(Naivasha) – The Kenyan government is set to revamp the cooperative movement with new legal frameworks and policies aimed at addressing governance, financial mismanagement, and operational challenges facing the sector.
Summary of Key Initiatives
| Initiative | Objective |
|---|---|
| Cooperatives Bill No. 7 of 2024 | Enhance governance and collaboration between National and County Governments |
| Dividend Policy | Promote responsible financial practices and long-term sustainability |
| Mwongozo for Cooperatives | Improve transparency, accountability, and leadership training |
| Central Liquidity Facility | Streamline financial operations and provide shared services |
| Deposit Guarantee Fund (DGF) | Safeguard members’ savings and address fund mismanagement |
Speaking at the third annual cooperative movement stakeholders’ meeting in Naivasha, Cabinet Secretary for Cooperatives, Micro, Small, and Medium Enterprises (MSMEs) Wycliffe Oparanya outlined the government’s plans to modernize and secure the sector. He emphasized that proposed legislation and policies would curb malpractices such as borrowing to pay dividends and declaring profits from losses to mislead members.
The CS stressed the importance of financial discipline, urging cooperatives to prioritize sustainability over short-term gains. A dividend policy under development aims to address malpractices and instill “good dividend manners” among cooperatives.
Kenya’s cooperative sector has seen tremendous growth, with over 14 million members and more than 500,000 jobs created. The sector mobilized KSh 682.19 billion ($4.56 billion) in deposits in 2023, a 9.95% increase from KSh 620.45 billion ($4.15 billion) the previous year. Despite these achievements, governance issues and financial mismanagement have tarnished its reputation, threatening public trust.
Oparanya expressed concern over defaults on contributions amounting to over KSh 600 million ($4.01 million), particularly by county governments and public universities. This has negatively impacted SACCOs, which are owed significant sums and rely heavily on member contributions.
Additionally, the coffee sector, burdened with debts totaling KSh 9 billion ($60.3 million), has seen only KSh 2 billion ($13.4 million) of relief from the Treasury. This has limited efforts to address challenges in the sector.
The government plans to amend the SACCO Societies Act to establish a central liquidity facility, ensuring financial efficiency and resilience. This initiative will provide SACCOs with access to shared services and better resources to support their operations.
To protect depositors, the Deposit Guarantee Fund (DGF) is being operationalized to prevent fund mismanagement. Oparanya also highlighted the importance of technology in modernizing cooperative operations, encouraging shared digital platforms to maintain competitiveness.
Kenya ranks first in Africa and seventh globally for cooperative savings, with SACCOs holding close to KSh 390 billion ($2.61 billion) in deposits. These institutions are crucial for Kenya’s Vision 2030 goals, mobilizing savings for investment needs.
Despite the sector’s achievements, challenges persist. A Ministry of Cooperative Development report revealed leadership weaknesses, political interference, and financial mismanagement among some cooperatives. The “Mwongozo for Cooperatives” framework aims to address these issues through transparency, accountability, and capacity-building programs.
A study by the International Labour Organization (ILO) noted that 6.84 million Kenyans were SACCO members in 2023, representing 30% of the adult working population. This highlights significant growth potential if governance and operational challenges are addressed.
Oparanya urged cooperative stakeholders to align their strategies with emerging policies and support legislative reforms, including the Cooperatives, Coffee, and SACCO Societies (Amendment) Bills.