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"id": 184707,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/184707/?format=api",
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"type": "speech",
"speaker_name": "Mr. Nyagah",
"speaker_title": "The Minister for Co-operative Development and Marketing",
"speaker": {
"id": 269,
"legal_name": "Joseph Nthiga Nyagah",
"slug": "joseph-nyagah"
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"content": "Mr. Temporary Deputy Speaker, Sir, as we all know, the SACCO movement is a critical movement for the development of this country. We all know that the poorest people in this country - and they are the majority - would not know what to do if we did not have the SACCO movement. We all know that people who depend on a salary would also not know what to do if they did not have access to the SACCO money that is available even to us in this House, because most of us are members of the SACCO movement. But critically for the poor, I assume that we have total support for this Bill, because it represents the interests of millions and millions of Kenyans who depend on coffee, sugar-cane, tea, matatu and salary savings in order to earn a living and meet their daily expenses for school fees, funerals, building houses around the country. Indeed, Nairobi, the capital of our country, would be owned by foreigners and a few wealthy Kenyans, and there would be almost nothing in the City for ordinary people. Therefore, I would like to thank the SACCO movement. For the sake of record, this Bill was prepared last year, over 18 months ago, but was not presented to Parliament until early this year when we found it necessary to bring it the way it had been printed, and hoped that Parliament would make appropriate amendments to the Bill. In 1964, we had the first registered and licensed institution of this kind; this was very soon after Independence. In 1969, the first registered SACCOs for employed staff in the Ministries of Government were created and legally licensed. In the next few years many failed, because we did not understand that a new nation had to manage their operations. Therefore, people took loans and did not think it was necessary to repay them. There was also insecurity for the savings in the sense that these institutions were often weak and without proper registration that would protect the interests of the people who were making savings. Mr. Temporary Deputy Speaker, Sir, from 1973, there was a major growth and many were registered and by 1975, approximately 1,000 SACCOs were registered in Kenya, and had what we called in the sector \"bank offices\", and could give credit to their members. About the same time, rural agricultural marketing SACCOs developed; farmers created what were known as \"unions banking sections\". These were within, for example, co-operatives of coffee or cotton or other crops farmers. They would have a department within the co-operative union of the district that would handle savings and payments to the farmers. So, we see a parallel development at the same time for the rural people, who were involved in agricultural produce processing and marketing. In 1982, a new policy was introduced by the Government under the Ministry, where banking sections were separated from the coffee, cotton, sugar and tea unions of districts. That was the reason I gave earlier. There is need to separate the main farming activities from the savings and credit activities of the unions. But it was also a period when many people still had management problems. They did not quite understand what was involved and, very often, the people managing those institutions were not well trained. But the Government and the Ministry gave birth to what we call \"Rural SACCOs\" today. Mr. Temporary Deputy Speaker, Sir, the rural SACCOs, in addition to the urban SACCOs, play a very important role in the country. Out of 12,000 or so registered co-operative societies in this country, approximately 5,000 are SACCOs. They are the fastest growing sector of the co- operative movement. Most of those 5,000 or so co-operative societies or SACCOs are found in 2638 PARLIAMENTARY DEBATES October 9, 2008 urban areas where people earn salaries. But we have now been opening up the common boundaries - what we call a movement - in order to allow more people to get involved. Mr. Temporary Deputy Speaker, Sir, just to give you an indication of what the 5,000 SACCOs or so mean to this economy, we are talking of a figure of up to Kshs170 billion today! That is a huge sum of money that the poor of this country have saved! They have put aside money from their salaries, savings from their coffee, tea, cotton and sugar-cane production. That is the basis of development that we see in the rural areas. If you look at the beautiful houses, shops and kiosks, chances are that they have benefitted from the SACCO movement in this country. Out of that Kshs170 billion or so that has been saved, we have a loan credit amounting to approximately Kshs120 billion today! As I said, that is the money that our teachers, employees in the Civil Service, companies and in the shambas, use for their activities that I have just described. Mr. Temporary Deputy Speaker, Sir, out of the 5,000 SACCOs or so, approximately 200 or so have proper front offices and they operate almost like commercial banks. They have all the facilities of a commercial bank. In fact, if you entered the offices of those SACCOs, you would think you are in a small commercial bank! Some of them, in the last few years, have constructed and built huge operations. Some of those front offices have many tellers or cashiers who are serving the customers using modern technology. In those offices, you will find savings accounts and people depositing their money just like in a commercial bank. You can use debit cards. You can borrow money. As I said, it operates like any commercial bank. Mr. Temporary Deputy Speaker, Sir, to complete my history of SACCOs, in the last few years, as commercial banks pulled out of major towns claiming that the poor people do not have money; or claiming that the poor rural salaried people were not creditworthy and we saw a big movement from the small towns to the big cities, the SACCOs moved in to fill the vacuum created by commercial banks. I am happy to see that, in the last few years, commercial banks have realised that the poor have the kind of money that I have just mentioned, and we have seen a movement by the commercial banks back to the rural areas. But as those front offices and SACCOs grow, there is need to introduce regulations and controls so that, the problems that we have seen in the last few years, could come to an end. Mr. Temporary Deputy Speaker, Sir, we have heard of mismanagement, corruption, stealing, employment of friends and relatives in those SACCOs. We have seen members' deposits collapse! We have seen people losing millions and millions of shillings! It is for that reason that it has became necessary, in order to ensure that we have adequate legal and regulatory framework, that this Bill, which will hopefully become an Act, has been brought to this House. It is a fact that many lack development strategies. They are just there collecting money and lending money. It is necessary to bring this Bill to this House, so that we can have a proper development strategy. Each SACCO will be helped, directed and assisted in coming up with an appropriate strategy that will serve its membership well. It is for that reason that they were not meeting international performance standards. It has become necessary to come to this House so that we can introduce, legally, international performance standards that they will meet, just like commercial banks and other institutions. As you know, Mr. Temporary Deputy Speaker, Sir, it was a few years ago when the insurance industry found it necessary to be put together under one regulator, in order to assist the insurance sector which also, for many years, had grown without a proper strong legal base! Yes, there was some direction from the Treasury, but at that time, it eventually became necessary to have a regulatory authority that oversaw that industry. Mr. Temporary Deputy Speaker, Sir, I have mentioned that lack of good management has also caused the stakeholders, the people in that sector, the Ministry and the Government to see the need for this Bill. The SACCOs are not able to absorb the type of Information Communication October 9, 2008 PARLIAMENTARY DEBATES 2639 Technology (ICT) or computer technology that is required. If you are managing the kind of money that I have just mentioned, you need expensive ICT technologies that SACCOs are not able to manage and, hence, the need to bring in the regulations and those kind of controls to help them. Mr. Temporary Deputy Speaker, Sir, up until now, and until this Bill becomes law, the SACCOs are managed or controlled by the Commissioner of Co-operatives under the current Co- operative Societies Act. The bulk of that Act was meant for mainly marketing agricultural type of co-operatives. There is little mention of the SACCO side. But because of the fast growth of the SACCOs; because of the sophistication and the competition in that sector, it has, therefore, become necessary for this Bill to be introduced before this House. What will the Bill do, Mr. Temporary Deputy Speaker, Sir? The Bill is intended to introduce a regulatory authority. If commercial banks have a Central Bank-type of organisation; if the telecommunications sector has the Communications Commission of Kenya (CCK); if the insurers and many other sectors in this country have a regulatory authority, it is, therefore, important for SACCOs to have a similar regulatory authority not to constrain their development and make their lives difficult, but to help them develop in keeping with the experiences in other countries of this world. Many countries of this world have regulatory bodies and authorities that we have borrowed examples from, to make it possible for the SACCOs to operate so that every Kenyan is aware of what the rules of the game are. When we are talking about 5,000 such organisations and the kind of money I am talking about, it is necessary to establish a regulatory authority. We have gone through great details over the last few years, looking for a possible model for that. That will be obvious for those of you who have read this Bill in detail and fully understand the justification for that. Mr. Temporary Deputy Speaker, Sir, it is for that reason that the solution would be to license SACCOs. As I said, they will be licensed at the moment under the general Cooperative Societies Act which does not focus on them specifically. The new law will allow for people who understand finance, credit and savings to regulate and license them. This should, by definition, lead to good governance. We have attempted for the last few years, particulary since 2005, to improve governance in the cooperative movement. I know the cooperative movement has the reputation of mismanagement, corruption and all sorts of things. What is not known to many Kenyans is that in 1990s, after the International Monetary Fund (IMF) and the World Bank pressurised the Government to pull out of management of cooperatives, the movement collapsed. The bulk of the chaos that we see in cooperative movement took place in the 1990s until early 2003 when a new law was introduced. During that period of slightly over ten years, we saw all the chaos. I would like to appeal to all Kenyans to give us a chance. Mr. Temporary Deputy Speaker, Sir, there is a tendency to judge us by the period when the movement had no control and the cooperative movement was seen as bad and the Government pulled out. In recognition of the importance of the cooperative movement, the Government moved in, with the 2005 Act, which has helped. I wish to confirm that, in my view, there has been a major improvement. I am not saying that we are perfect; we still have problems in the cooperative movement. We still have wrangles. We still have fights. We still have mismanagement but generally speaking, there has been a major improvement in the last few years since the new Act came into place. We hope that this Bill will go a long way towards improving governance so that what Kenyans are telling the Government, the Minister and Ministry officers all over the county; that they want good governance, this Bill will go a long way towards meeting the needs of Kenyans. It will also improve supervision. We will have a team of experts, who understand finance, savings and credit issues. They will be responsible for supervising. I would like to thank my officers in the field and others who have tried very hard over the years to supervise SACCOs. 2640 PARLIAMENTARY DEBATES October 9, 2008 These are things they did not always understand. However, we have had programmes to assist them understand. Most of them have accounting background in their training. This has helped, but we know this Bill will help in ensuring that we have more thorough supervision by an authority and the Government to help wananchi. Mr. Temporary Deputy Speaker, Sir, finally, like is the case with commercial banks, when a commercial bank collapses, the Deposit Protection Fund helps pay the losers some money. We have come up with this programme. We have a Deposit Guarantee Fund (DGF) that will assist those who loose money in the event a SACCO collapses. The details of how it works are explained here. We have gone through it in detail with the various committees. Therefore, the aim of the Bill is to protect SACCOs, the membership of SACCOs and also develop SACCOs to become proper institutions that we can all be proud of and can serve our people better. They should be institutions that can be used for the development of our country. I have a few words about this authority; the SACCO Societies Regulatory Authority. It will have seven members of the Board. That is important. Just to show you the close proximity of the SACCOs to the financial structures of this country, in the Board will be the Governor of the Central Bank of Kenya among others. The Board will also have the Permanent Secretary, Ministry of Finance. This is in addition to the Chief Executive who will be appointed by the Board but a man or woman with a distinguished career. This is somebody we know and is confident to manage those huge resources that I have mentioned. This Authority, therefore, clearly shows that the Government and stakeholders who represent cooperatives in housing, marketing, matatu business, agriculture and every thing else, will be able to feel that they have a neutral body that will help them grow. Mr. Temporary Deputy Speaker, Sir, I hope that this SACCO movement will overtake some commercial banks like in other countries. As you know, some SACCOs are much larger than commercial banks in this country. This would help us in globalisation that is taking place in the world. Kenya will be very well equipped to deal with the competition that is expected to come from many financial institutions all over the world. Some of the things that are important have been mentioned in this Bill. These include, where the money to run such an Authority will come from. It will come from various fees that will be generated by the Authority. There will be grants and donations from the Government, donors and friends of the movement. There will also be levies introduced in keeping with the understanding and consultations with the stakeholders. The rules will be established by the Minister working closely with the stakeholders in order to allow for smooth operations. These rules are not meant to hinder progress or create problems but to strengthen and ensure that the SACCO movement plays the role I have just described. Mr. Temporary Deputy Speaker, Sir, there will be a requirement for disclosure. For the first time, we will allow in a transparent manner, people to know what is going on in the movement. This is similar to what commercial banks are put through by the Central Bank of Kenya (CBK). I spoke about the deposit guarantee fund that will pay up to Kshs100,000 for members of a SACCO in the event it collapses. The Deposit Guarantee Fund will be managed by independent, trustworthy men and women of integrity. This is slightly separate from the Authority. This Fund is very important for the survival and success of the movement. Mr. Temporary Deputy Speaker, Sir, earlier on, I thanked the Parliamentary Committee which reviewed this Bill. They spent a lot of time. My Ministry and the stakeholders met with them. We went through the Bill paragraph by paragraph. They made very constructive recommendations and that report was laid on the Table of this House just before we went home in the last Parliament. We are in full agreement with the House committee. We have discussed with stakeholders who are also comfortable with it. They too were summoned by the House in the October 9, 2008 PARLIAMENTARY DEBATES 2641 absence of the Minister so that they could speak freely and comfortably without feeling intimidated. The result is the document that was produced by the Committee. Therefore, when we go into the Committee stage, I will be supporting the recommendations that have come from the Committee. There is clarification of the definitions, some of which were not very clear; so, we agree with the definition language that was proposed by the Committee. There have been amendments and we are in full agreement with them, because they have been negotiated between the Committee, stakeholders and the Ministry. There are some Clauses that were totally deleted, because they were found to be unfair to the SACCO movement, and they would have hurt it. For example, Clause 32 had introduced a very strange thing; it said that SACCOs shall not get involved in things like issuance of third party cheques, opening of current accounts, foreign trade operations and so on. The law had said that there shall be no investing in enterprise capital, and that SACCOs would not be allowed to do wholesale or retail trade and so on and so forth. So, the Committee told us that was not acceptable and I agreed with them. That is an example of a clause that has been deleted by the Committee and my Ministry has no problem. Mr. Temporary Deputy Speaker, Sir, as a result of that, there has been need to renumber some of the paragraphs. So, the final document will be renumbered to take into account the things that I have mentioned. There are completely new ideas, which are very positive, from this Parliament of very able people. For the record, I would like to mention that, that Committee included the Chairman, who was involved in the task force that drafted this document. The Member of Parliament for Igembe North was the Chairman of the Task Force that prepared this document. He and Members of the Departmental Committee of this House, and other distinguished Kenyans, went round the world to understand what happens. So, I am very happy that they introduced new ideas. For example, there was need to include a clause on how to deal with disputes. We have disputes everyday and we can clog the courts system with disputes from the SACCOs, which I said are 5,000 and are increasing every day. It is necessary to have a mechanism to deal with disputes, hence the need for that clause. I agree that the Co-operate Societies Tribunal, which we, as a Ministry, are strengthening will play the role of dealing with disputes instead of clogging the High Court with disputes. The Committee was very good in getting us to accept the need to be realistic in terms of the levels of the capital that is required for the SACCOs, and we have reached an agreement. The figures that we had proposed and the definition of what we had called \"reality capital requirement\" were not practical. We thank them for that. Mr. Temporary Deputy Speaker, Sir, also very important is that, given the history where committee members lent money to people outside the SACCO, people who are not members, which led to serious problems, they propose that we do not allow anybody who is not a member of a SACCO to borrow from it; I agreed with that. There is a schedule in the document, the 2nd Schedule, which talks about minimum capital requirement. After going through it in detail, and having realised that it was locking the SACCOs into a not practical situation in so far as minimum capital requirement was concerned, after consultations, we have agreed that the Schedule, because it is addressed elsewhere in the law and also by the rules that the Minister and the authority will introduce, should be deleted. We again supported that. Mr. Temporary Deputy Speaker, Sir, to summarise, I would like to plead with this House to support this Bill. This Bill is the main hope of the poor people of this country. In the coming years, as we prepare to introduce more SACCOs in areas that have never seen them--- I have come from a tour of Nyanza where the SACCO movement is in the early stages of development, and where the fish traders earn a substantial amount of money, but it is spent on the same day. We are in the process of creating SACCOs to ensure that those fish traders in Nyanza have SACCOs. We are at 2642 PARLIAMENTARY DEBATES October 9, 2008 an advanced stage in working with the Jua Kali people to ensure that the culture of saving is introduced to them. I have visited some Jua Kali people who have now become co-operative societies; we have seen the potential for saving by Jua Kali people. They can save up to Kshs100,000 per day. Our only hope of helping the poor is encouraging a culture of saving and lending. Very closely related to these institutions is the Co-operative Insurance Company, which is owned by the movement. It also plays an important role in strengthening the co-operative movement in so far as SACCOs are concerned. We have programmes that involve the insurance side and the SACCO movement in this country. Mr. Temporary Deputy Speaker, Sir, for the salaried people, including Members of Parliament, it is obvious that without SACCOs we would be in trouble. The demand in Kenya on anybody who has a salary by the extended family and other things is too high. When mwananchi cannot afford food, fuel and so on, the SACCO system is critical. It will, therefore, fill the gap that was initially created when banks pulled out. As commercial banks come to the rural areas, I would like to see SACCOs strengthened so that they can face the competition that will emerge. It is for that reason that we have talked of merging of SACCOs, so that they can compete favourably with other institutions. Finally, SACCOs are to be found everywhere. I dream that one of these days, there will be a SACCO in every market; this way, mwananchi will collect money from his bank; his relative living overseas can transmit money to him; they will not need to go to big towns and cities for money. I look forward to the days when automated teller machines (ATMs), will be found in the village. It is possible. We have the technology. It is beginning to happen; it can happen and it will happen. With those remarks, I beg to move."
}