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"id": 184714,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/184714/?format=api",
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"type": "speech",
"speaker_name": "Mr. M'Mithiaru",
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"speaker": {
"id": 72,
"legal_name": "Ntoitha M'mithiaru",
"slug": "ntoitha-mmithiaru"
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"content": "Thank you, Mr. Temporary Deputy Speaker, Sir. First, let me congratulate the Minister for Co-operative Development and Marketing for having moved with speed to bring this Bill to this House. Let me also congratulate the staff of the Ministry, led by the Permanent Secretary and the Commissioner for Co-operatives for devoting a lot of time to ensure that the Bill was ready in time to be brought to the House. I would say that this is a very happy moment in that I have been associated with the co- operative movement for a long time. As the Minister said earlier, I was the Chairman of the taskforce that was drafting this SACCO Bill. I know that it was not easy. From the movement itself and the competitors, the road was long. The road was long and tough in that the SACCOs that we know today are actually financial co-operatives. Financial co-operatives in all respects are actually banks. Since they are in the banking arena, competing with the mainstream banking institutions, then definitely, you expect that the banks will not take it very kindly. It is in this respect that I would wish to say that one of our colleagues said that the SACCOs are not in competition with banks. I would like to say that they are in competition. If anything, it is the banks that have encroached into the area that was the preserve of the co-operatives. A few years ago, we saw most of the mainstream banks, led by Barclays Bank, closing all their branches in the rural market centres. They closed them and the people who had been used to banking facilities woke up and October 9, 2008 PARLIAMENTARY DEBATES 2651 found that they did not have those facilities at all. It was the effort of the SACCOs that saved the situation. When the banks saw the way the SACCOs were succeeding in the area of mobilising savings, they have come back to those areas. You have seen that banks are now even opening branches in walk ways so that they can tap all these savings. So, it is the banks that are encroaching on this area, and it is the banks, as far as SACCOs are concerned, that should receive no mercy at all, because they left the people alone at the hour of need. But when they realised that the small people whom they had left alone were the people with the deposits, then that was when they started coming back and saying that the SACCOs were trying to take the deposits which were their preserve. There is competition and the SACCOs must be ready to compete. It is in this respect that the current law, the Co-operative Societies Act, that governs the operations of the SACCOs, is deficient and there is need to come up with a law specific to the SACCOs. There is a need to come up with a specific law for the SACCOs that is going to give guidelines and prudential standards that are akin to what pertains in the banking world. It is the import of that, that this SACCO Bill is now in front of this House. Mr. Temporary Deputy Speaker, Sir, the way the SACCOs have been operating and the members, in particular, have actually been at the mercy of the management committees. There were no hard and fast rules to govern their operations and set limits on how the committees did their job. But now, with the enactment of this Bill, it is going to give prudential guidelines. It is going to instill discipline in the management of the SACCOs. It is going to bring about the performance standards that are supposed to be observed by all the SACCOs. Mr. Temporary Deputy Speaker, Sir, the role of the SACCOs today cannot be over- emphasized. We know that it is through those SACCOs that the poor people are now able to march from poverty towards the road of growth and development. We know that it is through the SACCOs that people have bought themselves some parcels of land, educated their children, started some businesses and all that. Those are the people who were not able to get loans from the mainstream banking institutions but, through their SACCOs, they have been able to grow. They have been able to get the loans. It is the same banks which were saying that the smaller people were not \"bankable\" because they are risky. But statistics available show that in the mainstream banking sector, what we call the default rate of non-performing loans is about 38 per cent. The default rate of the SACCOs is less than 5 per cent. That shows that the smaller people who were told that they were \"unbankable\", were actually the ones who were trustworthy and had financial discipline because they were able to pay their loans. Mr. Temporary Deputy Speaker, Sir, I wish now to visit one or two areas in the Bill, itself. One of them is: The Bill is intended to licence and regulate certain SACCOs. I have no quarrel with that, but I would wish that, that area be attended to because what has been bedeviling the SACCOs is actually management. It is mismanagement and mismanagement! Whether it is a small SACCO or a big SACCO, mismanagement cannot be condoned! A smaller SACCO must be managed well to grow; not to kill it! So, Mr. Temporary Deputy Speaker, Sir, I have said that while the Bill will attend to certain SACCOs, I would say that it should actually attend to all SACCOs. What the Minister may provide in the regulations is that there must be a threshold on which SACCOs should have what we call \"site inspections\". Again, the smaller ones should provide the off-site report to ensure that they are actually on the road towards prudent management. So, that is an element I will be proposing. Mr. Temporary Deputy Speaker, Sir, the other one is on the core capital. That is because the Minister said that when the stakeholders met, they said that, that schedule should be cancelled altogether. But I have something to say on that. In the co-operative movement, the SACCO sector, we have people who have been in the management committees and are thrown out because of mismanagement. When they go out, they go and form small SACCOs. Then, within those small 2652 PARLIAMENTARY DEBATES October 9, 2008 SACCOs, they ride back to the national management of the co-operatives. They are those small SACCOs with a capital of about Kshs200,000 or Kshs500,000 to ride back and continue mismanaging! So, I would ask the Minister that, as we look into this Bill, this is an area that we should not cancel in total. But we should actually provide a minimum amount of capital to ensure that we do not bring crooks back through a back door. Mr. Temporary Deputy Speaker, Sir, the other one is on the area of the prohibited business. I remember that when we met in my Committee earlier on, we had not provided for that. That is a clause that was brought in through the pressure from the banks themselves. They did not want the SACCOs to grow! But I have moved in many parts of this world, including the USA, where the SACCO movement is very strong. It is so strong that it is even the President of that country who actually appoints the management board of their regulatory authority. It is the SACCO movement of that country that most of the middle income and downwards of Americans all depend on. They are called the credit unions. In those credit unions, they will do all manner of businesses, including foreign trade, issuance of cheques and all that! I know that even today in our SACCO movement, there is even a programme of money remittance. It is called IR NET. This one is affording Kenyans who are in America to remit funds in Kenya. So, you can imagine if that facility was not there and those people are ready to remit the money to the country, then they will have no forum to do so because doing it through the main banking stream is very expensive! To wind up, Mr. Temporary Deputy Speaker, Sir, so that I can give my colleagues a chance to contribute to this Bill, I would like to say that SACCOs in this country have to grow. The only way to grow is through this route! The establishment of the SACCO Authority will mean that the SACCOs will be regulated so that, in all the management of their activities, they will be able to instill discipline of financial management. The Authority will be able to vet the people in the senior management of the SACCOs. It will be able to vet the people who will be appointed in the board of the SACCOs, to ensure that they are fit and proper to manage those co-operative financial institutions. It is also through the report that the SACCOs will be serving the authority and also, the on-site inspections that will give early warning signs in the event that a SACCO is being mismanaged. There will be early warning signals to ensure that corrective measures are taken as early as possible, unlike today, when a SACCO can be mismanaged to the extent of collapsing and even members losing their savings before it is realized that it is being mismanaged. So, the Authority will afford the opportunity to have early warnings signs for any mismanagement in SACCOs to be detected. Mr. Temporary Deputy Speaker, Sir, somebody has mentioned that in the appointment of the board of the Authority, the four board members who will be appointed besides the Governor, the Permanent Secretary and the Commissioner--- Why are they not coming from the movement itself? I would say that regulation is not punishment. It is meant to instil discipline. Normally, to appoint people who are already serving in the movement to be Board members of the Authority is not giving what we call the draw control. For example, if there is a Board member of a SACCO who also becomes a Board member of the Authority, suppose that SACCO is mismanaged, it presents a very awkward situation. Therefore, those calling for the movement to include the four Board members should get their priorities right. Mr. Temporary Deputy Speaker, Sir, I would like to mention in passing that, since SACCOs are vehicles to drive people out of poverty and they provide almost 30 per cent of the financial needs of Kenyans, the Government's hand should be seen in this. The Government should ensure that they promote SACCOs. One way of doing this is by ensuring that SACCOs get certain tax exemption. Like I mentioned, in the United States of America (USA), SACCOs have tax exemptions so that they can provide for the people well. We know that SACCOs are not in business. SACCOs have a human face. The difference between SACCOs and the mainstream October 9, 2008 PARLIAMENTARY DEBATES 2653 banks is that they have a human face; they listen to the people. They are affordable. If that be so, the Government's hand should be seen; tax matters should be adequately addressed to ensure that they serve the people well. With those few remarks, I would like to say that this is my happiest moment when I see this Bill become an Act. I beg to support."
}