The Cooperative Bill, 2024, currently under review in Parliament, is set to tackle persistent governance and management issues plaguing Kenya’s cooperative sector, according to Cabinet Secretary for Cooperatives and MSMEs Development, Wycliffe Oparanya.
The proposed bill, now in its second reading, aims to replace the Cooperative Act of 2004 and introduce stricter controls to address the mismanagement of members’ funds, a problem that has long undermined the performance of some SACCOs.
Oparanya highlighted that the bill, expected to be enacted by the end of the year, includes a key provision to impose term limits on cooperative society directors. Directors will be limited to a three-year term, renewable only once, a measure designed to prevent long-serving directors from engaging in corrupt practices that have cost SACCO members billions of shillings over the years.
Additionally, the bill proposes the creation of a loan verification committee, chaired by the Commissioner of Cooperatives, to oversee borrowing by cooperative management teams. This committee will help curb unnecessary debt accumulation, a common issue within the sector.
“Cooperatives have suffered from poor management and the misuse of members’ savings. This bill seeks to address these problems once it becomes law,” Oparanya explained.
Despite government efforts to alleviate cooperative debts through waivers amounting to billions of shillings, Oparanya noted that many cooperatives continue to struggle with rising debt, leaving numerous members in financial uncertainty. He criticized certain SACCO directors for misusing loans, which has resulted in overwhelming debt and, in some cases, the closure of societies.
Oparanya cited the coffee sector as an example, where debt levels have increased from KSh 6 billion to KSh 7 billion in just a few months, largely due to mismanagement. In the sugar sector, the government has already paid out KSh 4 billion to clear some of the mounting debts, with ongoing verification processes in place to ensure the authenticity of remaining debts before further payments are made.
Speaking at the ongoing SACCO Annual Congress in Naivasha, Oparanya praised the growth of Kenya’s cooperative movement, which currently ranks first in Africa, with a savings portfolio of KSh 1.2 trillion, over one trillion of which has been disbursed as loans to members. He underscored the importance of shifting from small-scale lending to financing manufacturing projects that could drive economic growth and create jobs, with cooperatives playing a pivotal role.
Oparanya also called for greater youth participation in cooperatives, noting that the decline in white-collar job opportunities presents an opportunity for young people to engage in the cooperative sector. Currently, most cooperative members belong to an older generation.
“This SACCO Congress brings together over 2,000 representatives from 42 countries to share experiences and strategies for promoting financial inclusion, job creation, wealth generation, and poverty reduction,” Oparanya said.
Cooperatives Principal Secretary Patrick Kilemi echoed Oparanya’s sentiments, highlighting that over 15 million Kenyans are members of cooperatives, with a significant portion involved in agriculture and another four million in the financial sector. He stressed that the Cooperative Bill would help manage the growing debts owed by cooperatives, with an audit committee already in place to review borrowing practices.
“The government has established an audit and verification committee to review the more than KSh 9 billion owed by cooperatives in the coffee sector. Necessary recommendations will be made before debt repayment begins,” Kilemi stated.
He also pointed out that many cooperatives have embraced technology to improve service delivery, enhance financial inclusion, and invest in systems to prevent cybercrime.
George Ombado, CEO of the Africa Confederation of Savings and Credit Cooperative Societies (ACCOSCA), expressed optimism that stronger regulations will help address Africa’s high youth unemployment rate, which remains in double digits compared to other regions, despite the continent’s population of over 2.3 billion people. He noted that fewer than 100 million Africans are currently members of cooperatives, highlighting the need for further growth and inclusion.