November 1, 2021

REGULATION AND SUPERVISION OF SACCO SOCIETIES   Regulation and supervision of Sacco societies The Authority shall be responsible for the regulation and supervision of Sacco societies to which this Act applies. Without prejudice to the generality of subsection (1), the Authority shall— (a) prescribe prudential standards to be adhered to by Sacco societies; (b) undertake inspections or require a Sacco society to submit information and reports on its financial affairs of the deposit-taking business to enable the Authority to evaluate the society’s financial condition; (c) require or oversee Sacco societies’ workout plan to avert or alleviate financial difficulties; (d) prescribe the maximum number of years an external auditor may serve the same Sacco society; (e) exercise such incidental powers as may be necessary or requisite to enable it to effectively carry out its functions under this Act. Powers of the Authority to inspect The Authority may, at any time and from time to time, and shall, if so directed by the Minister, cause an inspection to be made by any person authorized by the Authority in writing of any Sacco society and of its books, accounts and records. The Authority shall assist any investigative authority regarding matters of suspected fraud or malpractice in Sacco societies either by identification of such matters for referral or at the request of such authority. Where an inspection is made under subsection (1), the society concerned and every officer or employee thereof shall produce and make available to the person making the inspection, all books, accounts, records and other documents of the Sacco society and such correspondence, statements and information relating to the society as the person making the inspection may require, and within such period as he may direct in writing. A person who fails to produce any books, accounts, records, documents, correspondence, statements or the information required under subsection (2), within the period specified in the relevant direction, commits an offence. The person making the inspection shall prepare and submit a report to the Authority, and the report shall state— (a) any breach or contravention of any of the provisions of this Act or any regulations made under this Act; (b) any irregularity in the manner of conduct of the inspected society; (c) any mismanagement of a Sacco society; and (d) any other matter relating to a Sacco society not consistent with sound and prudent business practice. A copy of the report of the findings of an inspection under subsection (1) shall be submitted by the Authority to the Commissioner. A report of the findings of an inspection under subsection (1) shall, in addition to any action that may be taken under the Co-operative Societies Act, 1997 (No. 12 of 1997) be presented by the Authority to the board of directors of the Sacco society. Powers of the Authority to advise and direct If, at any time, the Authority has reason to believe that— (a) the business of a Sacco society is being conducted in a manner contrary to or not in compliance with the requirements of this Act or of any regulations made thereunder or in any manner detrimental to or not in the best interest of its members or members of the public; or (b) a Sacco society, any of its officers or any other person participating in the management of the society is engaged in any practice likely to occasion a contravention of any of the provisions of this Act or any regulations made thereunder, or any other Act, the Authority may— (i) give advice and make recommendations to the Sacco society with regard to the conduct of its business generally; (ii) issue directions regarding measures to be taken to improve the management or business methods of the society or to secure or improve compliance with the requirements of this Act, any regulations made thereunder or any other written law or regulations; (iii) in any case to which paragraph (b) applies, issue directions to the Sacco society, officer or other person to cease such practice; (iv) appoint a person, suitably qualified and competent in the opinion of the Authority, to advise and assist the Sacco society generally or for the purposes of implementing any directions under subparagraphs (ii) and (iii). The advice of a person appointed under subsection 1(b)(iv) shall have the same force and effect as a direction made under subsection 1(b)(ii) and (iii) and shall be deemed to be a direction of the Authority under this section. The Authority shall, before issuing a direction under subsection (1), serve upon the Sacco society, officer or other person, a notice of such intent specifying the reasons therefor and requiring the Sacco society, officer or other persons, within such period as may be specified in the notice, to show cause why such direction should not be issued. A Sacco society which receives a direction under this section shall comply with the direction within such period as may be specified in the direction and, if so required, shall produce evidence that it has done so. The Authority may issue directions to a Sacco society generally, and where appropriate provide exceptions to those directions to be detailed at time of issuance for the better carrying out of its functions under this Act and in particular, with respect to— (a) the prudential standards to be adhered to by a Sacco society in the conduct of its business in Kenya; and (b) regulations to be adhered to by Sacco societies in order to maintain a stable and efficient deposit-taking Sacco movement and financial system. A person who fails to comply with any direction under this section commits an offence and shall, in addition to the penalty prescribed under this Act, be liable to such additional penalty as may be prescribed for each day or part thereof during which the offence continues. The Authority may impose minimum standards on significant members and officers of a Sacco society as prescribed.

GOVERNANCE OF SACCO SOCIETIES Minimum capital requirements All Sacco societies shall comply with and maintain at all times the minimum capital requirements as may be prescribed by the Authority. Minimum liquid assets A Sacco society shall maintain such minimum holding of liquid assets of its members’ deposits and borrowings as may be prescribed by the Authority. Every Sacco society shall calculate the average monthly balance of its deposits and borrowings at the close of business on such day as may be prescribed by the Authority. A Sacco society which does not comply with the requirements of subsection (1), within such period as the Authority may prescribe, shall be liable to pay, on being called upon to do so by the Authority, a penalty interest charge not exceeding one percent of the amount of the deficiency, for every day during which the offence continues. Prohibited business A Sacco society shall engage only in such business as the Authority shall prescribe. Place of business No Sacco society may open in Kenya a branch or a new place of business or change the location of a branch or the existing place of business in Kenya without the approval of the Authority. A person who contravenes the provisions of this section commits an offence and shall be liable, on conviction, to a fine not exceeding one hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both such fine and imprisonment. Application for loan or credit facility Any member of a Sacco society may apply to the Sacco society for a loan or credit facility in writing. A person who applies for a loan or credit facility under subsection (1) shall provide evidence of his or her ability to repay the loan or credit facility. Every Sacco society shall prescribe in writing (a) a loans policy and procedures manual specifying the criteria and procedures applicable in the evaluation, processing, approval, documentation and release of loans or credit facilities; (b) an asset review system, which shall accurately identify risk and assure the adequacy of the provisions for losses account; A system of reviewing the entire asset portfolio including contingent accounts or off balance sheet items and adequate provisioning for losses at periodic monthly intervals. Where security is required with respect to a loan, the Sacco society may accept as security against any loan, an endorsement by a guarantor or coguarantor, assignment of an interest in real or personal property, deposits or wages of the borrower or any collateral as may be prescribed by the Authority. No Sacco society shall grant a loan or credit facility to a person who is not a member of that society. Limits on loans and credit facility No Sacco society shall grant a loan or credit facility to a member where the loan or credit facility, in the aggregate, exceeds such limit of the society’s core capital as the Authority may prescribe. No Sacco society shall grant a loan or credit facility against the security of the core capital of the society. Any person who contravenes the provisions of this section commits an offence and shall be liable, on conviction, to a fine not exceeding one hundred thousand shillings, or to imprisonment for a term not exceeding two years, or to both such fine and imprisonment. Insider lending A Sacco society may make loans to its employees and members of its board of directors. The conditions for the grant of a loan or credit facility to an employee or board member shall comply with all requirements under this Act with respect to loans to other members and shall not be made on terms more favourable than those extended to other members. A person who has applied for a loan or credit facility to which this section applies shall not be present nor participate in the consideration of the application. No director, officer, employee or a member of the board of a Sacco society shall act as a guarantor of any person with respect to a loan advanced or credit facility granted to a person by that society. A Sacco society may lend to its staff and officials an amount in the aggregate not exceeding such proportion of its total assets as prescribed by the Authority. Charge against shares and savings deposits A Sacco society shall have a first charge against deposits and share capital and upon any dividend or interest payable to a member for any debt due to the society from the member, either as a guarantor or endorser of a loan or credit facility or for any other obligation. A Sacco society may refuse to allow withdrawals from any deposit account operated by a member where the member is in arrears on a debt owed to the society. Dormant accounts The treatment of members’ dormant accounts shall be in such manner as may be prescribed by the Authority. Investments by Sacco societies The funds of a Sacco society may be invested in— (a) securities, obligations or other debt instruments issued or guaranteed by the government or any agency of the government; (b) deposits, obligations or other accounts of deposit-taking institutions under the Banking Act (Cap. 488); (c) shares, stocks, deposits in, loans to or other obligations of any Sacco society or co-operative society. An investment made under this section shall not in the aggregate, exceed such proportion of the total core capital and deposits of a Sacco society as the Authority may prescribe. A Sacco society shall not purchase or acquire any land or any interest or right therein except as may be reasonably necessary for the purpose of conducting its deposit-taking business and where such investments do not exceed such proportion of the total assets of the society as the Authority may prescribe. Financial year The financial year of a Sacco society shall be the period of twelve months ending the thirty-first December in each year. Form of accounts Every Sacco society shall keep proper books of accounts. Every Sacco society

LICENSING OF SACCO SOCIETIES Carrying out of deposit-taking business No person shall carry out deposit-taking business within the meaning of this Act, unless such person— (a) is a Sacco society registered under the Co-operative Societies Act of 1997 (b) holds a valid licence issued under this Act. A person who contravenes the provisions of this section commits an offence and shall be liable, on conviction, to a fine not exceeding five hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both such fine and imprisonment. The Cabinet Secretary may, in consultation with the Authority, make regulations providing for the licensing and supervision of co-operative societies carrying out deposit taking business in compliance with Islamic law. Application for license A Sacco society intending to transact the deposit-taking business in Kenya shall, before commencing such business, apply in writing, to the Authority for a licence, in the prescribed form. (2) An application under subsecti(a) a copy of the certificate of registration and the by-laws of the Sacco society; (b) evidence that the Sacco society meets the minimum capital requirements prescribed in the Second Schedule; (c) information relating to the place of business, indicating that of the head office, and branches, if any; (d) the prescribed fees; (e) a report by the Sacco society, covering the following— (i) objectives of the deposit-taking Sacco society business; (ii) membership and share capital; (iii) economic and financial environment; (iv) organisational structure and management; and (v) financial and risk analysis; (f) such other requirements as the Authority may prescribe. A Sacco society may appeal to the Minister in reference to refusal to grant a licence within thirty days after receipt of notification of refusal. The Minister may reverse the decision of the Authority only if— (a) the Authority failed to follow required procedures in making its decision; (b) the Authority’s decision was contrary to the Act and the regulations; (c) there was no factual basis for the Authority’s decision; or (d) based on a review of the record the Authority committed a manifest error in its assessment of facts, or abused its discretion in taking its decision. The Authority shall, in consultation with the Minister make regulations providing for further requirements to be fulfilled before the grant of licence to a Sacco society. Issuance of licence The Authority shall consider every application made under section 24 and may, if satisfied that the applicant meets the requirements of this Act, grant a licence to the applicant upon payment of the prescribed fee. The Authority shall upon the payment by the applicant of the prescribed fee, issue a licence to a Sacco society to carry out deposit-taking Sacco society business. The licence referred to in subsection (2) shall, where the other requirements of this section are fulfilled, be issued within fourteen days from the date of payment of the prescribed fee. Every Sacco society shall be required to pay an annual licence fee of such amount and within such time as may be prescribed by the Authority. A Sacco society which fails to pay the annual fee by the date on which such payment is due shall in addition to any action by the Authority under section 27 be liable to pay such penalty as the Authority may prescribe. The Authority may grant or refuse an application made under subsection and its decision shall be final. Conditions of a license The Authority shall endorse on a licence granted under this Act such conditions as it considers necessary and may from time to time add, vary or substitute such conditions as it deems appropriate. Where it appears to the Authority that there are reasonable grounds for the revocation of a licence, but that the circumstances are such as that the revocation would not be expedient or would be unjust to the members, the Authority may restrict the licence in accordance with subsection (3). A licence may be restricted by imposing (a) a limit on the duration of the licence for a period, not exceeding one year; or (b) such additional conditions for the protection of depositors as the Authority may deem necessary. Revocation of licence The Authority may, by notice in writing to a Sacco society, revoke the licence if the Sacco society— (a) ceases to carry on deposit-taking business in Kenya or goes into liquidation or is wound up or is otherwise dissolved or deregistered under the Co-operative Societies Act, 1997 (No. 12 of 1997); (b) fails to comply with this Act, or any rules, regulations, orders or directions issued under the Act or any condition of the licence; (c) fails to pay the annual licence fee as required under section 25(3); (d) does not hold at least fifty percent of the capital requirements prescribed in section 30 and the Second Schedule; or (e) has knowingly engaged in serious criminal or fraudulent acts that are likely to cause insolvency, substantial dissipation of assets or earnings or may otherwise weaken the deposit-taking Sacco society’s condition or seriously prejudice the interests of the deposit-taking Sacco society’s members. The Authority shall, before revoking a licence, give to the Sacco society not less than fourteen days’ notice in writing of its intention, and shall consider any representations made to it in writing by the Sacco society within that period before revoking the licence. The Authority shall cause the name of every Sacco society whose licence is revoked under this section to be published forthwith in the Gazette and at least one newspaper of national circulation. Where the licence of a Sacco society is revoked or cancelled, the Sacco society shall not be entitled to any refund of the licence fee in respect of any unexpired period of the licence. An aggrieved Sacco society may appeal to the Minister in respect of a revocation of its licence within thirty days after being notified of the revocation. An appeal shall not have the effect of suspending the actions of the Authority while the appeal is being pursued. The Tribunal

SACCO SOCIETIES REGULATORY AUTHORITY Establishment of the Authority There is established an Authority to be known as the Sacco Societies Regulatory Authority. The Authority shall be a body corporate with perpetual succession and a common seal and shall be capable, in its corporate name, of— (a) suing and being sued; (b) taking, purchasing or otherwise acquiring, holding, charging, and disposing of both movable and immovable property; (c) borrowing or lending money; (d) entering into contracts; and (e) doing or performing all such other things or acts necessary for the furtherance of the provisions of this Act. Objects and functions of the Authority The objects and functions of the Authority shall be to— (a) license Sacco societies to carry out deposit-taking business in accordance with this Act; (b) regulate and supervise Sacco societies; (c) hold, manage and apply the General Fund of the Authority in accordance with the provisions of this Act; (d) levy contributions in accordance with this Act; (e) do all such other things as may be lawfully directed by the Minister and (f) perform such other functions as are conferred on it by this Act or by any other written law. Board of the Authority The oversight function and management of the Authority shall vest in a Board of the Authority which shall comprise— (a) the chairman to be appointed by the Minister from amongst the members appointed under paragraph (e); (b) the Permanent Secretary to the Treasury or his representative; (c) the Commissioner or his representative; (d) the Governor of the Central Bank or his representative; (e) four members, not being public officers, appointed by the Minister by virtue of their knowledge, and possession of a minimum of ten years experience, in co-operative practice and management, law, finance or economics; and (f) the chief executive officer appointed under section 12. A member of the Board appointed under subsection (1)(e) shall hold office for a term of three years and shall be eligible for re-appointment for one more term of up to three years. The members of the Board appointed under subsection (1)(e) shall be appointed at different times so that the respective expiry dates of their terms shall fall at different times. A person shall not be qualified for appointment as a member of the Board, if that person is— (a) a member of the National Assembly or of a local authority; (b) a director or employee of a Sacco society or of a co-operative society; (c) auditor of a Sacco society or of a co-operative society; and (d) a person who is prohibited from being a director or to take part in the management of a cooperative or financial institution by the Commissioner under the Co-operative Societies Act, 1997 (No. 12 of 1997) or by the Central Bank of Kenya respectively. A member of the Board appointed under subsection (1)(e) may be removed from office by the Minister, if that member— (a) accepts any office the holding of which, if he were not a member of the Board, would make him ineligible for appointment to the office of a member of the Board; (b) fails to discharge the functions of his office whether arising from infirmity of body or mind or any other cause; (c) conducts himself in a manner not befitting a member of the Board; and (d) becomes subject to any disqualification set out in subsection (4)(d). A member of the Board appointed under subsection (1)(e) may resign office by giving a fourteen days notice to the Minister. Powers of the Board The Board shall have all the powers necessary for the performance of its functions under this Act and, in particular, shall have the power to— (a) supervise, control and administer the assets of the Authority in such manner and for such purposes as would best promote the objects and functions for which the Authority is established; (b) open and operate bank accounts; (c) determine provisions to be made for the Authority’s capital and recurrent expenditure and for the reserves of the Authority; (d) award contracts; (e) enter into association with other bodies or organizations within or outside Kenya as the Board may consider desirable or appropriate and in furtherance of the purpose for which the Authority is established; (f) invest funds of the Authority not currently required for its purpose in the manner provided in section 19; and (g) receive grants or donations and make legitimate disbursements therefrom for the furtherance of the objects and functions for which the Authority is established. Committees and delegation of powers The Board may appoint committees from among its own members or otherwise, to carry out such general or special functions as may be specified by the Board. The Board may, by resolution, either generally or in any particular case, delegate to any committee of the Board or to any member, officer, employee, or agent of the Authority, the exercise of any of the powers or the performance of any of the functions or duties of the Authority under this Act or under any other written law. Except for purposes of the performance of his duties or the exercise of his powers under this Act, or where required under any other law to do so, any officer or any other employee or agent of the Authority shall not disclose any information which he has acquired in the course of the performance of his duties or the exercise of his powers in accordance with this Act. Any person who contravenes subsection (3) commits an offence and is liable on conviction to a fine not exceeding one hundred thousand shillings, or to imprisonment for a term not exceeding one year, or to both such fine and imprisonment.