant fees and charges, and reckless lending coupled with uncouth debt collection practices are some of the prevalent malpractices in the sector and that market abuse should be dealt with according to the Chief Officer.

“Market conduct regulation is an oversight that focuses on regulated entities’ compliance with laws and regulations related to the financial service provider’s pattern of behaviour in executing its pricing and promotion strategy, and its responses to the realities of the market it serves,” he added.

Other than depositors suffering from mismanagement, other external and internal factors have greatly contributed to a decline in the performance of these credit institutions. Non-performing loans, customer deposits declined, some institutions failing to meet their financial obligations leading to the revocation of their licenses, absences of a deposit insurance facility and the Sacco’s non-participation in the national payments system are among the concerns slowing down the growth of Deposit Taking Saccos.

Unlike other deposit-taking institutions, SACCOs in as much as they collect deposits from the public, they do not hold reserve accounts at the Central Bank or operate in the automated clearing house owned by banks, explaining the less strict regulation by relevant government authorities.

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