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WOCCU helps Kenya develop first CU reg
NAIROBI, Kenya (5/26/09)--Seven months after passing its first credit union law, Kenya’s government is taking its initial steps toward creating regulations with the help of the World Council of Credit Unions (WOCCU). The Kenyan government is working to ensure it gets the rules for credit unions right the first time--after worldwide fallout against some poorly regulated financial institutions, said WOCCU. In November 2008, Kenya became the first country to develop a law that specifically regulates savings and credit cooperatives (SACCOs), as credit unions are known. A committee is working in Kenya to develop regulations, design a regulatory agency, create model bylaws and develop a deposit guarantee fund. WOCCU joined the 15-person committee two weeks ago in Nairobi to set priorities and timelines to establish the SACCO regulation. “WOCCU has a lot of experience working with SACCOs in Kenya and understands the strengths, challenges and opportunities that exist in the Kenyan SACCO sector,” said F.F. Odhiambo, cooperative development commissioner with Kenya's Ministry of Cooperative Development and Marketing. The ministry is involved with the technical development of the country's financial and non-financial cooperatives.
Kenyan savings and credit cooperatives (SACCOs) workshop participants, from left, Jesús Chavez, World Council of Credit Unions (WOCCU)-Kenya; Daniel Tallam, Central Bank; Brian Branch, WOCCU; David Ferrand, FSD Kenya; and Carilus Ademba, Kenya Unions of Savings and Credit Co-operatives, share ideas about forming a regulatory agency for SACCOs.
Brian Branch, World Council of Credit Unions’ executive vice president and chief operating officer, discusses the requirements for establishing a deposit guarantee fund for savings and credit cooperatives in Kenya. (Photos provided by World Council of Credit Unions)
“Given WOCCU's vast international experience in regulatory development, the task force invited the organization to help implement the SACCO Societies Regulatory Agency,” Odhiambo added. Brian Branch, WOCCU executive vice president and chief operating officer, who helped spearhead the legislative initiative, facilitated the workshop. He joined WOCCU-Kenya program directors Jesús Chavez and Erick Silé to provide an overview to the committee on the SACCO sector. “Kenya’s SACCO system has grown at a tremendous rate in the past several years, but it has lacked any kind of regulatory oversight and supervision that would enable SACCOs to really evoke trust in their communities and to compete against banks and microfinance institutions,” Branch said. “Passing the SACCO law was the first step in establishing a strong supervisory framework. Now the real work begins.” The committee agreed to establish a task force of consultants and representatives from Kenya's Ministry of Finance, Central Bank and WOCCU to draft regulations based on the new legislation and recommendations from the workshop. It also discussed establishing a deposit guarantee fund to protect the institutions and their members’ savings. The fund would be at risk of collapsing if any large SACCO failed during the next five years so the committee proposed to solicit temporary government funding to get started. Most of the workshop was dedicated to creating SACCO Societies Regulatory Authority. It would license deposit-taking SACCOs, regulate and supervise the institutions and manage the deposit guarantee fund. Regulators would be based in Nairobi rather than in the field to ensure adequate training. Of the nearly 4,000 SACCOs in Kenya, slightly more than 200 are deposit-taking institutions. The committee expects about half will be able to comply with regulatory standards required for licensing. SACCOs have 12 months from the time of their application to become licensed. The committee seeks to amend the law so that SACCOs that improve within a specific range can become certified institutions. Workshop participants included representatives from the Central Bank of Kenya, the country's Ministry of Finance, Financial Sector Deepening Kenya (an independent trust that supports the development of inclusive financial markets) and Kenya's two SACCO trade associations--Kenya Unions of Savings and Credit Cooperatives and Kenya Rural Savings and Credit Societies Union. The committee will meet every two weeks until it presents draft regulations to the Minister of Finance, planned for December. For more information, use the link to Branch’s travel blog.
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