The Sacco Societies Regulatory Authority (Sasra) has revoked the licences of five credit unions, effectively barring them from taking deposits from the public. The deregistered saccos, including the giant Ufundi and Transcom.
“They had liquidity challenges and were unable to meet obligations such as paying members deposits when due,” said Sasra chief executive John Mwaka, adding that the affected saccos must revert to offering back office services only. They saccos are also reported to have corporate governance challenges that required strong action.
The list of saccos whose deposit-taking licences have been withdrawn includes Nest Sacco, Green Hills Sacco (formerly Chebosobon) and Maono Daima Sacco which have been ordered to immediately cease offering banking-like services popularly known as front office services.
Mr Mwaka directed them to terminate services such as salary processing, operating savings and current accounts, automated teller machine (ATM) services, mobile banking and money transfer services.
A total of nine saccos have had their licences withdrawn since 2014, giving Sasra a fresh impetus to the planned setting up of a centralised lending facility for credit unions, akin to commercial banks’ interbank market, to help societies manage short-term liquidity challenges.
The five deregistered saccos have a combined membership of 18,769 savers, Sh1.9 billion in assets, Sh641million in deposits and a loan book of Sh517 million.
The Kenyan sacco industry’s loan book grew nearly a fifth to hit Sh228.5 billion by December 2014. A total of 3.01 million Kenyans belong to credit unions.
Deposit-taking co-operatives held assets worth Sh301.5 billion and Sh205.9 billion customer deposits in the year under review.
The withdrawal of deposit taking licences means Ufundi, Transcom, Nest, Green Hills and Maono Daima will now be under the jurisdiction of the Commissioner for Co-operative Development.
The Sacco Societies Act bars any person from engaging in deposit-taking business without a valid licence from Sasra.
Those found culpable of running a deposit-taking sacco business without a licence from Sasra face a Sh0.5 million fine and a three-year jail term.
Sasra regulations require deposit-taking credit unions to maintain a regulatory 15 per cent liquidity ratio, and are compelled to file a liquidity statement report at the end of every month detailing the liquid assets as well as the balance of liquid liabilities.
A total of 177 deposit-taking saccos are currently licensed to operate in Kenya with 13 of them having temporary licences that are due to lapse in June, down from 181 unions last year and 215 in 2014.
Saccos are also required to maintain a core capital of not less than Sh10 million and must maintain a core capital to total assets ratio of 10 per cent, and core capital to deposit liabilities and institutional capital to total assets at eight per cent each.