MPs back Bill forcing saccos to list loan defaulters

Lawmakers at Parliament Buildings. PHOTO | JEFF ANGOTE | NMG

By EDWIN MUTAI
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Summary

• The Sacco Societies (Amendment) Bill sailed through the second reading in Parliament on Wednesday evening.
• The proposed law was among 23 Bills that the High Court in 2020 declared unconstitutional for having been passed by the National Assembly without the input of the Senate.
• Leader of Majority Amos Kimunya told the House that the republication of the Sacco Societies (Amendment) Bill is meant to comply with the court order.

Parliament has backed a Bill that will compel savings and credit co-operative societies (saccos) to share information with credit reference bureaus (CRBs) in what promises to expose hundreds of thousands of defaulters.

The Sacco Societies (Amendment) Bill sailed through the second reading in Parliament on Wednesday evening.

The proposed law was among 23 Bills that the High Court in 2020 declared unconstitutional for having been passed by the National Assembly without the input of the Senate.

Leader of Majority Amos Kimunya told the House that the republication of the Sacco Societies (Amendment) Bill is meant to comply with the court order.

A three-judge bench on October 29, 2020, ruled that the Senate’s role in legislation is not optional and that it was illegal for the National Assembly to ‘ignore’ the Senate.

“This Bill has been republished to comply with the court order. It has gone through all processes and we should pass it before being forwarded to the Senate for input,” Mr Kimunya said.

The Bill seeks to overhaul how saccos operate.

It aligns the Sacco Societies Act 2008 with the Banking Act and the Microfinance Act 2008, bringing credit information sharing under a single regulatory framework.

At the moment, saccos are obligated to share positive credit information among themselves but only share data with CRBs under the third parties’ category.

The category, as provided under the CRB Regulations 2013, requires saccos to seek prior approval from the Central Bank of Kenya (CBK) and obtain consent from their customers before sharing the credit information.

The Bill mandates saccos to share both positive and negative information of their customers with licensed CRBs.

Saccos will be required to issue pre- and post-listing notices to their customers as required by law if the Bill is enacted into law.

“A sacco society shall, in the ordinary course of business, exchange information on performing and non-performing loans as may be specified by the authority and to such extent as may be prescribed through regulations made under the Act,” says the Bill.

The proposed changes further provide for the registration and licensing of saccos as deposit-taking savings and credit co-operatives.

It requires deposit-taking saccos to incorporate the phrase “DT-SACCO” or any of its derivatives.

The deposit-taking saccos will have 12 months to comply with the new law.

There are more than 2,286 non-deposit-taking saccos operating in Kenya, holding billions of shillings in assets.

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