A Critical Analysis of Kenya’s Legal Framework for Deposit Taking Saccos: Towards a More Efficient Regulatory Framework for Transparency and Accountability

Abstract

Kenya’s legal framework for DT-SACCOs provides for various periodic statutory reporting obligations designed to attain accountability and transparency between the members of a DT-SACCO, the Management Committee, the Commissioner for Cooperative Development and SASRA. However, the SACCO sector is facing a crisis which has seen the collapse or financial distress of major DT-SACCOs. And what is more is that both SASRA and the Commissioner take long to detect fraudulent and wrongful dealings, even where the dealings have continued for a span of years. This study seeks to investigate whether there are legal impediments that make SASRA and the Commissioner take long to detect the fraudulent and wrongful dealings despite their extensive supervisory powers. The study utilizes a combination of qualitative and doctrinal research methodologies to answer the research questions. In addition, interviews on key informants in the SACCO regulatory framework were also utilized. The study revealed that Kenya’s legal framework has been inefficient due to pertinent legal issues occasioned by the devolution of the cooperative function, the intermittent jurisprudence emanating from SASRA’s enforcement tendencies, ineffective penalties and sanctions for non-compliance with statutory reporting obligations among others. It also revealed that Kenya has much to emulate from the UK’s and the USA’s experiences. The study found that the UK’s regime is responsive to the financial muscles of the credit unions, with the financially stronger credit unions being subjected to more stringent regulatory requirements. In addition, it has a clear apportionment of duties amongst the regulatory authorities, with no instances of duplication or overlap. Further, the regulatory authorities have a special working relationship characterized by complementarity and partnership. The USA’s regime has a dual-regulatory system in which federal credit unions are regulated by a national authority while state-chartered unions are regulated at the state level.