The Cooperative Bill, 2024, currently under review in Parliament, will address longstanding governance and management challenges bedivilling the cooperative sector.
Cooperatives and MSMEs development Cabinet Secretary Wycliffe Oparanya says the proposed bill, now undergoing its second reading in Parliament, will replace the Cooperative Act of 2004 and introduce measures to curb the mismanagement of members’ funds which has for years wrecked a section of saccos.
Oparanya noted that the bill, which is expected to be enacted by the end of the year, includes a provision to introduce term limits for cooperative society directors who will only be allowed to serve for three years, renewable only once.
This move, he said is intended to tackle issues arising from long-serving directors who have been accused of misappropriating members’ funds, amounting to billions of shillings over the years.
Additionally, Oparanya said the government has established a loan verification committee chaired by the Commissioner of Cooperatives to monitor borrowing by cooperative management teams to prevent unnecessary debt accumulation.
“Cooperatives have been plagued by poor management and misuse of members’ savings, and this bill aims to address these issues once it becomes law,” said Oparanya.
The CS said despite the government’s efforts to alleviate cooperative debts through waivers totalling billions of shillings, many societies continue to struggle with rising debts that have left tens of members in limbo.
Oparanya criticised some sacco directors for misusing loans, which has left many societies facing unmanageable debt, while others have been forced to shut down, noting that the government waiver system is unstable.
For instance, he pointed out that debt in the coffee sector has increased from Sh6 billion to Sh7 billion in a matter of months, with some management teams borrowing funds for personal use.
In addition, the CS said Sh4 billion has already been paid to offset some of the runaway debts in the sugar sector even as other verification exercises by the established committee continue with its work to check their authenticity before more payments.
Speaking during the ongoing SACCO Annual Congress in Naivasha, Oparanya praised the cooperative movement’s growth in Kenya which he said ranks first in Africa with an accumulated savings portfolio of Sh1.2 trillion, of which over one trillion shillings has been issued as loans to members.
He emphasised the need to shift from small-scale lending to financing manufacturing, which will spur economic growth and create jobs, with cooperatives playing a central role.
Oparanya also called for the inclusion of more youth in cooperatives, given the decline in white-collar job opportunities with current data indicating that more members are older generation.
“This SACCO Congress brings together over 2,000 representatives from 42 countries to share experiences and strategies for enhancing financial inclusion, creating jobs, generating wealth, and eradicating poverty,” Oparanya said.
Cooperatives Principal Secretary Patrick Kilemi also addressed the congress, noting that over 15 million Kenyans have joined cooperatives, primarily in the agriculture sector, with another four million involved in the financial sector.
He added that the Cooperative Bill would help manage the increasing debts owed by cooperatives, with an audit committee already established to review borrowing practices.
“The government has set up an audit and verification committee to review the over Sh9 billion owed by cooperatives in the coffee sector and necessary recommendations will be made before we begin debt repayment,” Kilemi said.
The PS also noted that most cooperatives have embraced technology to improve service delivery and enhance financial inclusion while also investing in systems to prevent cybercrime.
George Ombado, CEO of the Africa Confederation of Savings and Credit Cooperative Societies (ACCOSCA), said that despite Africa’s population of over 2.3 billion, fewer than 100 million people are members of cooperatives.
He expressed optimism that stronger regulations will help tackle the continent’s high youth unemployment rate, which remains in the double digits compared to other regions.
