International Legal Factors Affecting Savings and Credit Cooperative Societies in Kenya

Abstract

In this research paper, the researcher set out to establish the international legal factors affecting Savings and Credit Cooperative Societies (SACCOs) in Kenya. This was meant to enhance the management of SACCOs in Kenya trough the creation of an understanding of how international factors affect the happenings in Kenya, and in the SACCO sector, in particular. A questionnaire was sent to forty five Licensed SACCOs operating in Kenya, of whom thirty one responded. Descriptive analysis indicated that international legal factors were, by far, the greatest cause of changes in the regulatory regime in the Kenyan SACCO sub-sector. Among the factors cited as most affected by the regulations are capital, liquidity, governance, information technology and general infrastructural set up of the SACCOs. The Ethics commission for cooperative Societies and Public officer ethics (Amendments) Regulations, 2010 were not perceived as having been influenced by international legal aspects nor were they seen as a major challenge to SACCO operations. The negative effects of the Changes on SACCOs include increased cost of consultancy (88%), increased, loan loss provisioning (100%), increased cost of licensing (93%), increased total operating costs (91%), massive shifts in customer loyalty (79%) and reduction in dividends and honoraria payable to members. There is also a general apathy by the movement to the government for the introduction of the regulations. On the positive side, SACCOs consider the newly introduced regulatory framework as being responsible for increased operational efficiency, enhanced public confidence, and reduction in corruption in the sector. Other benefits cited included improved competitiveness in the whole financial sector as well as enhancement of standardization and benchmarking as eventual benefits. Most SACCOs consider staff training, product diversification, shares or funds mobilization, aggressive cost cutting, lobbying for changes and sustained marketing to increase membership, in that order, as necessary interventions to overcome the challenges posed by the regulations. The findings have regulatory policy implications and in particular the researcher recommends urgent need for the government to addressing the disquiet in the industry pertaining to the financing of the Sacco Societies Regulatory Authority (SASRA), the powers wielded by the Authority over deposit taking SACCOs and the prudential guidelines issued by the Authority. On the other hand, the movement needs to learn to embrace change, be more accommodative and work with the government to iron out any outstanding issues.