Savings and credit cooperatives have been barred from investing in non-core business ventures under new guidelines issued to streamline operations and reduce exposure to risky financial undertakings.
The directive aims to refocus saccos on their primary mandate of mobilizing savings and providing affordable credit to members.
The move comes amid growing concerns over the financial health and governance of some saccos that have diverted resources into sectors unrelated to their core cooperative functions.
Real estate, transport, hospitality, and speculative investments have been cited as areas where some saccos have incurred losses or exposed member funds to undue risk.
Under the new framework, all deposit-taking saccos will be required to align their investment strategies strictly with their registered objectives.
The emphasis will be on ensuring that members’ contributions are safeguarded and used to enhance financial services within the cooperative framework. Saccos will only be allowed to invest in activities directly linked to savings mobilization, member credit facilities, and liquidity management.
The regulator has also set a threshold on capital deployment in investments to limit the extent to which member funds can be committed to ventures outside traditional sacco operations.
This is part of a broader effort to maintain financial stability and restore confidence in the sacco sector, which has recently faced scrutiny over issues of fraud, mismanagement, and collapsing investment schemes.
Supervisory authorities have emphasized the importance of prudent investment practices, transparent governance, and periodic audits.
Saccos are now required to obtain regulatory approval before initiating any major investment or entering into partnerships that may have financial implications.
The ban is expected to impact saccos that had diversified aggressively into real estate projects and other speculative markets without the requisite expertise or risk mitigation strategies.
A few had gone as far as setting up subsidiaries in sectors such as insurance and ICT, raising questions about their ability to manage such ventures effectively.
The directive seeks to enhance the resilience of saccos by reducing financial strain from failed ventures and ensuring that capital is directed toward member-driven priorities.
The move is seen as part of a wider reform agenda to professionalize the sector and protect over 15 million Kenyans who are members of various cooperatives.
Written By Ian Maleve
