Is FSD Undermining SASRA?

The recent past has witnessed alarming reports that reek of highly sinister motives concerning the country’s multi-billion shillings Cooperative Savings and Credit Movement.

Ag SASRA CEO JOHN MWAKA

The media reports based on a report reportedly released by the Financial Sector Deepening (FSD) after a study raises more questions than making an in-depth address of the pertinent issues concerning the country’s cooperative movement.

Apart from that they are simply raising alarmist concerns without the media taking its principal role by critically interrogating the issues raised by FSD, than simply copy pasting the contents of the said report and the reasons behind the FSD study of the movement before releasing the report.

The end result is the fact that the developments are squarely putting the movement’s regulatory authority SASRA and the umbrella union Kenya Union of Cooperatives (KUSCCO) on that sport whether fairly or un-fairly it is all there for all to see and judge for themselves.

According to these reports, the FSD says that some of Kenya’s savings and credit cooperative societies have higher risk of collapse; a new report warns that is despite the creation of a dedicated industry regulator and laws to professionalize the sector, Kenya’s Sacco industry remains as weak as it was 12 years ago.

This statement is blatantly misleading in the sense that every financial year over the last twelve years and more even before the establishment of SASRA, the Kenya Economic survey has been systematically documenting the growth in this and each and every other sector of the economy.

In the current Economic Survey issue the cooperative movement is documented as one of the fastest growing segments of the economy surpassed only by the higher growth rates being experienced in the Information and Communications sector of the economy – besides the growth rates indicating the strength in the movement has remained steady throughout all these years.

Apart from that the World Organization of Cooperative and Credit Unions has consistently rated the growth of the country’s cooperative movement as the number one on Africa’s continent and on the international scene 7th best beating many global industrial and economic powerful giants.

According to media reports: “The competition to increase clients and boost savings has seen many Saccos turn to existing or new members in an attempt to raise capital putting a strain on liquidity. “Whilst increasing Sacco assets ‘on paper’, this strategy has rapidly increased the demand for borrowing and led to a slackening of loan conditions and applicant vetting.”

This quote is also very misleading in the sense that the Saccos’ assets cannot be just on paper as quoted, because it will take any lay person residing in Nairobi or in the counties to point out the multi-billion shillings ultra modern buildings owned by many Saccos scattered in all corners of the country.

Giant Saccos like Afya Sacco, Ukulima, Mwalimu, Harambee, Stima own a myriad of physical assets like Afya Centre, Harambee Plaza, Mwalimu Centre with yet to be officially opened ultra modern high rise building in Upper Hill – these physical structures are there for all to see and most of them are free from loan encumbrances.

The quote continues that: “The net result is a Sacco sector less liquid and even more at risk than it was prior to regulation.” The liquidity challenges that the Saccos may be facing in the country are trigger5ed more because of the high demand for loans from them by members who shun seeking them from commercial financial institutions.

The demands were so acute before the enactment of the Banking Amendment Act 2012 that saw controls on the hyper super interests the commercial financial institutions in the country were charging on their loans compared to the rigidly controlled low rates charged by the Saccos in the country.

What is clearly emerging from these developments deliberately triggered by FSD is that there are secret sinister motives behind these misleading study findings that reeks of in fighting considering the fact that the same FSD was one of the forces to push for SASRA’s creation.

Therefore, it raises a lot of queries on why the same FSD is turning around to fight its creation in the name of a study that has many obvious flaws that the highly respected National Economic Survey will always annually document the correct data and information.

This is what FSD said in its report: “The country’s Sacco Societies Regulatory Authority (Sasra), does not have adequate capacity to regulate the sector making it difficult to monitor compliance or enforce regulations against non-compliance. Sasra continues to assess license applications and to publish names of non-compliant Saccos.”

Therefore it came as no surprise when SARSA came out with a detailed apparently factual rejoinder that was published in paid up advertisements carried in a section of the local dailies.

What is clear from the contents of the advert is that FSD’s assertions are telling us something much more than meets the eye carefully designed to achieve specific purposes to serve particular interests of which only FSD can tell and which the media practitioners must critically interrogate to get to the truth.

Indeed SASRA acting Chief Executive John Mwaka had earlier come out to respond to some of these FSD purported findings asserting on its capacity abilities and the state of the cooperative movement in Kenya, but what the media should be asking the SASRA board of directors is why they have taken too long to confirm Mwaka as the CEO?

According to Afya Sacco Chief Executive officer, Felix Ndoi, this can only come as a result of irresponsible statements issued to the press by organizations like FSD who do not have the proper background grouching on the ideas and principals by which Sacco societies operate adding that Saccos have been there for decades and have all along been on steady growth.

Ndoi says Institutions like SASRA came in to improve Co-operatives by enforcing prudential standards not because there were signs of failure but to strengthen the institutions and safeguard members’ deposits as a result of tremendous growth in deposits and the loan books running into billions of shillings.

The role of the regulator is very clearly defined in law and the authority has exercised its mandate since 2011 which has seen improved confidence by members and other stakeholders in the Saccos hence their current tempo of growth.

The Saccos have existed for decades, and witnessed steady growth; the fact that one or two Saccos may face challenges does not mean the whole industry should be through into a panic spin.

The model and its modus operandi, fostered by Co-operative ideals have been the fulcrum upon which Saccos growth is anchored. Saccos do not play “Russian roulette” with members’ savings. The regulator does onsite and offsite monitoring the way the Saccos affairs and financial transactions are carried out.

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