State races against time to revamp co-op sector
Wednesday, April 21st, 2021
- Though various legal interventions has resulted in substantial gains in the development of co-operative leadership and governance, incidences of poor governance are still experienced in some co-operative institutions.
- The sector is also dotted with incidences of ineffective leadership, micro-management of the societies by the boards, unethical business practices, and inadequate application of good financial management and lack of effective member participation.
- Experts say co-operatives as private enterprises offering public good require mechanisms that promote good governance for transparency and accountability to secure public confidence in their operations.
- As part of the reforms, according to Cooperative Alliance of Kenya CEO Daniel Marube, there is also need to put in place strong systems for credit appraisals factoring in risk management.
- Managements need to be keen when appraising members for loans so that they do not burden guarantors even as there are plans to introduce an insurance scheme to help in easing the burden on guarantors.
Bogged down by poor governance and old laws, the multi-billion shilling Co-operatives sector is racing against time to turn around its performance.
For over 10 years, the sector has found itself in a situation where it cannot continue using the old laws because they are not in tandem with the Constitution, while at the same time they do not have their own laws to guide the sector.
The government is yet to operationalise the National Co-operative Policy, Non-Deposit Taking Business Regulations 2020 and deepen the prudential and market conduct measures for Back Office Services Activity (BOSA) business.
These regulations cover Non-Deposit Taking Saccos with Sh100 million and above in deposits, diaspora co-operatives and Saccos operating on virtual platforms.
In an interview with Business Hub, Commissioner for Co-operatives Geoffrey Njang’ombe said the ministry is determined to fast-track changes in the movement, though it comes years after the devolved units were established.
Kenya changed its entire constitution after many years of advocacy and activism in 2010, creating one unitary state and 47 county governments.
Other changes being pursued, according to Njang’ombe are review of Co-operative Societies Act, Sacco Societies Act and restructuring of key co-operative institutions to align them with the Constitution and changing business environment.
The reforms, he said are geared towards taming poor governance in co-operative institutions to assist the sector fit in the current business realities and shield the financial institutions against unfair business practices.
“We have disturbing issues in the co-operatives in terms of leadership and governance which affects the management of the institutions, grand corruption and emergence of unethical professionals.
So our mission as a government is to align the current pieces of legislation to the constitution under the devolved system of governance,” said Njang’ombe.
The reforms, he added, will help in cushioning savings and credit co-operative societies against unfair business practices and equally make them stronger to compete in the current money market.
“Much of the function being held in the Office of the commissioner have been devolved, we want to harmonise the counties and national government and the entire movement on how we can operate mutually and seamlessly for members to benefit from devolution by defining the roles of each level”, he added.
The ministry, Njang’ombe said wants to come up with reforms which can put the financial co-operatives in a fair platform to be able to compete by introducing the central liquidity fund under a shared platform.
“This will enable Saccos to jointly share issues services like information technology and inter-lend to each,” he added.
Speaking recently during a co-operative leaders forum at Oltukai Lodge in Amboseli, Agriculture and Co-operative Cabinet Secretary Peter Munya said the ministry is at an advanced stage of establishing a Central Liquidity Facility to facilitate inter-Sacco borrowing and enable co-operatives to participate in the National Payment Systems.
“Sacco Societies Regulatory Authority (Sasra) is also in the process of operationalising the Deposit Guarantee Fund which will enhance members confidence in Saccos,” he said.