Minimum capital requirements
All Sacco societies shall comply with and maintain at all times the minimum capital requirements as may be prescribed by the Authority.
Minimum liquid assets
A Sacco society shall maintain such minimum holding of liquid assets of its members’ deposits and borrowings as may be prescribed by the Authority.
Every Sacco society shall calculate the average monthly balance of its deposits and borrowings at the close of business on such day as may be prescribed by the Authority.
A Sacco society which does not comply with the requirements of subsection (1), within such period as the Authority may prescribe, shall be liable to pay, on being called upon to do so by the Authority, a penalty interest charge not exceeding one percent of the amount of the deficiency, for every day during which the offence continues.
Prohibited business
A Sacco society shall engage only in such business as the Authority shall prescribe.
Place of business
No Sacco society may open in Kenya a branch or a new place of business or change the location of a branch or the existing place of business in Kenya without the approval of the Authority.
A person who contravenes the provisions of this section commits an offence and shall be liable, on conviction, to a fine not exceeding one hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both such fine and imprisonment.
Application for loan or credit facility
Any member of a Sacco society may apply to the Sacco society for a loan or credit facility in writing.
A person who applies for a loan or credit facility under subsection (1) shall provide evidence of his or her ability to repay the loan or credit facility.
Every Sacco society shall prescribe in writing
(a) a loans policy and procedures manual specifying the criteria and procedures applicable in the evaluation, processing, approval, documentation and release of loans or credit facilities;
(b) an asset review system, which shall accurately identify risk and assure the adequacy of the provisions for losses account;
A system of reviewing the entire asset portfolio including contingent accounts or off balance sheet items and adequate provisioning for losses at periodic monthly intervals.
Where security is required with respect to a loan, the Sacco society may accept as security against any loan, an endorsement by a guarantor or coguarantor, assignment of an interest in real or personal property, deposits or wages of the borrower or any collateral as may be prescribed by the Authority.
No Sacco society shall grant a loan or credit facility to a person who is not a member of that society.
Limits on loans and credit facility
No Sacco society shall grant a loan or credit facility to a member where the loan or credit facility, in the aggregate, exceeds such limit of the society’s core capital as the Authority may prescribe.
No Sacco society shall grant a loan or credit facility against the security of the core capital of the society.
Any person who contravenes the provisions of this section commits an offence and shall be liable, on conviction, to a fine not exceeding one hundred thousand shillings, or to imprisonment for a term not exceeding two years, or to
both such fine and imprisonment.
Insider lending
A Sacco society may make loans to its employees and members of its board of directors.
The conditions for the grant of a loan or credit facility to an employee or board member shall comply with all requirements under this Act with respect to loans to other members and shall not be made on terms more favourable than those extended to other members.
A person who has applied for a loan or credit facility to which this section applies shall not be present nor participate in the consideration of the application.
No director, officer, employee or a member of the board of a Sacco society shall act as a guarantor of any person with respect to a loan advanced or credit facility granted to a person by that society.
A Sacco society may lend to its staff and officials an amount in the aggregate not exceeding such proportion of its total assets as prescribed by the Authority.
Charge against shares and savings deposits
A Sacco society shall have a first charge against deposits and share capital and upon any dividend or interest payable to a member for any debt due to the society from the member, either as a guarantor or endorser of a loan or credit facility or for any other obligation.
A Sacco society may refuse to allow withdrawals from any deposit account operated by a member where the member is in arrears on a debt owed to the society.
Dormant accounts
The treatment of members’ dormant accounts shall be in such manner as may be prescribed by the Authority.
Investments by Sacco societies
The funds of a Sacco society may be invested in—
(a) securities, obligations or other debt instruments issued or guaranteed by the government or any agency of the government;
(b) deposits, obligations or other accounts of deposit-taking institutions under the Banking Act (Cap. 488);
(c) shares, stocks, deposits in, loans to or other obligations of any Sacco society or co-operative society.
An investment made under this section shall not in the aggregate, exceed such proportion of the total core capital and deposits of a Sacco society as the Authority may prescribe.
A Sacco society shall not purchase or acquire any land or any interest or right therein except as may be reasonably necessary for the purpose of conducting its deposit-taking business and where such investments do not exceed such proportion of the total assets of the society as the Authority may prescribe.
Financial year
The financial year of a Sacco society shall be the period of twelve months ending the thirty-first December in each year.
Form of accounts
Every Sacco society shall keep proper books of accounts.
Every Sacco society shall keep accounts and records which—
(a) show a true and fair state of affairs; and
(b) explain all transactions and financial position to enable the Authority to determine whether the Sacco society has complied with the provisions of this Act and the regulations made under this Act.
The accounts and other financial records of a Sacco society shall be denominated in Kenya shillings and shall comply with the international financial reporting standards and such other requirements as the Authority may prescribe.
The board of directors shall cause the accounts of the Sacco society to be audited within three months after the close of each financial year.
Submission of accounts to the Authority
A Sacco society shall, not later than three months after the end of each financial year, submit to the Authority, in the prescribed format—
(a) an audited balance sheet, showing its assets and liabilities;
(b) an audited profit and loss account; and
(c) a copy of the auditor’s report.
A person who contravenes the provisions of this section commits an offence.
Disclosure requirements
The disclosures in the financial statements of a Sacco society shall include
disclosures on—
(a) members, if any, who hold more than twenty percent of the share capital and deposits in the Sacco society;
(b) any advances or credit facilities exceeding such limits of its core capital as may be prescribed by the Authority and any lending to insiders.
Appointment of internal auditor
Every Sacco society shall appoint an internal auditor who shall report to the board of directors on the internal control systems and financial matters of the society.
No person shall be appointed as an internal auditor under this section unless the person holds such professional qualifications in accounting and has such experience in deposit-taking business, as may be prescribed by the Authority.
