Kenya to Establish Dedicated Regulator for Non-Sacco Cooperatives as Sasra Faces Capacity Constraints
The Kenyan government plans to create a separate regulatory authority for non-Sacco cooperatives, with Cabinet Secretary Wycliffe Oparanya citing operational strain on the existing Sacco Societies Regulatory Authority.
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Kenya's government is moving to establish a new regulatory body specifically for non-Sacco cooperatives, marking a significant restructuring of the country's cooperative oversight framework as the existing regulator struggles with capacity limitations.
Cabinet Secretary Wycliffe Oparanya announced the initiative, stating that the Sacco Societies Regulatory Authority (Sasra) has become overwhelmed by the sheer volume of cooperatives operating across Kenya. The decision reflects the rapid expansion of the cooperative movement beyond traditional savings and credit cooperatives, encompassing agricultural, transport, housing, and consumer cooperatives that now require specialized regulatory attention.
Kenya's cooperative sector represents a substantial component of the national economy, with cooperatives contributing approximately 45 percent of GDP according to historical government data. The sector employs millions of Kenyans either directly or indirectly, making effective regulation critical for financial stability and member protection. Sasra, established under the Sacco Societies Act of 2008, has primarily focused on prudential regulation of deposit-taking Saccos, which hold member deposits exceeding KES 700 billion across more than 175 licensed institutions.
The proliferation of non-Sacco cooperatives has created regulatory gaps, as these entities operate under different financial models and risk profiles compared to deposit-taking institutions. Agricultural cooperatives, which handle billions in crop payments and input financing, face distinct challenges related to seasonal cash flows and commodity price volatility. Similarly, transport and housing cooperatives require oversight mechanisms attuned to their specific operational structures and member obligations.
According to Oparanya's statement reported by Nairobi News, the current regulatory arrangement has stretched Sasra's resources thin, potentially compromising the quality of supervision for both Saccos and other cooperative types. The authority currently oversees prudential standards including capital adequacy, liquidity management, and governance frameworks for Saccos, while also maintaining registration functions for the broader cooperative universe.
The proposed restructuring would allow Sasra to concentrate exclusively on its core mandate of regulating deposit-taking Saccos, where financial stability risks are most acute. A new regulatory entity would assume responsibility for non-Sacco cooperatives, developing tailored regulatory frameworks that address sector-specific risks without imposing unnecessary prudential requirements designed for financial institutions.
Kenya's cooperative regulatory model has evolved considerably since independence, when cooperatives played a central role in agricultural marketing and rural development. The 2004 Cooperative Societies Act and subsequent 2008 Sacco-specific legislation created the current two-tier system, distinguishing between financial and non-financial cooperatives. However, the explosive growth in cooperative membership and diversification into new sectors has outpaced the regulatory architecture's capacity to adapt.
The establishment of a dedicated non-Sacco regulator aligns with international best practices in cooperative supervision, where jurisdictions with large cooperative sectors typically maintain specialized regulatory bodies. The International Cooperative Alliance guidelines emphasize the importance of proportionate regulation that recognizes cooperatives' mutual ownership structure while ensuring adequate member protection and operational transparency.
Implementation of the new regulatory framework will require legislative action, including potential amendments to existing cooperative laws or enactment of new statutes defining the mandate, powers, and funding mechanisms for the proposed authority. The transition period will necessitate careful coordination to avoid regulatory gaps or duplication of oversight functions between Sasra and the new entity.
The government has not yet disclosed a timeline for establishing the new regulator or details regarding its organizational structure, staffing requirements, or funding model. Key questions remain about whether the authority will be self-funded through regulatory fees or rely on exchequer allocations, and how it will coordinate with other sectoral regulators where cooperatives operate, such as the Capital Markets Authority or the Insurance Regulatory Authority.
For Kenya's cooperative movement, the regulatory split presents both opportunities and challenges. Enhanced specialized oversight could strengthen governance standards, improve dispute resolution mechanisms, and facilitate access to development financing for non-Sacco cooperatives. However, the sector will need to prepare for potentially increased compliance costs and reporting requirements as the new regulator establishes its operational framework and supervisory expectations.