SACCO Regulation in Kenya: SASRA Licensing for Deposit-Taking and Non-Deposit-Taking SACCOs

Operating a SACCO that takes deposits, or one that mobilises significant member capital without taking withdrawable deposits, requires a licence or written authorisation from the Sacco Societies Regulatory Authority (SASRA). This guide explains SASRA licensing for deposit-taking SACCOs, the separate authorisation regime for specified non-deposit-taking SACCOs, the capital and liquidity rules, and the consequences of operating without approval.

The Legal Framework and SASRA’s Role

SASRA is established under the Sacco Societies Act (Act No. 14 of 2008), which applies to every deposit-taking business and to specified non-deposit-taking business (section 3). Two sets of regulations do the detailed work: the Sacco Societies (Deposit-taking Sacco Business) Regulations (Legal Notice 95 of 2010) and the Sacco Societies (Non-Deposit-Taking Business) Regulations (Legal Notice 82 of 2020).

SASRA Licensing for Deposit-Taking SACCOs

Under section 23 of the Act, no person may carry out deposit-taking business unless it is a Sacco society registered under the Co-operative Societies Act and holds a valid licence. Contravention is an offence punishable by a fine of up to KES 500,000, imprisonment for up to three years, or both.

Regulation 4 of the Deposit-taking Regulations requires an application accompanied by:

• the completed application and “fit and proper test” forms;
• a certified copy of the registration certificate and of the by-laws, and notification of the registered head office;
• a three-year business plan and feasibility study;
• a certified extract of the general meeting resolution authorising the application;
• the name of the proposed chief executive officer;
• certified financial statements for the preceding three years, where applicable;
• evidence of adequate capital; and
• an application fee of KES 3,000.

If satisfied, SASRA issues a letter of intent requiring the SACCO to put in place institutional infrastructure (including a banking hall, strong room and safe) and an information management system before the licence is issued. A licence must be renewed by applying at least ninety days before it expires (regulation 5).

SASRA may revoke a licence in accordance with section 27 of the Act. On revocation, the SACCO’s assets, books and records are preserved by SASRA pending liquidation (regulation 6), which is why compliance failures in a deposit-taking SACCO can end the business and not only attract a penalty. Boards should treat licence conditions and renewal dates as hard deadlines and calendar them from the day the licence is issued.

Capital and Liquidity for Deposit-Taking SACCOs

Under regulation 9, a licensed SACCO must at all times maintain:

• core capital of not less than KES 10 million;
• core capital of not less than 10 percent of total assets;
• institutional capital of not less than 8 percent of total assets; and
• core capital of not less than 8 percent of total deposits.

SASRA may require higher ratios where, for example, a SACCO has capital-depleting losses, significant risk exposure or poor-quality assets (regulation 10). Under regulation 13(2), a SACCO must hold liquid assets equal to 15 percent of its savings deposits and short-term liabilities. Liquid assets include cash, balances at licensed banks, treasury bills and bonds traded in the secondary market.

Authorisation for Specified Non-Deposit-Taking SACCOs

A non-deposit-taking SACCO falls under SASRA’s regime only if it carries on “specified” business. Regulation 4 of the Non-Deposit-Taking Regulations specifies three categories:

• business in which total non-withdrawable deposits from members equal or exceed KES 100 million;
• business in which the SACCO mobilises membership and share capital through digital or other electronic payment platforms; and
• business in which it mobilises membership and share capital from persons ordinarily resident outside Kenya.

For the second and third categories, the SACCO may not mobilise members principally through digital platforms or from non-residents unless SASRA has authorised it in writing. Regulation 5 prohibits carrying on specified business without written authorisation. The application must include fit and proper forms for the board, supervisory committee, chief executive officer and senior management, the registration certificate and by-laws, a three-year business plan and feasibility study, a certified extract of the general meeting resolution, audited financial statements for the preceding three years where applicable, evidence of adequate capital and a non-refundable fee of KES 3,000. SASRA then conducts an onsite inspection of the SACCO’s infrastructure and management information system.

Ongoing Obligations for Authorised Non-Deposit-Taking SACCOs

• Capital: core capital of at least KES 5 million, at least 8 percent of total assets and at least 5 percent of non-withdrawable deposits (regulation 11).
• Renewal: by 30 November each year, an annual renewal fee of KES 30,000 for the head office and KES 10,000 for each authorised place of business, plus annual performance data (regulation 9).
• Returns: a quarterly capital adequacy return, with a financial penalty of up to KES 50,000 for failure to file (regulation 13).

Consequences of Operating Without Approval

For a SACCO that ought to have obtained authorisation but did not, regulation 8 of the Non-Deposit-Taking Regulations requires SASRA to issue an order prohibiting it from taking further non-withdrawable deposits and to notify the public and employers. A SACCO that has grown past the KES 100 million threshold, or adopted digital member mobilisation, should therefore review its position before SASRA does. Unlicensed deposit-taking also carries the criminal penalty under section 23(2) of the Act.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.