The Sacco Societies (Non-Deposit-Taking Business) Regulations

Legal Notice 82 of 2020

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Legal Notice 82 of 2020
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Sacco Societies Act
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LAWS OF KENYA

SACCO SOCIETIES ACT

THE SACCO SOCIETIES (NON-DEPOSIT-TAKING BUSINESS) REGULATIONS

LEGAL NOTICE 82 OF 2020

  • Published in Kenya Gazette Vol. CXXII—No. 83 on 8 May 2020
  • Commenced on 1 January 2020
  1. [Amended by Sacco Societies (Non-Deposit Taking Business) (Amendment) Regulations, 2020 (Legal Notice 215 of 2020) on 24 December 2020]
  2. [Revised by 24th Annual Supplement (Legal Notice 221 of 2023) on 31 December 2022]

Part I – PRELIMINARY

1. Citation and commencement

(1)These Regulations may be cited as the Sacco Societies (Non-Deposit-Taking Business) Regulations.
(2)These Regulations shall come into operation on the 1st January, 2021.[L.N. 215/2020, r. 2.]

2. Interpretation

In these Regulations, unless the context otherwise permits—"allowance for loan loss" means an amount set aside in the statement of financial position (balance sheet) to recognise probable Loan losses so that the true value of the loan portfolio is fairly stated;"amalgamation" is the consolidation of assets, liabilities and equity of two or more Sacco societies to form a new entity referred to as the amalgamated society;"Committee" has the meaning assigned to it in the Co-operative Societies Act (Cap. 490);"core capital" means the fully paid up members' shares, capital issued, disclosed reserves, retained earnings, grants and donations all of which are not meant to be expended unless on liquidation of the Sacco Society;"delinquent loan" means any loan which the principal or interest remain unpaid after the due date;"deposit-taking business" has the meaning assigned to it in the Act;"equity" means is the difference between assets and liabilities, or the total of institutional capital and other capital accounts;"foreclosed assets" means real estate and assets of material value that are transferred to the Sacco society because of non-repayment of a loan;"full and fair disclosure" means the level of disclosure which a prudent person would provide to a member of a Sacco society, to the Authority or at the discretion of the Committee, to creditors to inform them of the financial condition and the results of operations of the Sacco society;"illiquid assets" means assets that cannot be readily converted into cash due to the nature of the asset or the condition of the market;"institutional capital" means disclosed reserves, retained earnings, grants and donations;"immediate family member" means a spouse or other family member living in the same household or under the direct influence of an officer, member or employee;"non-deposit taking business" means Sacco business, other than deposit-taking business;"non-earning assets" means those assets that do not generate income;"non-withdrawable deposit-taking SACCO" means a Sacco society whose Sacco business, is strictly limited to the receipt of non-withdrawable deposits from members and which deposits are not available for withdrawal for the duration of the membership of a member in a Sacco society, and which deposits may be used as collateral against borrowings and domestic money transfer services only;"off balance sheet items" means items not shown on the balance sheet but which constitute a risk to the Sacco society;"officer" means a director or any other person by whatever name or title he may be called or described, who carries out or is empowered to carry out functions relating to the overall direction of a non-withdraw-able deposit taking Sacco society or takes part in the general management thereof;"place of business" has the meaning assigned to it in the Act;"provision for Loan Losses" means an expense in the income statement to reflect an increase in the probability of losses due to uncollected loans;"Sacco business" has the meaning assigned to it in the Act; and"unclaimed assets" has the meaning assigned to it under the Unclaimed Financial Assets Act (Cap. 494).

3. Purpose

The purpose of these Regulations is to—
(a)specify the non-deposit-taking business to which these Regulations shall apply; and
(b)prescribe measures for the conduct of specified non-deposit-taking business pursuant to section 3(2) of the Act.

4. Specified non-deposit-taking business

(1)For the purposes of section 3(1)(b) of the Act, the following shall be specified non-deposit taking business—
(a)non-deposit taking business in which the total non-withdrawable deposits from members is equal to or exceeds the sum of one hundred million shillings;
(b)non-deposit taking business in which the Sacco society mobilises membership and subscription to its share capital through digital or other electronic payment platforms; or
(c)non-deposit taking business in which the Sacco society mobilises membership and subscription to its share capital from persons who are ordinarily resident outside the country.
(2)For the purposes of paragraph (1) (b) and (c), a non-deposit-taking Sacco society shall not mobilise for membership and subscription to its share capital principally through digital or other electronic payment platforms or from persons who are ordinarily resident outside the country unless it has been authorised to do so in writing by the Authority.

Part II – AUTHORISATION

5. Authorisation requirements

(1)A person shall not carry on a specified non-deposit taking business without written authorisation from the Authority.
(2)A non-deposit-taking Sacco society that undertakes specified non-deposit-taking business shall apply to the Authority in the form set out in Form 1A in the First Schedule;
(3)An application for authorisation shall be accompanied by—
(a)a completed "fit and proper test" form as set out in Form 1B in the First Schedule specifying—
(i)the members of the Sacco society's board of directors;
(ii)the members of the Sacco society's supervisory committee;
(iii)the Sacco society's chief executive officer; and
(iv)the Sacco society's senior management staff including heads of the information, communications and technology function, the internal audit function, the credit management function and the finance function;
(b)a copy of the Sacco society's registration certificate;
(c)a copy of the Sacco society's by-laws;
(d)a three-year business plan and feasibility study of the Sacco society;
(e)a certified extract of minutes of the general meeting resolution authorising the Sacco society to carry on specified non-deposit taking business;
(f)certified copies of the Sacco society's audited financial statements for the preceding three years, where applicable;
(g)evidence that the Sacco society has adequate capital; and
(h)a non-refundable application fee of three thousand shillings.
(4)The Authority shall, if satisfied that an applicant has fulfilled the requirements in paragraph (3), conduct an independent onsite inspection to ascertain if the non-deposit-taking Sacco society has—
(a)appropriate institutional infrastructure, including adequate working space;
(b)a Management Information System for the purpose of performing and accounting for all transactions and providing the minimum reports required by the Authority;
(c)appropriate risk management policies and internal control systems; and
(d)suitable organisational, governance and management structures.
(5)Where the Authority is satisfied that a non-deposit-taking Sacco society has complied with conditions prescribed in paragraph (4), the Authority shall notify the Sacco society.
(6)A non-deposit-taking Sacco society that has been notified of compliance with the conditions prescribed in paragraph (4) shall pay an authorisation fee of—
(a)fifty thousand shillings for the Sacco society's head office; and
(b)and ten thousand shillings for every other place of business of the Sacco society.
(7)The Authority shall, upon receiving the authorisation fee from the non-deposit-taking Sacco society, issue the Sacco society with an authorisation certificate in Form 1C as set out in the First Schedule.
(8)The Authority may, at any time, inspect or cause an inspection to be made by any person authorised by the Authority in writing of any non-deposit-taking Sacco society and of its books, accounts and records to determine if the Sacco society is carrying on a specified non-deposit-taking business.

6. Publication of list of specified non-deposit-taking business

(1)The Authority annually shall publish a list of all non-deposit-taking Sacco societies authorised under these Regulations in the Gazette and in at least one newspaper of national circulation.
(2)Despite paragraph (1), the Authority shall publish in the Gazette and in at least one newspaper of national circulation any newly authorised non-deposit-taking Sacco society within sixty days of such authorisation.

7. Protection of name

(1)A non-deposit-taking Sacco society that has been authorised to undertake specified non-deposit taking business shall include in its name the words "Regulated Non-withdrawable deposit-taking SACCO" or "Regulated Non-WDT-SACCO".
(2)A person shall not use the words "Regulated Non-withdrawable deposit-taking SACCO" or "Regulated Non-WDT-SACCO" or any of its derivatives in the name, description or title under which that person transacts business in Kenya or represent that the person transacts specified non-deposit taking business unless that person is authorised to carry on non-deposit taking business in accordance with these Regulations.

8. Failure to obtain authorisation

(1)Where the Authority determines that a Sacco society ought to obtain authorisation under these Regulations but has failed to apply for authorisation or, having applied for it, has failed to obtain authorisation, the Authority shall—
(a)issue an order prohibiting the Sacco society from taking any further non-withdrawable deposits from the date of the order;
(b)notify the public and employers to cease making any remittances of non-withdrawable deposits to the Sacco society;
(c)direct bankers and other payment service providers to cease receiving funds on the accounts of or on behalf of that Sacco society;
(d)publish a notice stating that the Sacco society is not authorised to take any further non-withdrawable deposits; and
(e)initiate the appropriate enforcement action against any officer of the Sacco society in accordance with the Act and these Regulations.
(2)A non-deposit-taking Sacco society or an officer thereof that is aggrieved by any action by the Authority under paragraph (1) may appeal within thirty days to the Tribunal.
(3)An appeal made under paragraph (2) shall not operate as a stay in respect of the action of the Authority under paragraph (1).

9. Renewal and validity of authorisation

(1)An authorisation certificate issued by the Authority shall—
(a)be valid unless otherwise revoked under these Regulations; and
(b)be renewable annually by the Authority in accordance with these Regulations.
(2)Despite paragraph (1), a non-deposit-taking Sacco society shall not later than the 30th November of every year submit to the Authority—
(a)an annual authorisation renewal fee of thirty thousand shillings for the Sacco society's head office;
(b)an annual authorisation renewal fee of ten thousand shillings for each of the Sacco society's authorised places of business; and
(c)the Sacco society's annual data and information specifying the operations and performance of the Sacco society in such form as the Authority may require.
(3)A non-deposit-taking Sacco society shall at all times display the authorisation certificate issued by the Authority in a conspicuous place within its head office and a copy of the authorisation certificate in each of it's other places of business.
(4)A non-deposit-taking Sacco society or an officer that contravenes the provisions of this regulation shall be liable to pay to the Authority a financial penalty not exceeding one hundred thousand shillings in accordance with section 51 of the Act.

10. Revoation of authorisation

(1)The Authority may revoke an authorisation on the ground Revocation of that a non-deposit-taking Sacco society—
(a)has failed to maintain at least twenty-five percent of the prescribed minimum capital adequacy requirements;
(b)has ceased to undertake specified non-deposit taking business or failed in its objects;
(c)has gone into liquidation, been wound up or has otherwise been dissolved or deregistered under the Co-operative Societies Act (Cap. 490);
(d)has failed to comply with the Act, these Regulations or any condition imposed upon or attached to the authorisation certificate;
(e)has failed to pay the prescribed authorisation fees or authorisation renewal fees; or
(f)has knowingly engaged in criminal or fraudulent acts that—
(i)are likely to cause insolvency, substantial dissipation of assets or earnings of the Sacco society; or
(ii)may otherwise weaken the business of the Sacco society or seriously prejudice the interests of the members or the public.
(2)A non-deposit-taking Sacco society whose authorisation is revoked under paragraph (1) shall be liable to have its registration cancelled by the Authority under section 62(1)(c) of the Co-operative Societies Act (Cap. 490).
(3)Upon revocation of authorisation, the Authority shall, within sixty days of the revocation—
(a)initiate enforcement action to preserve the assets, books and records of the non-deposit-taking Sacco society pending any other appropriate action under the Co-operative Societies Act (Cap. 490); and
(b)hand over the assets, books and records of the non-deposit-taking Sacco society to the Commissioner of Co-operatives for appropriate action under the Co-operative Societies Act (Cap. 490).
(4)A person who, at the time of revocation of an authorisation, was an officer of a non-deposit-taking Sacco society shall not participate in the oversight and management of any other Sacco society without the written approval of the Authority.
(5)The Authority shall publish in the Gazette and in at least one newspaper of national circulation—
(a)the name of every non-deposit-taking Sacco society whose authorisation has been revoked under these Regulations; and
(b)every person who at the time of revocation of an authorisation was an officer or former officer of the non-deposit-taking Sacco society whose authorisation was revoked during the period of twelve months preceding the revocation.
(6)An aggrieved non-deposit-taking Sacco society may appeal to the Tribunal in respect of the revocation within fifteen days after being notified of the revocation.
(7)An appeal under paragraph (6) shall not operate as a stay of the revocation of authorisation.

Part III – CAPITAL ADEQUACY

11. Minimum capital requirements

(1)A non-deposit-taking Sacco society shall maintain a core capital which shall comprise of—
(a)not less than five million shillings;
(b)not less than eight percent of the total assets of the Sacco society: provided that at least fifty per cent of the core capital shall be composed of retained earnings and disclosed reserves; and
(c)not less than five percent of the total non-withdrawable deposits held by the Sacco society on behalf of its members.
(2)Despite paragraph (1), the Authority may at any time require higher minimum core capital ratios for a non-deposit-taking Sacco society where the Sacco society—
(a)suffers any losses resulting in capital deficiency;
(b)is significantly exposed to risk;
(c)has a high or particularly severe volume of poor-quality assets;
(d)is growing rapidly without adequate capitalisation and risk management system;
(e)may be adversely affected by the activities or conditions of its associates, subsidiaries or related parties; or
(f)has contravened the provisions of the Act, these Regulations or any guideline, condition or directive issued by the Authority.

12. Sanctions for non-compliance

Where a non-deposit-taking Sacco society fails to maintain its capital adequacy requirements, in addition to sanctions provided under section 51 of the Act, the Authority may—
(a)suspend the Sacco society from lending and investment;
(b)prohibit the Sacco society from acquiring any additional land or buildings; or
(c)prohibit the Sacco society from accepting further non-withdrawable deposits or other lines of credit.

13. Capital adequacy returns

(1)A non-deposit-taking Sacco society shall submit to the Authority with respect to every quarter a return on capital adequacy as set out in Form 2A in the Second Schedule.
(2)A non-deposit-taking Sacco society or the relevant officer of the Sacco society that fails to submit a return on capital adequacy as required under paragraph (1) shall be liable to pay to the Authority a financial penalty not exceeding fifty thousand shillings.

Part IV – LIQUIDITY MANAGEMENT

14. Liquidity management

(1)The board of directors of a non-deposit-taking Sacco society shall formulate, review and approve the liquidity policy of the Sacco society.
(2)A liquidity policy of a non-deposit-taking Sacco society prepared under paragraph (1) shall provide for the—
(a)constitution, appointment and composition of a technical liquidity management team which shall be responsible for the daily liquidity management of the Sacco society;
(b)measures of analysing and monitoring liquidity performance by the Sacco society;
(c)criteria for determining and accessing lines of credit for liquidity purposes;
(d)contingency plan for handling liquidity crises including for making up liquidity shortfalls in emergency situations and back-up liquidity strategy for circumstances in which the normal approach to funding operations are disrupted;
(e)minimum and maximum thresholds for total cash assets;
(f)cash holding limits;
(g)frequency for the liquidity management; and
(h)any other relevant matter as may be directed by the Authority.
(3)A non-deposit-taking Sacco society shall maintain a liquidity ratio of not less than ten per cent of the Sacco society's non-withdrawable deposits and short-term liabilities in liquid assets.
(4)For the purpose of this regulation, "liquid assets" shall include—
(a)notes and coins;
(b)balances at institutions licensed under the Act or Banking Act (Cap. 488) after deducting balances owed to those institutions;
(c)government securities;
(d)deposits held at other Sacco societies of a maturity not exceeding ninety-one days after deducting balances owed to those Sacco societies;
(e)value of balances in electronic transfer systems; and
(f)such other liquid assets as the Authority may specify.
(5)A non-deposit-taking Sacco society that fails to maintain the liquidity ratio specified in paragraph (3) shall, in addition to the penalties prescribed by section 30(3) of the Act, be liable to—
(a)be suspended by the Authority from lending and investing;
(b)suspended by Authority from taking new non-withdrawable deposits;
(c)prohibited by the Authority from acquiring additional non-core assets;
(d)prohibited by the Authority from declaring dividends, paying bonuses, salary incentives or any other discretionary compensation to officers of the Sacco society; or
(e)prohibited or suspended by the Authority from activities that may contribute to the liquidity strain in the Sacco society.

15. Liquidity statement returns

(1)A non-deposit-taking Sacco society shall, at least once in every quarter, submit a liquidity statement return to the Authority in Form 2B as set out in the Second Schedule.
(2)Despite paragraph (1), the Authority may require a non-deposit-taking Sacco society to submit a liquidity statement as frequently as may be necessary to evaluate and monitor the Sacco society's liquidity position.
(3)A non-deposit-taking Sacco society or the relevant officer of the Sacco society that fails to submit a liquidity statement return under paragraph (1) shall be liable to pay to the Authority a financial penalty not exceeding fifty thousand shillings.

16. Prohited business

A non-deposit-taking Sacco society shall not engage in the following activities—
(a)deposit-taking Sacco business;
(b)foreign trade operations;
(c)dealing in crypto currencies;
(d)trust operations;
(e)custodial services;
(f)investing in venture capital;
(g)underwriting or placement of securities;
(h)purchase or otherwise acquisition of any land except as may be reasonably necessary for the purpose of expanding the Sacco business beyond the prescribed limits; or
(i)transacting business with non-members.

Part V – PLACES OF BUSINESS

17. Opening of a place of business

(1)Subject to these Regulations, a non-deposit-taking Sacco society may operate a place of business, other than its head office, including a branch, marketing office, satellite office or an outlet.
(2)A non-deposit-taking Sacco society that wishes to operate a place of business under paragraph (1) shall—
(a)notify the Authority in writing of such intention at least ninety days before opening the new place of business;
(b)obtain a written approval from the Authority before opening the new place of business;
(c)pay to the Authority the prescribed fee; and
(d)prominently display the authorisation to operate the place of business at the new place of business.
(3)The Authority shall issue a written authorisation to operate the place of business to the non-deposit-taking Sacco society if it is satisfied that the Sacco society has complied with the provisions of the Act and these Regulations.
(4)A non-deposit-taking Sacco society shall pay an annual authorisation fee of ten thousand shillings for a place of business authorised under paragraph (3).

18. Relocation of place of business

(1)A non-deposit-taking Sacco society shall not relocate its head office or other authorised place of business without the written approval of the Authority.
(2)A non-deposit-taking Sacco Society intending to relocate its head office or other place of business under paragraph (1) shall—
(a)notify the Authority in writing of such intention at least ninety days before the relocation;
(b)obtain a written approval from the Authority before opening the new head office or place of business.
(3)A notification under paragraph (2)(a) shall be accompanied by—
(a)a statement of the reasons for the change of location and plan for settlement or transfer of claims and liabilities; and
(b)a statement on the completion of the preparations of the new place of business premises.

19. Closing a place of business

(1)A non-deposit-taking Sacco society may, with the approval of the Authority, close or cause to be closed a place of business in a manner as to permanently cease business.
(2)A non-deposit-taking Sacco society shall apply to the Authority for authorisation to close a place of business and the application shall be accompanied by—
(a)a statement on the reasons for the proposed closure; and
(b)a plan for the settlement or transfer of assets and liabilities.
(3)The Authority may approve the closure of business if it is satisfied that—
(a)the public interest will not be jeopardized by the closure; and
(b)there are alternative financial services to the services provided by the Sacco society in the locality.
(4)A non-deposit-taking Sacco society granted approval to close its business shall—
(a)give a notice of the closure to the members at least ninety days before the closure in at least one newspaper of nationwide circulation or through any other method acceptable to the Authority; and
(b)report the closure of the business to the Authority not later than fourteen days after the closure.

20. Guidelines and directives on place

(1)The Authority may issue guidelines or directions to a Sacco society generally, and where appropriate provide exceptions to those guidelines or directions for the better carrying out of its functions under regulation 17, 18 and 19 of these Regulations, and in particular, with respect to the opening, relocation or closure of a place of business.
(2)An officer of a Sacco society who without cause, contravenes the provisions of this Act, regulations, guidelines or directives on opening, operating; relocating or closure of a place of business shall be liable to a financial penalty not exceeding a sum of one hundred thousand shillings.
(3)A person who contravenes the regulations on place of business commits an offence and shall be liable on conviction to a fine not exceeding one hundred thousand shillings or to imprisonment for a term not exceeding three years or to both such fine and imprisonment.

Part VI – MEMBERS' SHARES AND DEPOSITS

21. Terms of member shares

(1)A non-deposit-taking Sacco society shall prescribe a minimum number of shares, and the par value of each share, for which an individual shall subscribe in order to become a member of the Sacco society.
(2)A non-deposit-taking Sacco society may not increase the number of minimum shares or the par value of the shares without the written approval of the Authority.
(3)A non-deposit-taking Sacco society shall maintain at its head office an up to date register for member shares which shall provide the following information and details for each member—
(a)the name of the member in full;
(b)the unique number assigned to the member;
(c)the national identity card number or passport number of the member;
(d)the number of shares subscribed to by the member;
(e)the total value of the shares subscribed to by the member;
(f)the gender of the member;
(g)the date of birth of the member;
(h)the address of the member including postal, physical or email address;
(i)the names and addresses of the next of kin of the member; and
(j)any other information or details as the Authority may prescribe.
(4)A non-deposit-taking Sacco society shall issue share certificates to each of its members within thirty days of payment by the member for shares to which the member has subscribed
(5)A share certificate issued to a member shall bear the—
(a)the name of the non-deposit-taking Sacco Society in full;
(b)the address of the non-deposit-taking Sacco society including the locations of the Sacco society's registered offices and the postal, telephone and email addresses of the Sacco society;
(c)the name of the member in full to whom the share certificate is issued as appears in the shares register;
(d)the member's unique number;
(e)the number of shares subscribed to by the member;
(f)the seal of the non-deposit-taking Sacco society;
(g)the signature of the authorised officer of the non-deposit-taking Sacco society;
(h)the date of issuance of the share certificate; and
(i)the unique serial number.

22. Restriction on dealing in shares

(1)A member of a non-deposit-taking Sacco society shall not pledge the Sacco society's shares as collateral or security for a loan or any other credit facility.
(2)A member of a non-deposit-taking Sacco society may transfer shares to another or other members on leaving membership of a Sacco society, provided the Sacco society shall not refund shares.
(3)Shares issued by a non-deposit-taking Sacco society may earn dividends paid from net surplus after required transfers to reserves at the end of a financial year in accordance with the dividend policy of the Sacco society have been made.
(4)A non-deposit-taking Sacco society shall pay dividends if it has—
(a)realised an excess income over expenditure; and
(b)complied with the prescribed capital adequacy and any other requirements prescribed by these Regulations.

23. Non-withdrawable deposit account

(1)A non-deposit-taking Sacco society shall maintain an up-to-date non-withdrawable deposit account for each member of the Sacco society which shall specify the—
(a)the name of the member in full;
(b)the member's unique number;
(c)the account number of the member;
(d)the national identity card number or passport number of the member;
(e)the gender of the member;
(f)the date of birth of the member;
(g)the address of the member; and
(h)an up to date account of the balances of the member.
(2)The non-withdrawable deposit account of a non-deposit-taking Sacco society shall be operated in accordance with the Act, these Regulations and any guidelines or directives issued by the Authority.
(3)The amount accumulated in a non-withdrawable deposit account of a member may, on the written application of such a member and subject to the by-laws and policies of the non-deposit-taking Sacco society, be used as collateral or security against any borrowings or credit facilities advanced by the Sacco society to the member.
(4)The amount accumulated in a member's non-withdrawable deposit account shall be refunded when the member withdraws from membership of the non-deposit-taking Sacco society:Provided that the member shall have fully repaid all debts owed to the Sacco society or for which the non-withdrawable deposits have been pledged as security or collateral and is free from any outstanding guarantees.
(5)Where a non-deposit-taking Sacco society operates non-withdrawable deposit accounts, every member shall contribute to the deposit accounts on a monthly basis or at such fixed periods and in such amounts as determined by the Sacco society.
(6)A non-deposit-taking Sacco society shall refund to a member the amount accumulated in the member's non-withdrawable account within sixty days of receiving the written notification of the member to withdraw from membership of the Sacco society.
(7)The amount held in a non-withdrawable account of a member shall attract interest at a rate to be determined by the Sacco society as dictated by external market forces or internal funding needs.
(8)The amount held in a non-withdrawable account of a member or any portion thereof shall not be—
(a)converted to the share capital in the non-deposit-taking Sacco society; or
(b)withdrawn to pay for or for the payment of the share capital in the non-deposit-taking Sacco society.
(9)The Authority may at any time require a Sacco society to submit for inspection the non-withdrawable accounts of members.

24. Returns of non-withdrawable deposits

At least once in every quarter, each non-deposit-taking Sacco society shall submit to the Authority returns on the non-withdrawable deposits held by the Sacco society at the end of every quarter in Form 2C as set out in the Second Schedule.

25. Record-keeping

(1)A non-deposit-taking Sacco society shall maintain an account for each of its members through which shares and non-withdrawable deposit transactions with the member shall be recorded.
(2)A non-deposit-taking Sacco society may establish an electronic system for its members to access their shares and non-withdrawable deposit transactions statements.

26. Non-withdrawable deposits disclosure requirements

(1)A non-deposit-taking Sacco society shall disclose to its members the terms for operating non-withdrawable deposit accounts and the legal obligations of the members.
(2)The disclosure under paragraph (1) shall not be misleading or inaccurate and shall not misrepresent the non-deposit-taking Sacco society's non-withdrawable deposit account terms and conditions.

27. Dormant accounts

(1)A non-deposit-taking Sacco society shall deem a non-withdrawable account as dormant if, without justifiable cause, transactions have not been made therein for a period of at least twelve months and the Sacco society shall maintain a separate accounting record of all such dormant non-withdrawable accounts.
(2)Any non-withdrawable deposits and other sums due to a member shall be deemed to be unclaimed in accordance with the provisions of the Unclaimed Financial Assets Act (Cap. 494).
(3)A non-deposit-taking Sacco society shall fully comply with the provisions of the Unclaimed Financial Assets Act (Cap. 494) with respect to any unclaimed non-withdrawable deposits or any sums due to a member or a member's nominee or former member.

Part VII – CREDIT MANAGEMENT

28. General lending requirements

(1)Except as otherwise provided, these Regulations shall apply to all credit facilities provided by non-deposit-taking Sacco societies to the members.
(2)A non-deposit-taking Sacco society shall have a written credit policy consistent with the provisions of the Act, these Regulations and any other relevant written law.
(3)The credit policy of a non-deposit-taking Sacco society shall provide for the—
(a)composition, constitution and appointment of a credit committee;
(b)composition, constitution and appointment of a technical credit committee;
(c)responsibilities and duties of the credit committee and technical credit committee;
(d)loaning procedures and loaning documentation;
(e)eligibility requirements for a loan from the Sacco society;
(f)permissible loan purposes and acceptable types of collateral;
(g)loan concentration limits;
(h)terms and conditions for loans;
(i)maximum loan size per product;
(j)loan performance classification and provisioning for impairment reserve;
(k)where collateral is used as security for lending, maximum loan amounts as a percentage of the value of collateral;
(l)minimum due diligence procedures including ownership, county rates, lease period, pre-charge search and post-charge search;
(m)appraisal of the borrower's ability to repay the loan;
(n)terms and conditions for insider lending and insider dealing;
(o)maximum loan approval levels for each officer and members of committees;
(p)requirements for guarantors; and
(q)procedures for disposal of foreclosed assets.
(4)Except as otherwise provided, no director or employee of a non-deposit-taking Sacco society, or immediate family member of a director or employee shall receive anything of value or other compensation in connection with any loan made by the Sacco society.
(5)The credit committee of a non-deposit-taking Sacco society shall be responsible for ensuring that the credit policy of the Sacco society remains up-to-date and reflects current lending practices.
(6)A non-deposit-taking Sacco society shall give at least sixty days written notice to each member affected by a change in any term disclosed in the loan contract.
(7)A non-deposit-taking Sacco society shall provide each borrower, at least annually and upon request by the member, a statement for each outstanding credit facility which shall provide adequate detail of each transaction made during the period.

29. Sectoral loan classification returns

(1)A non-deposit-taking Sacco society shall, at least once in every quarter, submit to the Authority a return on sectors! loan classification of the loans issued to its members during that period.
(2)The sectoral loan classification return submitted under paragraph (1) shall specify—
(a)the members' unique number;
(b)the name of the member in full;
(c)the national identity card number or passport number of the member,
(d)the gender of the member;
(e)the date of birth of the member,
(f)the loan account numbers of the member;
(g)amounts of the loans advanced to members;
(h)the date on which the loans were advanced;
(i)the purposes of the loans;
(j)the economic sectors in respect of which the loans are meant to finance; and
(k)the repayment periods of the loans in months.
(3)For purposes of paragraph (2), the Authority may issue publish guidelines prescribing the economic sectors into which loans issued by non-deposit-taking Sacco societies may be classified.

30. Lending disclosure requirements

A non-deposit-taking Sacco society shall disclose the following lending terms and legal obligations applicable to any loan advanced by the Sacco society—
(a)the amount to be financed;
(b)the finance charges including interest rate, fees and any other charges that may be imposed by the Sacco society;
(c)the interest computation method and date on which interest begins to accrue on the loan;
(d)the conditions for refinancing of loans;
(e)the conditions for consolidation of loans;
(f)the frequency of issue of statements; and
(g)the collateral required to secure a loan.

31. Interest rates, fees and penalties

(1)Interest rates on loans issued by non-deposit-taking Sacco societies may be proposed by management and approved by the board of directors.
(2)A non-deposit-taking Sacco society shall, with respect to a loan issued by the Sacco society, first recover the interest accruing on the loan and thereafter, any charges due on the repayment of the loan.
(3)A non-deposit-taking Sacco society may levy a late charge in respect of the collection of a debt arising out of an extension of credit which remains unpaid after its due date.
(4)A non-deposit-taking Sacco society shall be limited to the interest it recovers from a borrower with respect to a delinquent loan which shall not exceed the amount outstanding when the loan became delinquent.

32. Security for loans

(1)A non-deposit-taking Sacco society shall ensure that—
(a)all loans granted or issued by the Sacco society are adequately secured; and
(b)a member is not allowed to offer a guarantee for a loan that exceeds the member's capacity to secure the loan.
(2)A non-deposit-taking Sacco society shall, at least once in every year, adequately inform a member of the performance of a credit facility for which the member has given a guarantee.
(3)A non-deposit-taking Sacco society shall not grant a loan or credit facility if the loan or credit facility if the member offers his or her shares in the Sacco society as security for the loan.
(4)A non-deposit-taking Sacco society shall not grant a member, or permit to remain outstanding, a loan such that the aggregate amount in respect of that member shall at any time exceed ten per cent of the Sacco Society's core capital without the written approval of the Authority.
(5)A non-deposit-taking Sacco society or an officer that violates any provision of this regulation shall be liable to pay a financial penalty to the Authority not exceeding one hundred thousand shillings in accordance with section 51 of the Act.

33. Inter-Sacco borrowing

(1)A non-deposit-taking Sacco society may borrow or lend to another non-deposit-taking Sacco society for the purpose of providing funding for member loans or to finance temporary liquidity shortfalls:Provided that—
(a)the Sacco sqciety shall not borrow or lend to another Sacco society without the written approval of the Authority;
(b)the borrowing Sacco society shall not exceed the prescribed limit for external borrowings;
(c)the board of directors of the Sacco society shall approve the transaction with the other Sacco society;
(d)the terms and conditions of the transaction shall be expressly set out in a written agreement between the parties and on the approval of the Authority; and
(e)where a Sacco society borrows for the purposes of on-lending to its members, it shall price loans taking in account the cost of the borrowed funds, the Sacco society's operating expenses, the quality of the existing loan portfolio and provisioning, the capital requirements of the Society and dividend and interest rebates expectations.
(2)The Authority may issue guidelines to provide for inter-Sacco borrowing by non-deposit-taking Sacco societies.

34. Approval of new products and services

(1)A non-deposit-taking Sacco society that wishes to introduce a new loan product or financial service shall—
(a)conduct a feasibility study to establish the demand and sustainability of the proposed product or service taking into consideration the attendant risks and the liquidity position of the Sacco society; and
(b)apply for approval from the Authority to introduce the product or service.
(2)Upon obtaining the approval of the Authority, the board of directors of the non-deposit-taking Sacco society may introduce the new product or service to the members of the Sacco society.
(3)An officer of a non-deposit-taking Sacco society who violates the provisions of this regulation shall be liable to pay to the Authority a financial penalty not exceeding one hundred thousand shillings in accordance with section 51 of the Act.

35. External borrowing and limits on loans

(1)A non-deposit-taking Sacco society shall not borrow externally in excess of twenty-five per cent of its total assets without the written permission of the Authority.
(2)A non-deposit-taking Sacco society that wishes to borrow externally in excess of twenty-five per cent of its total assets shall apply to the Authority for permission to do specifying the reasons for the need to raise the limit above twenty-five of its total assets.
(3)The Authority may permit a non-deposit-taking Sacco society to borrow externally in excess of twenty-five per cent of its total assets under exceptional circumstances, and shall impose such terms and conditions on the Sacco society as it deems fit if the proposed borrowing limit is not likely to have any adverse effect on the safety and soundness of the Sacco society.
(4)The borrowing powers of a non-deposit-taking Sacco Society under the Co-operative Societies Act (Cap. 490), shall not exceed the limit prescribed in these Regulations.
(5)A non-deposit-taking Sacco society shall only borrow externally to fund the loan portfolio of the Sacco society.
(6)For the purposes of this regulation, the computation of external borrowing shall Include any outstanding contingent liabilities or obligations that the non-deposit-taking Sacco society may have contracted.

36. Insider lending and insider dealing

(1)A director or employee of a non-deposit-taking Sacco society shall not use his or her position to further his or her personal interests.
(2)An application for a loan by a director or employee of a non-deposit-taking Sacco society shall first be approved by the board of directors of the Sacco society and where the applicant attends board meetings, he or she shall not be present in the meeting considering the loan application.
(3)The rates, terms and conditions of any loan made to a director or employee of a non-deposit-taking Sacco society, an immediate family member of the director or employee or a business associate of a director or employee shall not be more favourable than those offered to members of the Sacco society.
(4)A non-deposit-taking Sacco society shall not lend to its directors or employees or its directors', an immediate family member of the director or employee or a business associate of a director or employee or permit to be outstanding, an amount which in the aggregate exceeds ten per cent of its gross loan portfolio.
(5)A non-deposit-taking Sacco Society shall, on or before the fifteenth of each month, submit to the Authority an insider lending and loans performance report which the Authority may provide through guidelines.
(6)An officer of a non-deposit-taking Sacco society who violates the provisions of this regulation shall be liable to pay to the Authority a financial penalty not exceeding one hundred thousand shillings in accordance with section 51 of the Act.

37. Foreclosed assets

(1)Where a non-deposit-taking Sacco society holds an asset in satisfaction of a debt by a member, the disposition of such asset shall occur within one year:Provided that where the Sacco society fails to dispose of the asset, the Sacco society shall provide for probable loss at twenty-five per cent per annum.
(2)Where the proceeds from the disposition of an asset under paragraph (1) exceeds the amount owing, the excess amount shall be returned to the member after taking into account advertising charges and other charges related to the disposal of the asset.
(3)A non-deposit-taking Sacco society shall dispose of a foreclosed asset in accordance with the terms of the charge imposed on the asset.
(4)Where a charge imposed an asset held by a non-deposit -taking Sacco specifies disposal through public auction, a Sacco society shall advertise the disposal of the asset in a national newspaper of nationwide circulation on any day between Monday and Friday excluding public holidays.
(5)Any decline in the value of the property, as established by subsequent appraisals, shall be made through provisioning for the foreclosed asset.
(6)Assets of material value received by the Sacco society as partial or full payment for a borrower's indebtedness shall be accounted for at the lower of the outstanding loan balance or the market value on the date the asset is transferred to the foreclosed account.
(7)Any losses due to the loan balance being greater than the market value shall be charged to the allowance for loan losses when the asset is transferred to the foreclosed account.
(8)The Sacco society shall maintain adequate written documentation which shall provide evidence of the efforts of management to dispose the property within the time frame established in this regulation and include any legitimate offers to buy the asset.
(9)An officer of a Sacco Society or the family member of an officer shall not purchase foreclosed assets.
(10)An officer of a Sacco society, who violates the provisions of this regulation, shall be liable to a financial penalty not exceeding one hundred thousand shillings in accordance with section 51 of the Act.

38. Credit management and collection practices

(1)When a loan application is rejected, the Sacco society shall communicate to the applicant in writing the reasons for rejection of the loan within fourteen days of the receipt of the application.
(2)A Sacco society shall not levy fees where the only amount delinquent on a member's loan account is attributable to late fees or any other charges assessed on earlier instalments or payments made.
(3)A Sacco society may appoint a debt doftector after exhausting the normal debt collection procedures.

Part VIII – RISK CLASSIFICATION OF ASSETS AND PROVISIONING

39. Classification requirements

(1)A Sacco society shall undertake a detailed review of its credit portfolio at least once every quarter and shall ensure that—
(a)the granting of a loan and lending conforms to the approved credit policy;
(b)non-performing credit facilities are adequately identified and classified in accordance with the classification criteria prescribed in these Regulations;
(c)appropriate and adequate provisioning for potential loss are made and maintained at all times.
(2)The board of directors of the Sacco society shall at least once every quarter consider a report on the review of the credit portfolio undertaken in accordance with paragraph (1).

40. Delinquency and basis of classification

(1)A one-off loan payment shall be deemed to be delinquent if the total principal balance and interest is not serviced at the due date.
(2)The entire principal balance shall be deemed delinquent where the missed payment was for interest only.
(3)The Sacco society shall classify its loan portfolio based on performance and the terms provided in the loan contract.
(4)Where the loan interest payments are due, the loan classification will be based on the defaulted interest payments.
(5)All loans shall be classified into five categories on the basis of the following criteria—
(a)performing loans, being loans which are well documented and performing according to contractual terms;
(b)watch loans, being loans whose principal or interest have remained un-paid for one day to thirty days or where one instalment is outstanding;
(c)substandard loans, being loans not adequately protected by the current repayment capacity and the principal or interest have remained unpaid between thirty-one to one hundred and eighty days or where two to six instalments have remained outstanding;
(d)doubtful loans, being loans not adequately protected by the current repayment capacity and the principal or interest have remained unpaid between one hundred and eighty-one to three hundred and sixty days or where seven to twelve instalments have remained outstanding; and
(e)loss loans, being loans considered uncollectable or of such little value that their continued recognition as receivable assets is not warranted, not adequately protected and have remained unpaid for more than three hundred and sixty days or where more than twelve instalments have remained outstanding.
(6)A restructured loan may be reclassified if a sustained record of performance is maintained for six months or six instalments have been made from the date of the restructuring:Provided no loan shall be restructured more than once without the approval of the board of directors in its life cycle.
(7)All interest on non-performing loans and advances shall be suspended once a loan is classified as sub-standard, doubtful and loss and shall not be treated as income and interest in suspense shall be taken into account in computing provisions for non-performing loan accounts.
(8)At no time shall accrued interest income arising from loans exceed thirty days earnings of the entire loan portfolio.

41. Treatment of collateral

(1)Where a Sacco society obtains collateral for purposes of protecting itself against probable loan loss, the Sacco society shall ensure collateral that the collateral is duly charged and adequately insured based on a report of an independent registered valuer and revaluation shall be done every three years.
(2)A Sacco society shall maintain an up to date register of all securities and collaterals held against any loan issued by the Sacco society.

42. Loan loss allowances

A Sacco society shall assess and provide for loan loss allowance for non-performing loans as follows—
(a)one per cent for a loan classified as performing;
(b)five per cent for a loan classified as watch;
(c)twenty-five per cent for a loan classified as substandard;
(d)fifty per cent for a loan classified as doubtful; and
(e)one hundred percent for a loan classified as loss.

43. Loan write-offs

(1)A Sacco society shall write-off a loan or part of a loan from its statement of financial position when It loses control of the contractual rights over the loan or when all or part of the loan Is deemed uncollectible or where there is no realistic prospect of recovery and such circumstances shall be deemed to have arisen where -
(a)a court has ruled against the Sacco Society;
(b)all forms of securities or collateral have been called, realized but proceeds failed to cover the entire facility;
(c)a Sacco society is unable to collect or there is no collateral;
(d)a borrower is adjudged bankrupt; or
(e)efforts to collect the debt are abandoned for any other reason.
(2)The procedure for write-off should be detailed in the credit policy and any recovery made from any account previously written-off shall be credited back to the allowance for loan losses account in the financial statement and shall not be recognised as income in the year it is recovered.
(3)Despite the provisions of paragraph (1), a Sacco society shall not write off any loans to an insider, an immediate family member of an insider or a business associate of an insider, except with a prior written approval of the Authority.

44. Risk classification returns

A Sacco society shall submit to the Authority a return on the risk classification of assets and provisioning at the end of every quarter to be received on or before the fifteenth day of the following month as set out in Form 2D of the Second Schedule to these Regulations.

Part IX – INVESTMENTS

45. Investment policy

(1)A Sacco society's board of directors shall be responsible for formulating, reviewing and amending the investment policy that is consistent with the Act, these Regulations and any other applicable laws.
(2)A Sacco society's investment policy shall at the minimum provide for—
(a)purpose and objectives of investment activities;
(b)types and nature of investments that can be made;
(c)investment characteristics and limitations;
(d)investment approval guidelines;
(e)duties and responsibilities of a committee handling investment;
(f)investment risk management framework;
(g)composition, qualifications and competencies of persons handling the investment decisions;
(h)any other matter as the Authority may direct.

46. Limits on property equipment and financial assets

(1)A Sacco society shall not invest in land and buildings; and equipment in excess of ten per cent of total assets, unless a waiver to that effect has been obtained from the Authority, provided that the:
(a)investment in land and buildings shall not exceed five percent of the total assets; and
(b)donated assets and foreclosed assets are excluded in arriving at this percentage.
(2)The request for such waiver shall include a detailed investment appraisal showing the cost and justification for the investment, including how it will improve members' service and an analysis of expected impact on the profitability and capital adequacy requirements.
(3)A Sacco society shall be required to dispose of the investment in property acquired for the purpose of future expansion, if the property remains unutilized for five years from the date of acquisition.
(4)A Sacco society shall not make financial investments in non-government securities, including investments in equities, collective investment schemes, bonds, commercial papers and notes, or derivatives, or equities of a subsidiary or a related entity; in excess of forty per cent of its core capital provided that the—
(a)investments in equities of any legal entity or a derivate issued by any legal entity shall not exceed twenty per cent of the prescribed limit at any given time;
(b)investments in collective investment schemes, bonds, commercial papers and notes, shall not exceed thirty per cent of the prescribed limit at any given time; and
(c)investments in equities of a subsidiary or related entity shall not exceed fifty per cent of the limit prescribed at any given time.
(5)A Sacco Society shall not finance or extend a loan facility or guarantee in a subsidiary or a related entity without prior written approval from the Authority.
(6)For purposes of these regulations a "related entity" includes a Sacco society or a co-operative society in which the Sacco society shares common membership or common directorship or common bond or associates of the Sacco society or joint ventures.

47. Due diligence and approval of proposed investments

(1)A Sacco society shall carry out a due diligence on any investment it intends to undertake and shall at the minimum consider—
(a)compliance with the approved investment policy;
(b)investment cost and the Sacco society's financing ability;
(c)expected rate of return, payback period and associated risks including legal, compliance, financial, environmental and mitigation mechanisms;
(d)expected benefits to the entire membership;
(e)ownership of the investment and any insider dealings;
(f)any other matter as may be necessary to inform the investment decision.
(2)Despite the provisions of paragraph (1), a Sacco society shall not undertake any investment without prior written approval of the Authority; and the investment proposal together with the due diligence report being presented to members in a duly constituted meeting for approval.
(3)A Sacco society shall keep all original investment documentation in a fire-proof safe and shall maintain a disaster recovery site.

48. Restricted investment transactions

(1)A Sacco society shall not acquire, sell or lease premises to or from the following—
(a)a board member, employee or immediate family member of the board member or employee;
(b)businesses in which any of the persons named in sub paragraph (a) is an officer, partner or has an interest of greater than 10% in the entity or partnership
without the prior written approval of the Authority.
(2)All transactions with business associates of board members or family members of board members not specifically prohibited must be fully disclosed, conducted at arm's length and in the best interest of the Sacco society.

49. Investment returns

A Sacco society shall submit to the Authority a return on its investments at the end of every year to be received on or before the fifteenth day January of the following year as set out in Form 2E in the Second Schedule.

Part X – FINANCIAL PERFORMANCE REPORTING

50. Financial returns

(1)A Sacco society shall submit to the Authority a return of the statement of comprehensive income, a statement of financial position and a statement of other disclosures showing the results of its operations at the end of every quarter to be received on or before the fifteenth day of the following quarter as set out in format prescribed in the Second Schedule.
(2)The financial statements and associated descriptions shall be presented without deviation as set out in in the following forms set out in the Second Schedule—
(a)Form 2F— Statement of Comprehensive Income;
(b)Form 2G— Statement of Financial Position; and
(c)Form 2H— Statement of other disclosures.

51. Distribution of earnings to members

(1)A Sacco society may pay interest on the non-withdrawable deposits and dividends on the shares to its members based on financial performance for the year; subject to complying with regulatory requirements.
(2)A Sacco society may create a dividend equalization fund to serve as a buffer between desired dividend level and annual surplus realized.
(3)A Sacco society shall not finance payment of interest on non-withdrawable deposits, dividends, honoraria or bonuses from borrowed funds.

52. Internal auditors

(1)A Sacco society shall appoint an internal auditor who shall report to the board of directors; and be responsible for—
(a)the Sacco Society's internal audit function; and
(b)reviewing and reporting on the adequacy of the internal audit system and the financial matters of the Sacco society.
(2)A Sacco society may establish or outsource internal audit functions, provided that the person responsible for the internal audit function shall be a fully qualified accountant under the Accountants Act (Cap 531).
(3)The board of directors shall report to the Authority, within fifteen days, the appointment, resignation or removal of the internal auditor.

53. Specific duties of internal auditors and audit functions

(1)An internal auditor of a Sacco society shall be responsible to the board of directors for—
(a)developing a comprehensive audit program and audit plan to cover all the activities and programs;
(b)the implementation of an internal risk based audit strategy and annual plan;
(c)conducting timely risk-based internal audits and advising the board of directors on all audit matters;
(d)reviewing and advising the board of directors on the risk management framework;
(e)assessing the reliability and integrity of financial, operating procedures and compliance with set policies;
(f)reviewing the economic efficiency and effectiveness in the utilization of resources so that the objectives of the Sacco society are achieved;
(g)providing practical solutions to improve overall efficiencies and enhance internal controls;
(h)monitoring the level of compliance with laws, rules, regulations, policies, processes and procedures;
(i)conducting investigations on suspected internal fraud and corruption;
(j)proactively keeping the board of directors and management aware of emerging trends regarding internal controls, risk management, governance and internal auditing;
(k)preparing and presenting accurate internal audit reports to the board of directors on a monthly basis;
(l)liaising with external auditors when audits are undertaken;
(m)providing support, technical and secretarial services to the supervisory committee in the performance of its duties under these Regulations and the Cooperative Societies Act (Cap. 490); and
(n)promoting the highest standards of ethics and standards in the Sacco society based on the principles of integrity, objectivity, competence and confidentiality.
(2)A Sacco society's internal auditor shall be responsible to the Authority for—
(a)communicating any evidence of irregularities or illegal acts that have been committed by directors, employees or the Sacco Society;
(b)informing the Authority, if there are grounds to believe that the Sacco Society is insolvent or that there is a significant risk that it may become insolvent;
(c)reporting failure by the officers to provide all of the necessary information and documentation to enable the internal audit function to perform internal audit duties effectively; and
(d)performing any other responsibilities as the Authority may direct.

54. Appointment of external auditors

(1)A Sacco society shall recommend at last three names to the annual general meeting which shall select one out of the three to be the external auditor in accordance with section 45 of the Act.
(2)A Sacco society shall submit to the Authority the name of the selected external auditor within thirty days after the annual general meeting together with certified copy of the minutes recording the appointment.
(3)A Sacco society shall change or rotate its external auditors every three years; provided that the Authority may waive this requirement on exceptional circumstances, upon written a request from the Sacco society.

55. Restriction on removal of internal or external auditors

(1)A Sacco Society shall not remove its internal auditor or external auditor, except in accordance with section 44(2) of the Act.
(2)A notification for the removal of an internal auditor or external auditor shall contain detailed reasons for the proposed removal, and in its consideration of such notification, the Authority may obtain a written representation from the internal auditor or external auditor as the case may be.

56. Submission of audited financial statements

(1)A Sacco society shall within three months after the end of the financial year submit for approval to the Authority its audited financial statements.
(2)The audited financial statements to be submitted to the Authority pursuant to the Act shall be in four copies, or such other number of copies as the Authority may specify; and shall inter alia—
(a)disclose any material amount written off with a resolution of the annual general meeting of the Sacco society accompanied by a satisfactory explanation;
(b)have a signed statement of directors' responsibility;
(c)the auditor's opinion;
(d)statistical information;
(e)cash flow statement;
(f)statement of changes in equity;
(g)system's audit report;
(h)key audit matters;
(i)business sustainability report;
(j)other disclosures as prescribed in these Regulations.
(3)The board of directors shall not present the audited financial statements of a Sacco society to the members at the annual general meeting unless the financial statements have previously been submitted and approved by the Authority.
(4)The board of directors shall present the audited financial statements at the annual general meeting within four months after the end of the financial year during which the—
(a)external auditor shall present his independent report and opinion; and
(b)board of directors shall present to the members' the observations, directives, reservations or comments made by the Authority in approving the audited financial statements.
(5)A Sacco society shall display its audited accounts in accordance with section 46(1) of the Act, and in addition may post such statement of comprehensive income covering its activities and any other information prescribed, in both its website and that of the Authority.
(6)An officer of a Sacco society who wilfully occasions, or causes a Sacco society to violate this regulation, shall be liable to pay to the Authority a financial penalty not exceeding one hundred thousand shillings.

57. Responsibilities of external auditors to the Authority

The duties and responsibilities of the external auditor in relation to the Authority shall be to—
(a)communicate any evidence of irregularities or illegal acts that have been committed by directors, employees or the Sacco society itself;
(b)inform the Authority, if there are reasonable grounds to believe that the Sacco society is insolvent or that there is a significant risk that it may become insolvent;
(c)report failure by the officers to provide all of the necessary information and documentation to enable the auditor perform audit duties; and
(d)provide an opinion as to whether Sacco society management practices and procedures are sufficient to safeguard members' assets and enhance its financial stability.

58. Role of the supervisory committee

(1)The supervisory committee provided for under the Cooperative Societies Act, (Cap 490) shall, in addition to the duties assigned to it under the Cooperative Societies Rules 2004, (L.N. 123/2004) perform the following functions—
(a)review internal controls including the scope of the internal audit program, the internal audit findings, and recommend action to be taken by management;
(b)review internal audit reports and their overall effectiveness, the scope and depth of audit coverage, reports on internal control and any recommendations and confirm that appropriate action has been taken;
(c)ensure that accounting records and financial reports are promptly prepared to accurately reflect operations and results;
(d)review management reports, and reports from the internal and external auditors concerning deviations and weaknesses in accounting and operational controls;
(e)monitor the ethical conduct of the Sacco society and consider the development of ethical standards and requirements, including—
(i)effectiveness of procedures for handling and reporting complaints;
(ii)reviewing any related party transactions that may arise within the Sacco Society;
(iii)verifying that relevant plans, policies, and control procedures are established and properly administered;
(iv)investigating members complaints and making recommendations for redress;
(v)considering any matter of significance raised by members during the annual general meeting or the Authority.
(2)The supervisory committee shall prepare and submit quarterly reports to be presented to a joint meeting with the board of directors within thirty days after the end of each quarter.
(3)The supervisory committee shall submit or cause to be submitted to the Authority all quarterly reports of the supervisory committee, together with comments and actions made by the board of directors, within thirty days, after presentation to the board of directors.

59. Sanctions

A person who contravenes the provisions of this Part commits an offence and on conviction is liable to a fine of one hundred thousand shillings or imprisonment for a term not exceeding twelve months or to both such fine and imprisonment.

Part XI – GOVERNANCE OF SACCO SOCIETIES

60. Membership responsibilities

(1)Subject to the provisions of the Act, these Regulations and any other applicable law, the supreme authority of a Sacco society shall be vested in the members who shall jointly and severally protect, preserve and exercise such authority in general meetings.
(2)In exercising the responsibilities under this regulation, members shall jointly and severally ensure that only "fit and proper" members are elected to the board of directors and the supervisory committee.
(3)In electing the board of directors and the supervisory committee, members shall ensure compliance with the Constitution, the Act; Regulations; by-laws; nominee and vetting policy and any other applicable laws.
(4)The board of directors shall consist of elected non-executive directors.

61. Directors' duties and responsibilities

(1)In the conduct of the affairs of the Sacco society, the board of directors shall exercise prudence and diligence of and shall be held, jointly and severally liable for any loss occasioned by their actions which are contrary to the Act, these Regulations, guidelines and directives of the Authority, Co-operative Societies Act (Cap. 490) and rules, bylaws or the direction of any general meeting of the Sacco society or any other applicable law.
(2)The board of directors shall—
(a)ensure that management maintains proper and accurate records that reflect the true and fair position of the Sacco society's financial condition;
(b)safeguard the assets of the Sacco society;
(c)ensure the business of the Sacco society is conducted in accordance with its by-laws and any other resolutions made within the confines of the law and regulations;
(d)ensure that the Sacco society functions effectively and that an adequate and effective internal controls and risk management system is in place consisting of appropriate policies including human resource policy, credit policy, investment policy, savings policy, liquidity policy, information preservation policy, dividend policy, electoral and vetting policy and risk management framework;
(e)ensure that the Sacco society makes adequate provisions for known and probable losses likely to occur as required by these Regulations;
(f)ensure that the Sacco society maintains a positive image within the industry and the economy as a whole;
(g)develop and approve the terms of reference of various of committees of the Board;
(h)be responsible to the members for the preparation and publication of the Sacco society's annual audited financial statements which shall be presented at an annual general meeting held not later than four months after the end of a financial year;
(i)ensure effective co-ordination of the internal and external audit functions;
(j)monitor the external auditor's independence and objectivity, taking into consideration the external auditor's relevant professional, capacity and regulatory requirements;
(k)recommend three names of external auditors to the annual general meeting;
(l)review with external auditors the scope of the annual audit plan, systems of internal audit reports, assistance given by management to the auditors and any findings and actions taken and determine auditor's remuneration;
(m)develop and approve a board charter to guide the activities and operations of the board and its committees;
(n)ensure that the board keeps and maintains a true and accurate record of the minutes of the meeting of the board and the board committees.
(3)The board of directors shall—
(a)meet not more than fifteen times in a financial year and not more than two months shall lapse between the date of one meeting and the date of the next meeting; and
(b)furnish the Authority with a certified copy of the minutes of its meeting on a semi-annual basis to be received not later than the 15th July and 15th January of each calendar year.
(4)The board of directors shall disclose in the audited financial statements, any compensation, fees, travel or meeting expense or reimbursement paid to each director of a Sacco society and each member of the supervisory committee, and shall be presented at the annual general meeting.
(5)The board of directors shall create such number of committees as may be necessary to effectively discharge its functions including a Credit and Risk Management Committee, provided that the—
(a)number of board committees shall not exceed three;
(b)board members shall not sit in more than two committees;
(c)chairman shall not sit in any of the board committees, but may attend any committee meeting upon invitation in writing by the committee; and
(d)a board member shall not chair more than one committee.
(6)A director shall attend board meetings regularly and shall automatically cease to hold office if he or she fails to attend three consecutive board meetings without permission or reasonable cause.

62. Directors not to be remunerated

(1)A member of the board of directors shall not receive remuneration in form of a salary or any fixed or periodic payments, in respect of services rendered to the Sacco Society, but may be reimbursed for necessary expenses incurred in the course of discharging lawful duties to the benefit of the Sacco society.
(2)The reimbursements for necessary expenses incurred by directors in the course of discharging lawful duties shall be determined at such rates as the members shall approve during the general meeting.
(3)Where the Authority determines that a director or any other officer of a Sacco society has received any remuneration or any other payments whatsoever contrary to these Regulations, the Authority shall—
(a)direct the director or officer to forthwith refund to the Sacco society such remuneration or payment with interest at the prevailing Central Bank rate per month, from the date of receipt of such remuneration or payment until payment in full; and
(b)issue an order suspending the director or officer from the service of the Sacco society until the full refund with interest of such remuneration or payment.
(4)In addition to the penalty imposed by the provisions of paragraph (3), the Authority may impose or institute any other appropriate supervisory enforcement action against the officer or the Sacco society in accordance with sections 51 and 52 of the Act to protect the interest of the members.

63. Limitation

(1)A person shall not be permitted to hold the position of a Limitation director in more than one Sacco society.
(2)A person shall not be permitted to hold the position of a member of the supervisory committee in more than one Sacco society, or simultaneously hold the position of a member of a supervisory committee in one Sacco society and directorship in another Sacco society.

64. Appointment of chief executive officers

(1)Subject to obtaining prior written approval from the Authority, a board of directors shall appoint and may remove from office the chief executive officer of a Sacco society.
(2)A Sacco society shall not remove its chief executive officer except with prior written notification to the Authority.
(3)A notification for the removal of a chief executive officer shall contain detailed reasons for the proposed removal, and in its consideration of such notification, the Authority may obtain a written representation from the chief executive officer.
(4)The board of directors shall notify the Authority, within fifteen days of appointment, resignation or removal of the chief executive officer and in the case of resignation or removal, the board of directors shall indicate the reasons for such resignation or removal.
(5)Despite the provisions of paragraph (1), the Authority may remove from the service of the Sacco society, the chief executive officer or any other officer of a Sacco society, in accordance with the Act and these Regulations.

65. Responsibilities of chief executive officers

(1)The chief executive officer shall be responsible to the board of directors for the day to day running of the affairs of the Sacco society, including—
(a)the implementation and adherence to the prescribed policies, procedures and standards;
(b)systems that have been established to facilitate efficient operations and communication;
(c)the strategies developed and employed to facilitate achievement of targets and objectives;
(d)human resource management and development;
(e)adherence to the established code of conduct; the Act, these Regulations, guidelines and directives issued by the Authority; the Co-operative Societies Act (Cap. 490) and rules, the Sacco society's by-laws and any other applicable laws;
(f)any other matter concerning the operations and activities of the Sacco society as the Authority may direct.
(2)The chief executive officer shall ensure that the board of directors is frequently and adequately apprised about the operations and activities of the Sacco society through the presentation of relevant reports which shall cover, but not be limited to the following areas—
(a)financial statements (monthly, quarterly and annual) indicating current compared with past period actual performance, the budget compared with the actual expenditure and explanations for any variances;
(b)capital structure and adequacy;
(c)delinquent loan list, and in particular growth in loans, loan losses, recoveries and provisioning;
(d)statement of comprehensive income (monthly, quarterly and annual) including a comparison of the budget against actual;
(e)sources and distribution on profile of deposits;
(f)all insider dealings and non-performing insider loans if any;
(g)reports on violation of the Act, these Regulations, guidelines and directives issued by the Authority, the Co-operative Societies Act (Cap. 490) and rules, and any other applicable law, and the remedial actions taken to comply;
(h)large risk exposures;
(i)investment portfolio and its performance;
(j)any regulatory reports, and internal reports; and
(k)any other relevant areas to the Sacco society's operations.

66. Code of Conduct

(1)All officers of a Sacco society shall comply with the requirements of the Public Officer Ethics Act (Cap. 185B) and the Code of Conduct made thereunder.
(2)Every Sacco society shall prepare a code of conduct which substantially conforms to the form set out in the Third Schedule for the approval of the Authority.
(3)An officer of a Sacco society who wilfully violates the Sacco society's code of conduct, shall be liable to pay to the Authority a financial penalty not exceeding one hundred thousand shillings for every incidence.
(4)Despite the provisions of paragraph (3), the Authority may institute any other appropriate supervisory enforcement actions against an officer of a Sacco society who wilfully violates the Sacco society's code of conduct.

67. Directorships and subsidiaries

(1)A Sacco society shall not establish a corporate body or any other legal entity as its subsidiary without a written approval from the Authority, provided that where the subsidiary is a company, the subsidiary shall not be a public company.
(2)Where a Sacco society establishes a subsidiary, the board of directors shall develop a framework for the representation of its interest in the subsidiary, which shall be incorporated in the Sacco society's by-laws, provided that the chairman of the Sacco society shall not be eligible to be a member of the board of the subsidiary company or legal entity.
(3)The Authority may issue specific or general guidelines or directives to be complied with by Sacco societies intending to establish subsidiary corporate or legal entities.

Part XII – CONSUMER (MEMBER) PROTECTION

68. Access to financial products

(1)A Sacco society shall accord equal opportunities to its members to access the Sacco society's financial products and services.
(2)No member shall be discriminated upon on the basis of race, gender, age, tribe, religion or political affiliation when accessing the financial products and services of the Sacco society.
(3)A Sacco society shall—
(a)develop financial products and services aimed at improving the social-economic interests of members; and
(b)disseminate information about the financial products and services in a manner that is reasonably accessible to all its members.
(4)A Sacco society shall give advance written notice of at least thirty days before the effective date of a change to members affected or likely to be affected by any changes in the features of the Sacco society's products and services including the—
(a)products and services;
(b)likely impact of the charges on the members;
(c)effective date of the changes;
(d)rights of members affected by the changes; and
(e)any other material matters.
(5)Any member of a Sacco society who is adversely affected by any changes to the products and services of a Sacco society shall be granted opportunity to opt out of the products or services within a reasonable time, and without any charges or penalty.

69. Shares and non-withdrawal deposits disclosures

(1)A Sacco society shall in writing or verbally disclose fully and accurately, the terms and conditions for subscription to its shares or the terms and conditions for the mobilization of non-withdrawable deposits to operate to its members and potential members.
(2)A Sacco society shall upon opening a non- withdrawable deposit account for a member, disclose all the terms and conditions for operating the account including savings frequency, tariffs, penalties, commissions, charges and fees.
(3)In the case of a joint or group account, a disclosure under this paragraph may be made to any of the officials of the Sacco society.

70. Members' account confidentiality

(1)A Sacco society shall at all times maintain the confidentiality of the members accounts and except as provided in the Act and these Regulations, shall not disclose the details of any such account without a written consent of the member.
(2)A Sacco society shall provide each member with a free statement for each account that provides adequate detail of each transaction made during the period on a quarterly basis or upon request by a member.
(3)A Sacco society may furnish the statement referred to in paragraph (2) through an electronic media to the members' disclosed electronic address.

71. Lending terms and legal obligations

(1)A Sacco society shall disclose at a minimum the following lending terms and legal obligations between the parties as applicable—
(a)amount to be financed;
(b)finance charges, including interest rate, fees and any other charges that may be imposed;
(c)interest computation method (variable, fixed, flat or reducing) and the date interest charges begin to accrue;
(d)conditions for refinancing of loans;
(e)frequency of issue of statements; and
(f)collateral required to secure the lending.
(2)A Sacco society shall disclose the terms and conditions of a new loan it refinances to a member.
(3)A guarantor shall be adequately informed of the nature, purpose and amount of the liability prior to signing an agreement creating guarantor liability.
(4)A Sacco society shall inform a guarantor of a defaulted loan in writing within one month after the loan has gone into default.
(5)A guarantor to a loan facility shall upon request be granted full access to the performance of the guaranteed loan.

72. Dividends on shares and interest on non-withdrawable deposits

(1)A Sacco society shall disclose and share with members the—
(a)method employed to calculate any dividends payable on shares and interest payable on non-withdrawable deposits; and
(b)frequency of the dividend or interest calculation and the time the dividends or interest are paid or credited to an account.
(2)The shares of a Sacco society held by a member shall attract dividends so long as the member's share capital remains in the Sacco society, and non-withdrawable deposits shall attract interest on a pro-rata basis up to the time that such deposits are fully refunded to the member upon withdrawal from membership.
(3)A Sacco society shall take appropriate measures to ensure that any dividend or interest declared and payable to a member pursuant to paragraph (2) is as soon as is reasonably practical remitted to the member or the member's nominee.
(4)For non-withdrawal deposits, a Sacco society shall disclose the current interest rate and annual percentage yield as established by the board of directors and the method used to calculate the interest.
(5)A Sacco society shall fully comply with the requirements of the Unclaimed Financial Assets Act, (Cap 494) with regard to any unclaimed dividends on shares or interest on members' withdrawable deposit or both.

73. Disclosures in advertisements

(1)A Sacco society shall ensure that any advertisement on subscription to its shares, and operations of its non-withdrawable deposits account or the provision of any of its financial services—
(a)is not misleading or inaccurate; and
(b)does not misrepresent the Sacco society's status, or any of the Sacco society's products and services.
(2)An advertisement concerning credit or loan facilities—
(a)shall not be misleading or inaccurate;
(b)shall not misrepresent the Sacco society credit products and services;
(c)shall state only those terms and conditions of a credit or loan facility that actually are or will be offered by the Sacco society;
(d)state the interest rate charged or chargeable on the credit or loan facility, and if the rate is likely to change during the term of the credit or loan facility, the advertisement shall state that fact.

74. Fair debt-collection practices

(1)A Sacco Society shall be limited to the interest it recovers from a debtor with respect to a delinquent loan up to the limit not exceeding the amount owing when the loan became delinquent.
(2)A debt collector appointed by a Sacco society shall not engage in any conduct, the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt or any of the following—
(a)use of threat, or violence or other criminal means to physically harm the person, reputation, or property of any person;
(b)use of obscene or profane language;
(c)engaging any person in conversation on the telephone or in person with the intent to annoy, abuse or harass until they repay the debt;
(d)false, deceptive, or misleading representation or means in connection with the collection of any debt, including—
(i)false representation of the character, amount or legal status of any debt;
(ii)false representation or implication that any individual is an attorney or that any communication is from an attorney;
(iii)threat to take any action that cannot be legally enforced or that is not intended to be taken;
(iv)communicating or threatening to communicate to any person credit information that is known to be false.
(3)A debt collector shall not collect interest, fees, charges or expenses unless they are mentioned in the loan agreement or contract.
(4)A debt collector shall not collect his or her fees directly from a debtor.
(5)A Sacco society shall only engage a duly authorised person as its debt collector.

75. Member education and empowerment

(1)A Sacco society shall have a documented communication policy to guide in disseminating information to members.
(2)A Sacco society shall furnish its members electronically or otherwise on annual basis, with copies of its by-laws, audited financial statements and approved policies.
(3)A Sacco society shall hold at least one education day for it's members in a year to educate and update members on its products and services, rights of members and other emerging issues.
(4)A Sacco society shall develop service charter for it's members which shall provide for the turnaround time for service delivery, recourse and feedback mechanism.
(5)Every product and service developed and promoted by a Sacco society shall be accompanied by information brochures detailing the Sacco society's features and tariffs which shall be issued to members and conspicuously displayed for access by members.
(6)A Sacco society shall accord its members reasonable opportunity to access all material information about its financial products and services.

76. Complaint handling procedures

(1)A Sacco society shall establish effective procedures for receiving, considering and responding to member complaints which at the minimum are to be—
(a)member friendly;
(b)easily accessible;
(c)capable of addressing the complaints adequately;
(d)able to provide prompt feedback to the complainant;
(e)able to provide an audit trail report.
(2)A Sacco society shall adopt, document and disclose to its membership, the procedures for the proper handling of complaints and ensure that appropriate remedial action is taken on the complaints promptly.
(3)The complaints procedure of a Sacco society shall set out the process for dealing with complaints, including the—
(a)apportionment of responsibility for the actions that led to the complaint including to persons not specifically named in the complaint;
(b)timeframe for dealing with a complaint;
(c)timeframe within which to inform the complainant of progress in dealing with the complaint, which shall not be more than three months;
(d)right to reference or appeal to the Authority or the tribunal where the complaint cannot otherwise be resolved.
(4)A Sacco society shall designate an officer to review and investigate all complaints lodged by members and recommend appropriate remedial action to the chief executive officer of the Sacco society.
(5)A Sacco society shall handle complaints in a fair, appropriate and timely manner, and shall inform the members of the outcome in writing.
(6)A Sacco society shall, depending on the nature of the complaint, provide where a complaint is justified, appropriate restitution and address the weaknesses in its internal systems that led to the action causing the complaint.
(7)A Sacco society shall document all the actions it has taken under the complaints procedure.
(8)A Sacco society or an officer of a Sacco society, who without cause, contravenes or causes a Sacco society to contravene the provisions of this regulation shall be liable to pay to the Authority a financial penalty not exceeding a sum of one hundred thousand shillings.

77. Complaints register

(1)A Sacco society shall maintain an accurate and up to date complaints register specifying the—
(a)date when the complaint is received;
(b)member or any other person from whom a complaint was received;
(c)nature of the complaint;
(d)officer handling the complaint;
(e)officer against whom the complaint was made or who was responsible for the action that led to the complaint;
(f)progress in handling the complaint;
(g)manner or way the complaint was resolved; and
(h)time it took to resolve the complaint.
(2)A Sacco society may also maintain a summary register of complaints.
(3)A Sacco society shall—
(a)immediately and in all events within twenty-four hours, inform the Authority of any complaint that is still unresolved, three months after it was received; and
(b)prepare a quarterly report of the complaints handled in such manner and format as the Authority may determine or direct.
(4)A Sacco society or an officer of a Sacco society, who without cause, contravenes or causes a Sacco society to contravene the provisions of this regulation shall be liable to a financial penalty not exceeding a sum of one hundred thousand shillings.

78. Appeals and referrals

(1)Any dispute between a Sacco society and its members or other persons may be settled amicably through alternative dispute resolution mechanisms.
(2)Where the dispute under sub-regulation (2) is not amicably settled, such a dispute may be referred to the Authority for alternative dispute resolution or to Co-operative Tribunal pursuant to section 67 (3) of the Act, at the instance of either party.
(3)A Sacco society may conduct a satisfaction survey to ascertain the level of member satisfaction of it's products and services.

Part XIII – REGULATION AND SUPERVISION

79. Inspections

(1)The Authority shall be responsible for supervising Sacco societies to ensure compliance with the provisions of the Act, these Regulations, any guidelines or directives issued by the Authority pursuant to the Act, Sacco society's bylaws, policies, procedures and any other applicable law.
(2)The Authority shall have unlimited access to all premises and records of a Sacco Society.
(3)Without prejudice to the generality of paragraph (2), the Authority may in the supervision of Sacco societies—
(a)enter any premises of the Sacco society or any premises in which it is believed on reasonable grounds that books, records, accounts or documents relating to the Sacco society's business are kept;
(b)require any officer, employee or agent of the Sacco Society to produce any of the institution's accounting, financial and non-financial records or documents;
(c)open or cause to be opened any strong room, safe or other facility in which there are any of the Sacco Society's securities, books, records, accounts or documents;
(d)examine and make extracts and copies of any of the Sacco Society's securities, books, records, accounts or documents.
(4)The Authority may require a Sacco society to furnish any reports it may deem necessary and in such a form as the Authority may prescribe.
(5)In inspecting a Sacco society, the Authority shall satisfy itself with regards to—
(a)compliance with capital adequacy requirements;
(b)the composition of assets, liabilities and equity accounts;
(c)the quality of assets;
(d)risks management framework; and
(e)any other matter which in the opinion of the Authority is relevant to the performance of its mandate under the Act, these Regulations and any other applicable law.
(6)If the Authority is dissatisfied with the reports, it may request for additional information from the Sacco society or make an on-site inspection.
(7)The Authority may, at any time cause an on-site inspection to be made by any person authorised by it in writing, of any Sacco society and of its books, accounts and records.
(8)Where the Authority conducts an onsite inspection, the Authority shall—
(a)compile a report addressing all matters in paragraph (5); and
(b)present the report and the proposed corrective actions to the Sacco society.
(9)The board of directors of the Sacco society shall within fifteen days of receipt of the report pass a resolution on the implementation of corrective actions and submit a deficiencies restoration plan to the satisfaction of the Authority.
(10)All information obtained in the course of regulating and supervising a Sacco society shall be treated as confidential and used solely for the purpose of the Act and these Regulations.
(11)The Authority shall after every inspection, compile a report which shall highlight the performance of a Sacco society versus the set standards.

80. Enforcement action

(1)The Authority may use supervisory enforcement actions to provide specific corrective or remedial measures including appropriate timeframes and goals for achievement of compliance.
(2)The Authority shall prescribe any remedial action that it considers appropriate in addressing lapses or violations.
(3)The Authority may use any or all of the supervisory enforcement actions under section 51 of the Act and shall communicate to each individual Sacco society or officers of a Sacco society as and when need arises.
(4)Where the Authority has reasonable grounds to believe that an officer of a Sacco society is engaged or is likely to engage in any act or practice which has occasioned or is likely to occasion a contravention of the provisions of the Act, regulations or any other law in any manner detrimental to or not in the best interest of its members or of the members of the public, or the financial soundness of the Sacco Society, or has committed an offence, the Authority shall issue administrative directives regarding measures to be complied with or impose such sanctions to be taken against the said officer as it may deem fit and as provided for under the act and these Regulations.

81. Administrative sanctions

(1)In deciding which administrative action to be taken, the Authority shall consider the following—
(a)the financial condition of a Sacco society;
(b)the members' interests;
(c)the interest of the management and the board of directors in the continuation of the business of the Sacco society;
(d)the ability of the management and directors to manage the Sacco society effectively;
(e)the contribution of individual officers of the Sacco society to any non-compliance; and
(f)the local and macro-economic conditions.
(2)The Authority may pursue any or all of the following administrative sanctions against a Sacco society or its officers—
(a)prohibition from declaring or paying dividends or interest on non-withdrawable deposits;
(b)prohibition from expanding existing activities or engaging in new activities;
(c)prohibition from acquiring, through purchase or lease, additional property and equipment;
(d)suspension of lending, investment and credit extension operations;
(e)prohibition from accepting further non withdrawable deposits or other lines of credit;
(f)prohibition from declaring or paying bonuses, salary incentives, severance packages, management fees or reimbursement of expenses to officers; and
(g)assess and impose financial penalties.

82. Cease and desist orders

(1)A cease and desist order shall be issued by the Authority against a Sacco society or an officer thereof where the Sacco society has—
(a)engaged or continues to engage in any unsafe business practice; and
(b)violated or continues to violate the Act, these Regulations, or any guidelines and directives issued by the Authority.
(2)The order shall state the specific actions that shall be ceased, who is to cease from doing the action, and the time period.
(3)If the necessary corrections are not made, the Authority may invoke the provisions of section 51 of the Act to safeguard a Sacco society's assets and impose penalties as stipulated in the Act.
(4)The order shall be signed by the Authority and served upon the board of directors of the Sacco society.
(5)An officer of a Sacco society who occasions or causes a Sacco society to violate a cease and desist order, guidelines or directives issued by the Authority, shall be liable to pay to the Authority a financial penalty not exceeding one hundred thousand shillings.

83. Prohibition and removal of officers

(1)The Authority may prohibit any individual seeking to be a director or employee of a Sacco society, if the individual—
(a)has been charged or convicted with a crime involving monetary loss, fraud, perjury, or breach of fiduciary relationship with a financial institution;
(b)is adversely mentioned in an inquiry report under the Co-operative Societies Act (Cap. 490) or an inspection report under the Act; an investigation report or inquiry by any national law enforcement and investigative agency;
(c)has been charged with any offence under the Anti-Corruption and Economic Crime Act (Cap. 65) or Public Officers Ethics Act (Cap. 185B) or Leadership and Integrity Act (Cap. 185C) or in relation to any violation of Chapter 6 of the Constitution;
(d)is likely to pose a threat to the interest or threaten to impair public confidence in the Sacco society.
(2)A person against whom disciplinary action has been taken by way of removal from office shall be ineligible to hold office in any Sacco society for a period of three years or such other longer period as may be determined by the Authority.
(3)The Authority may direct a Sacco society not to conduct business or discontinue conducting business with an individual or legal entity that has been charged or adversely mentioned in connection with a crime involving monetary loss, fraud, perjury, breach of contract or a crime which may pose a threat to the interest of the Sacco society or threaten to impair public confidence in the Sacco society.
(4)The Authority may direct a Sacco society not to conduct business or discontinue conducting business with an individual or legal entity that has been charged or adversely mentioned in connection with a crime involving monetary loss, fraud, perjury, breach of contract or a crime which may pose a threat to the interest of the Sacco Society or threaten to impair public confidence in the Sacco Society.
(5)The Authority or Sacco Society may remove an officer from office, if the officer—
(a)directly or indirectly violates the Act, these Regulations, guidelines, directives or the Sacco society's bylaws;
(b)engages or participates in any unsafe or unsound practice in connection with the Sacco society;
(c)has a non performing loan or becomes a bad debtor; and
(d)commits any act, or practice or fails to take appropriate action, thereby committing a breach of fiduciary responsibility, resulting in or likely to result in—
(i)a Sacco society suffering financial loss or other damage;
(ii)members' interest being prejudiced; or
(iii)any party receiving unfair financial gain or other benefit.
(6)A notice to remove an officer from office by the Authority shall contain specific statement of facts constituting the grounds for removal and shall take immediate effect.
(7)A person aggrieved by the removal or prohibition order may appeal to the Cabinet Secretary.

84. Statutory management

(1)The Authority shall place a Sacco society under statutory management—
(a)if the Sacco Society willfully and continuously fails to comply with guidelines or directives issued by the Authority;
(b)if the Sacco Society has abandoned its core business or does not operate in the members' best interests;
(c)if the Sacco Society is totally incapable of coping with severe financial problems that need to be brought under control;
(d)if the Sacco Society has engaged in unsound financial practices resulting in massive erosion of capital; or
(e)if a petition is filed for winding up of the Sacco Society.
(2)A Sacco society's financial soundness and the member's interests shall be considered threatened if the Sacco society is unable to meet its obligations to depositors and creditors or if the core capital falls below fifty percent of the regulatory requirement.
(3)All expenses associated with the statutory management shall be met by the Sacco society.

85. Appointment of statutory managers

(1)A person shall not be appointed as a statutory manager of a Sacco society, if that person is a member of the Sacco society, a creditor of the Sacco society or is related to or is an immediate family member to an officer or former officer.
(2)Effective from the moment the statutory management is ordered, the following shall apply—
(a)the statutory manager shall operate on behalf of the Sacco society;
(b)all powers of the general meeting of members, board of directors and management shall be suspended and transferred to the statutory manager;
(c)no attachment or lien except a lien created by the Authority, shall attach to any property or asset of the Sacco society concerned as long as the statutory management stands;
(d)any gratuitous transfer of any asset of the Sacco society made within the period of one year before the statutory management shall stand revoked and all such assets shall be surrendered to the Authority;
(e)any lending to an officer, family member of the officer or business associate of the officer which is found to have been advanced on preferential terms or without adequate security made within twelve months prior to the statutory management shall be recalled, and that officer or family member or business associate shall immediately refund the monies advanced and pay any interest due.

86. Assessment of financial penalties

(1)Where the Authority determines that an officer of the Sacco society has occasioned or caused the Sacco society to suffer loss or potential loss, the Authority shall assess and impose a financial penalty in accordance with section 51(m) of the Act against the officer in a sum equal to such loss or potential loss that the Sacco society has or might have suffered.
(2)Where the officer fails to pay the assessed sum, the Authority may—
(a)direct the immediate removal of the officer from the service of the Sacco society;
(b)prohibit the officer from serving in any cooperative society until the penalty is paid in full; or
(c)institute civil recovery proceedings of the penalty in the tribunal.
(3)The penalty order shall be issued by the Authority to be served upon the guilty party and a copy to the board of directors, stating the reason for and the amount.
(4)Where the Authority imposes a financial penalty against the Sacco society or an officer of the Sacco society, the assessed amount shall be paid through an electronic funds transfer in favour of the Authority within thirty days upon service of the assessment notice.
(5)A Sacco society or an officer who is aggrieved by any assessment of a financial penalty made by the Authority, may appeal to the Cabinet Secretary.

87. Financial penalties for failure to submit reports, returns, etc.

(1)Save as provided in these Regulations, the Authority reserves the right to impose the following financial penalties in accordance with section 51(m) of the Act—
(a)an officer of a Sacco society who causes a Sacco society to fail to submit reports and information required by the Authority upon being requested to do so shall be liable to pay to the Authority a financial penalty not exceeding one hundred thousand shillings per incident;
(b)an officer of a Sacco society who causes a Sacco society to submit an incorrect report and information to the Authority upon being requested to do so shall be liable to pay to the Authority a financial a penalty not exceeding one hundred thousand shilling per incident.
(2)The Authority shall before imposing a financial penalty against an officer of a Sacco society—
(a)give the officer of the Sacco society not less than fourteen days' notice in writing of its intention to impose the financial penalty; and
(b)consider any representations made to it in writing by the officer of the Sacco society before imposing a financial penalty.

Part XIV – INFORMATION SECURITY, PRESERVATION AND BUSINESS CONTINUITY

88. Information preservation and management system

(1)The board of directors of a Sacco society shall be responsible for the establishment of an information preservation policy which shall comprehensively address the Sacco society's information preservation and business continuity.
(2)A Sacco society shall at all times maintain a robust management information system (MIS), which at the minimum shall be capable of—
(a)supporting flexible configuration of products and services offered by the Sacco society, and runs on a real-time and relational database;
(b)comprehensively capturing the members' data and information, including but not limited to members' date of birth, gender, residential physical address, postal address occupation, marital status, photographs and signatures;
(c)offering complete overview of a members' data and information, including account details and allows drill-down to individual transactions and postings;
(d)allowing a search for a member using different attributes of the data and information of the member;
(e)providing members with the transactional features to manage shares and deposits;
(f)supporting multiple methods of calculating interest including declining balance, annuity and balloon payment;
(g)supporting loan appraisals given the member's shares, salary income, turnovers, deductions etc;
(h)enabling member service by presenting personal details as well as information on accounts, loans, guarantors and collateral;
(i)allowing transactions to be posted real time to the general ledger as configured and which accounts are to be debited or credited for each transaction;
(j)allowing classification of loans and advances by performance and purpose;
(k)providing for the generation of comprehensive reports modules with the capability to design new reports and allow filtering and grouping of data;
(l)ability to produce detailed statement of financial position, statement of comprehensive income, statement of changes in equity, cash flow statement and other prescribed regulatory statements;
(m)supporting scheduling and export of reports to other electronic formats including Microsoft Excel, Word, CSV and PDF; as well as handling imported data from such electronic formats;
(n)capability of integration with other payment systems or applications;
(o)supporting automated and manually triggered archiving of data and information;
(p)supporting user profile and access rights management;
(q)capability of providing accurate and real time audit trail of all transactions;
(r)allowing daily data back-up to an off-site location or recovery centre;
(s)capability of rolling back to pending transaction and informs the user accordingly in case of a hardware failure or system crash;
(t)capability of supporting any other requirements as provided in the Act and these Regulations.
(3)A Sacco society may from time to time and shall when directed by the Authority carry out a comprehensive management information systems audit to establish vulnerabilities, weaknesses and risk exposures.
(4)A Sacco society shall—
(a)submit to the Authority a copy the comprehensive management information systems audit report within thirty days of receipt of the report, without any alterations; and
(b)prepare an implementation plan which shall include the actions to be taken, responsible parties and the time frame.

89. Due diligence on third-party service providers

(1)A Sacco Society shall not engage the services of third-party providers or vendors for its management information systems and infrastructure unless due diligence has been undertaken to assess—
(a)the providers' compliance with legal and industry standards including registration, tax compliance and membership or affiliation to professional associations;
(b)the providers' technical capacity to offer the intended services;
(c)the providers' governance structures that assures continuity including ownership structure, technical staffing level among others;
(d)the providers' financial condition including cash flows, audited financial statements; demonstrable financial capability to offer the services;
(e)the providers' cybersecurity measures including cybersecurity audit, monitoring cyber-attacks;
(f)the providers' risk management measures; and
(g)any other matter as the Authority may direct from time to time.
(2)The Authority may issue guidelines or circulars specifying any other feature that a service provider shall comply with before or prior of being engaged by a Sacco society.

90. Critical information and vital records

(1)A Sacco society shall keep copies of vital records in a safe location; which shall include but not be limited to copies of loan agreements, copies of member application forms, copies of titles for property and equipment owned by the Sacco society; copies of securities pledged by borrowers; copies of external borrowing agreements and insurance policies.
(2)A Sacco society shall copy all its critical and vital information to a memory device and store in a fireproof safe on a weekly basis provided a Sacco society shall ensure offsite backups are undertaken on weekly basis.
(3)A records log shall be maintained at the Sacco society showing the type of records stored, location of storage, the time the records were stored and the person who sent the records for storage as well as the person who did the backup.
(4)For purposes of these Regulations critical information and records means minimum records required to restore Sacco business operations in the event of a disaster, and shall include but not be limited to—
(a)a list of members' shares;
(b)non-withdrawable deposits and loan statements for each member's account;
(c)investments and bank balances; and
(d)financial reports which lists asset, liability and equity accounts.
(5)A Sacco society shall establish a secure archive for its physical records for future reference, which shall be installed with smoke detectors, fire extinguishers and be protected from rodents, water or moisture.

91. Disaster preparedness and business continuity

(1)A Sacco society shall have a written disaster preparedness plan approved by the board of directors.
(2)A Sacco society's disaster preparedness plan shall take into account the size and complexity of the Sacco society's business operations and other activities, and at minimum shall address—
(a)the interval at which the plan shall be reviewed;
(b)the person responsible for implementing the plan;
(c)the duties and responsibilities of the employees who are responsible for assessing the situation, providing information and establishing member service as quickly as possible;
(d)identification of alternative locations equipped with the necessary equipment to maintain critical operations for a sufficient time period in the event of a disaster;
(e)identification of alternative locations equipped with the necessary equipment to maintain critical operations for a sufficient time period in the event of a disaster;
(f)intervals of testing the back-ups and the plan;
(g)a security plan designed to protect the Sacco society's premises from robberies and burglaries which shall be reviewed periodically;
(h)a suitable and reliable standby power backup.

Part XV – MISCELLANEOUS PROVISIONS

92. Preparation, etc. of Sacco societies' performance reports

The Authority shall pursuant to section 22 of the Act prepare and submit to the Cabinet Secretary a report on the operations and performance of the specified non-deposit taking Sacco businesses during that year.

93. Amalgamations and divisions

(1)A Sacco society shall not—
(a)amalgamate with another Sacco society; or
(b)divide itself into two or more Sacco societies without prior written approval of the Authority.
(2)An application for approval of amalgamation or division of a Sacco society shall be accompanied by—
(a)a resolution of the general meeting of the Sacco societies on the proposed amalgamation or division;
(b)due diligence reports on Sacco societies proposed to be amalgamated or divided including their financial soundness, legal and regulatory compliance, products and services, ICT and human capacity;
(c)an amalgamation or division plan detailing probable asset or share ratios, share adjustments designation of a continuing Sacco society, by-laws, state of guarantee of member deposits, non-conforming assets and liabilities and provisions for notification and payment of creditors;
(d)the amalgamation agreement;
(e)the proposed notice of a special general meeting;
(f)financial statements and statistical reports in respect of the preceding months;
(g)the combined statement of financial condition; and
(h)an application for guarantee of members' deposits.
(3)The Authority shall approve or reject the application for amalgamation or division within thirty days of receiving all necessary and required information.
(4)Where the Authority gives its approval, each of the Sacco societies shall, not later than thirty days thereafter, notify all the creditors of the proposed changes in writing, post the information in all of the Sacco society's offices and place the relevant information in a national newspaper of wide circulation.

94. Electronic submission of returns and information and use of ICT

(1)Where a Sacco society is required to file, submit or furnish the Authority with any statement, returns, document, data or other information; such statement, returns, document, data or other information, shall unless otherwise directed by the Authority be filed, furnished or submitted through an electronic filing system established by the Authority in accordance with section 53A of the Act.
(2)The Authority may from time to time issue authentication access codes to Sacco societies to access the electronic filing system and shall where necessary cancel authentication access codes.
(3)The board of directors of a Sacco society shall be responsible to the Authority for—
(a)identifying the designated authorized officers of the Sacco Society who shall be issued with the authentication access codes;
(b)ensuring that designated authorized officer is a senior officer of the Sacco society capable of authenticating the accuracy, correctness and completeness of any statement, returns, document, data or other information filed, furnished or submitted through an electronic filing system;
(c)ensuring that chief executive officer of the Sacco society is at all times a mandatory designated authorized officer;
(d)ensuring that the designated authorized officers do not exceed three officers of the Sacco society at any time;
(e)notifying the Authority of any changes or intended changes in the Sacco society's authorized officers, including the chief executive officer;
(f)ensuring that the authentication access codes issued to authorized officers are not misused to the detriment of the Sacco society or the Authority or any other person.
(4)Where a Sacco society is required to submit or furnish a member of the Sacco society with any statement, returns, document, data or other information; such statement, returns, document, data or other information, may except as otherwise provided in the Act, these Regulations or any other written law, be submitted or furnished to the member through a secure electronic media as may be established by the Sacco society.

95. Unauthorized access or improper use or interference of electronic filing system established by the Authority or Sacco society

(1)A person who—
(a)knowingly and without lawful authority, by any means, gains access to or attempts to gain access to any electronic filing system established by the Authority or operated by the Sacco society;
(b)having lawful access to any electronic filing system established by the Authority or operated by the Sacco society, knowingly uses or discloses information obtained from such system for a purpose that is not authorised; or
(c)knowing that he is not authorized to do so, receives information obtained from any electronic filing system established by the Authority or operated by the Sacco society, and uses, discloses, publishes, or otherwise disseminates such information,
commits an offence.
(2)A person who commits an offence under paragraph (1) shall be liable on conviction—
(a)in the case of a natural person, to imprisonment for a term not exceeding three years, or to a fine not exceeding one hundred thousand shillings, or to both such fine and imprisonment.
(b)in the case of a body corporate, to a fine not exceeding five hundred thousand shillings.
(3)A person who knowingly—
(a)falsifies any record or information stored in any electronic filing system established by the Authority or operated by the Sacco society;
(b)damages or impairs any electronic filing system established by the Authority or operated by the Sacco society; or paragraph (c) damages or impairs any duplicate tape or disc or other medium on which any information obtained from any electronic filing system established by the Authority or operated by the Sacco society is held or stored otherwise than with the written permission of the Authority or the Sacco society,
commits an offence.
(4)A person convicted of an offence under paragraph (3) shall be liable to imprisonment for a term not exceeding three years, or to a fine not exceeding one hundred thousand shillings, or to both such fine and imprisonment.

96. Transitional provisions and provisional authorisation

(1)These Regulations shall—
(a)upon commencement be deemed to apply to every Sacco society which is carrying out the specified non-deposit taking business; and
(b)such a Sacco society shall submit to the Authority a written application for authorisation within six months from the date of commencement of these Regulations.
(2)The Authority shall consider any application made pursuant to paragraph (1) within ninety days of receipt of such application, and issue—
(a)an authorisation certificate in accordance with these Regulations, if the Sacco society meets the conditions specified under regulation 5 of these Regulations; or
(b)a provisional authorisation certificate for a period not exceeding twelve months, subject to such terms and conditions as may be imposed or endorsed thereon, if the Sacco society has not attained conditions specified under regulation 5 of these Regulations.
(3)A Sacco society issued with a provisional certificate in accordance with sub paragraph (2)(b) shall, in additional to any terms or conditions imposed or endorsed on the provisional certificate by the Authority, on or before the expiry of twelve months after the authorisation ensure that it complies with all the requirements set out under regulation 5 of these Regulations
(4)Where a Sacco society issued with a provisional certificate in accordance with sub paragraph (2)(b) fails to comply with the Transitional provisions and provisional authorisation requirements specified under regulations 5 of these Regulations, the Sacco Society shall immediately cease undertaking specified non-deposit taking business, and the Authority shall invoke the provisions of regulation 8 of these Regulations.
(5)Despite the provisions of sub paragraph (1) the Authority may, at any time and from time to time, and shall, if so directed by the Cabinet Secretary, cause an inspection to be made by any person authorized by the Authority in writing of any Sacco society and of its books, accounts and records, to determine if the Sacco society is conducting specified non- deposit-taking business.
(6)A Sacco society which fails to make an application for authorisation within six months commits an offence.

FIRST SCHEDULE

FORMS

  
FORM lA(r. 5(2))
  

APPLICATION FOR AUTHORIZATION

1.Name of Sacco Society:.................................................... C.S. No. ............................Date of Registration .............................................................
2.Location of Registered Office.........................................................
3.Physical Address of Head Office: L.R. No ..................................................Street ....................................... Building ..............................................
4.Postal Address ................................ Postal Code ...............................Telephone No .................................... P.I.N. No ...................................E-mail Address ....................................................................................
5.Specified non-withdrawable deposit taking business the Sacco is engaged in;Non-withdrawable deposit taking Sacco business where members deposits equal to or exceed KShs 100 millionNon-withdrawable deposits where registration and mobilization of share capital is through digital or other electronic payment platformsNon-withdrawable deposit taking Sacco business where deposits and shares mobilization is by persons ordinarily resident outside the country.
6.Names of places of business in Kenya and the number of years each has been established and has conducted or carried out business
No.Name of Place of BusinessName of Town, or trading centre or market center where branch is locatedCounty where branch is locatedYear of Establishment
1.    
2.    
3.    
NB: Attach to this application a list of other places of business. Provide name of the place of business, state whether it is a satellite, mobile unit etc.
7.Former name(s), if applicable, by which the Sacco society has been known1. ........................................from .............. to .............2. ........................................from .............. to .............3. ........................................from .............. to .............4. ........................................from .............. to .............
8.Details of Capital
(a)Paid-up value ..........................................................
(b)Core capital .............................................................
9.List and type of the Subsidiary of the Sacco Society (This section is MANDATORY)
Name of the SubsidiaryType (Company or Co-operative Housing,Investment etc.)Sacco'sShareholdingDirectorsDirector'sPosition in theSaccos Society
     
  
  
     
  
  
  
  
     
  
  
10.Particulars of Officers, Officials and Office Bearers (This section is MANDATORY):a) DirectorsList the Full Names of all the Directors, officials or office bearers of the SACCO Society including the date they assumed office; gender and year of Birth.
PARTICULARS OF DIRECTORS, OFFICIALS AND OFFICE BEARERS OF THE SACCO SOCIETY
 Full Namesof the DirectorDesignationDate ofAssumptionof office asDirectorGenderi.e.Male orFemaleYear ofBirthPersonal TelephoneNumber of Director
1.      
2.      
3.      
4.      
5.      
6.      
7.      
8.      
9.      
b) Supervisory Committee
PARTICULARS OF MEMBERS OF SUPERVISORY COMMITTEE OF THE SACCO SOCIETY
 Full Names ofthe DirectorDate ofAssumption ofoffice as MemberSupervisoryCommitteeGender i.e.Male orFemaleYear ofBirthPersonalTelephoneNumber
1.     
2.     
3.     
4.     
c) Senior Management (This section is MANDATORY).List the particulars of ALL Senior Management Officers in the SACCO Society clearly stating their designations; Highest Academic qualification, Professional Qualifications andDate of Appointment to current position in the table below.
PARTICULARS OF SENIOR MANAGEMENT AND OFFICERS OF THE SACCO SOCIETY
 Full Namesof the OfficerDesignationGender i.e.Male orFemaleYear ofBirthPersonalTelephoneNumber
1.     
2.     
3.     
4.     
5.     
11.Names of Bankers and their Address (This section is MANDATORY) Provide the particulars of ALL the SACCO Society's Bankers.
PARTICULARS OF BANKERS AND BANK ACCOUNTS OF THE SACCO SOCIETY
 Bank NameBranchNameAccountNumber(s)Nature of Accounte.g. overdraft,current, settlementetc.
1.    
2.    
3.    
4.    
5.    
6.    
12.Has the Sacco society ever been put under receivership or made any compromise or arrangement with its creditors or otherwise failed to satisfy creditors in full?...............................................................................If so, give particulars ................................................................................................................................................................................................................
13.Is the Sacco society under investigation by an inspector or other authorized officer of any government ministry, department or agency, professional association or other regulatory body or has any investigation ever taken place in the affairs of the Sacco society?.........................................................................................................................If so, give particulars ................................................................................Is the Sacco society currently engaged or does it expect to be involved in any litigation which may have a material effect on the resources of the Sacco Society? .................... If so, give particulars ............................................................................................................................................................................................................DECLARATIONWe, the undersigned, being officers of the Sacco society, declare that to the best of our knowledge and belief, the information contained herein and any attachments is complete, accurate and true.a) Chairman (Name) ..........................................Signature ...............................................................Date ........................................................................b) Chief Executive Officer (Name) ......................................Signature ........................................ Date ......................Notes:This application must be accompanied by all the relevant documents and requirements prescribed in the Act and these Regulations.

__________________________________

  
FORM lB(r. 5(3)(a))
THE FIT AND PROPER TEST
 
NOTE:Read the declaration below before completing this form. In case the space provided is inadequate, use additional paper.
1.THE SACCO SOCIETY
(a)Name of the Sacco Society .................................................................
(b)Position of the officer ...................................................................
.................................................................................................
2.PERSONAL INFORMATION
(a)Surname ........... Other Names .......... Gender ...... (MALE/FEMALE)
(b)Previous Names (if any) by which you have been known: ......................
(c)Year and Place of birth: .....................................
(d)Personal Identification Number (PIN) ........................
(e)National Identity Card/Passport number and date of issue ................
(f)Postal Address: ............... E-mail .............
(g)Mobile Telephone .............................
(h)Physical Address ...............................
(i)Educational Qualification and year obtained ...............
(j)Professional Qualifications and years obtained ................
(k)Name(s) of your bankers during the last 5 years ...............
3.EMPLOYMENT/BUSINESS RECORD
Name of Employer/BusinessAddressPeriodPosition HeldDatesReasons for Leaving
    FromTo 
       
       
4.DESCRIPTION OF YOUR PAST AND CURRENT ACTIVITIES4.1 SHAREHOLDING (DIRECTLY OWNED OR THROUGH NOMINEES)
Name of InstitutionDate ofIncorporationAmount ofShareholding% ofPast ShareholdingRemarks
    AB 
       
       
       
Key:A: Refers to date of closure or surrender of sharesB: Refers to reasons for closure or surrender4.2 DIRECTORSHIP
Name of InstitutionDate ofIncorporationExecutiveorNon-executivePosition Heldin case ofexecutivePast DirectorshipsRemarks
    CD 
       
       
       
KeyC: Refers to date of retirementD: Refers to reasons for retirement or resignation4.3 PROFESSIONAL BODIES
Name of BodyMember No.PositionPast MembershipsRemarks
   EF 
      
      
      
KeyE: Refers to date of retirementF: Refers to reasons for retirement or resignation4.4 SOCIAL CLUBS
Club NameMember No.Position HeldPast Club MembershipsRemarks
   GH 
      
      
      
      
KeyG: Refers to date of retirementH: Refers to reasons for retirement or resignation4.5 BORROWINGS
Name ofBorrowerLendingInstitutionType ofFacilityDateofOfferSecurityOfferedValue ofSecurityCurrent Out-standingBalanceRemarks
        
        
        
        
* Borrower to indicate individual/personal as well as the private Company shareholdings excess of 5%.
5.QUESTIONNAIRE5.1 Have you or has any entity with which you are associated as director, shareholder or manager, ever held or applied for a licence or equivalent authorization to carry on any business activity in any country? .......... If so, give particulars .............................................................................................................................5.2 Do you know whether any such application was rejected or withdrawn after it was made or any authorization revoked? .............. If so, give particulars ......................................................................................................................................................5.3 Have you at any time been convicted of any criminal offence in any jurisdiction? ............ If so, give particulars of the court in which you were convicted, the offence, the penalty imposed and the date of conviction ..................................................................................................................................5.4 Have you, or any entity with which you have been involved, been censured, disciplined, warned as to future conduct, or publicly criticized by any regulatory authority or any professional body in any country? ............. If so, give particulars .......................5.5 Have you, or has any entity with which you are involved, or have been associated as a director, shareholder or manager, been the subject of an investigation, in any country, by a government department or agency, professional association or other regulatory body? ..............................................If so, give particulars ...........................................................................................................................................................................................................5.6 Have you ever been dismissed from any employment, or been subject to disciplinary proceedings by your employer or barred from entry of any profession or occupation?If so give particulars ........................................................................................................................................................................................................5.7 Have you failed to satisfy any debt adjudged due and payable by you on an order of court, or have you made any compromise arrangement with your creditors within the last 10 years?If so, give particulars ...............................................................................................................................................................5.8 Have you ever been declared bankrupt by a court or has a bankruptcy petition ever been served on you?If so, give particulars ............................................................................................................................................................................................5.9 Have you ever been held liable by a court, for any fraud or other misconduct?If so, give particulars ......................................................................................................................................5.10 Has any entity with which you were associated as a director, shareholder or manager in any country made any compromise or arrangement with its creditors, been wound up or otherwise ceased business either while you were associated with it or within one year after you ceased to be associated with it? ............... If so, give particulars ..................................................................................................................................................................................................5.11 Are you presently, or do you, other than in a professional capacity, expect to be engaged in any li gation in any country? .......................................If so, give particulars ....................................................................................................................................................................5.12 Indicate the names, addresses, telephone numbers and positions of three individuals of good standing who would be able to provide a reference on your personal and professional integrity. The referees must not be related to you, and should have known you for at least five years.i) ..................................................................................................ii) .................................................................................................iii) ...................................................................................................5.13 Is there any additional information which you consider relevant for the consideration of your suitability or otherwise for the position(s) held/to he held? ............................if so give particulars ............................................................................................................................................................................................................NOTE: The information given in response to this questionnaire shall be kept confidential by the Authority, except in cases provided for by law. The omission of material facts may represent the provision of misleading information.DECLARATIONI am aware that it is an offence to knowingly or recklessly provide any information, which is false or misleading in connection with an application for authorization certificate to carry out the Sacco non-deposit-taking business in Kenya. I am also aware that omitting material information intentionally or un-intentionally shall be construed to be an offence and may lead to rejection of my application and legal action being taken against the offender.I certify that the information given above is complete and accurate to the best of my knowledge, and that there are no other facts relevant to this application of which the Sacco societies Regulatory Authority should be aware.I undertake to inform the Authority of any changes material to the applications which may arise while the application is under consideration.Further, I confirm that I have agreed to fulfil the responsibilities related to this position, and submit myself to the jurisdiction of the Authority in the performance of my duties as an officer of the Sacco society as provided in the Act and the Regulations made thereunderName: ..................................................................................Signed: ..............................................................................Dated at ............... this ................. Day of ............... 20 .............WITNESSED BEFORE MECOMMISSIONER FOR OATHS/MAGISTRATEName .......................................................................................Signature .................................................................................Address ..............................................................................................................................................................................NOTES FOR COMPLETION OF APPLICATION FORMSGENERALThese completion instructions are issued to give further guidance on completion of certain items in the application forms for an authorization certificate to conduct non-deposit taking Sacco business. These include:
(i)Fit and Proper Test-
This should be completed by all persons proposed as directors, supervisory committee and senior management. In the case of senior management, the following officers: the chief executive officer and the deputy chief executive officer if any or the equivalent by whatever title they are called by the Sacco society and the officers in charge of finance and audit functions or any other officer as may be determined by the Authority.
(ii)Educational qualification - State only qualifications attained at college level or highest educational qualification.
(iii)The rest of the items are considered self-explanatory and should be completed as fully as possible.

____________________________

  
FORM lC(r. 5(7))
AUTHORIZATION CERTIFICATE
AUTHORIZATION No. ......................This Authorization is granted to ................. (Name of Sacco Society) CS/NO. ............. of ..................... (Address) authorizes the said Sacco Society to conduct specified non-deposit-taking Sacco business in Kenya. This authorization is issued subject to the provisions of the Sacco Societies Act (Cap. 490B) and the non-withdrawable deposit taking Sacco Business regulations issued there under and to any conditions endorsed here on.This authorization covers the period from.......................to................................. for the Sacco Society's head office situated at L.R No................. Road, Town and the following places of business:
Authorized places of business
 Name of place of businessLocationCounty
    
    
1.   
2.   
3.   
The Authority may at any time revoke, amend or restrict this Authorization Certificate or vary any terms and/or conditions of its issuance.Issued under the common seal ofTHE SACCO SOCIETIES REGULATORY AUTHORITYDated this ................. day of .................. 20 ............

SECOND SCHEDULE

OTHER FORMS

  
FORM 2A(r. 13 (1))
CAPITAL ADEQUACY RETURN
Name of Sacco Society: CS No..........................
Financial Year:  
Start Date:  
End Date:  
1.CAPITAL COMPONENTS AMOUNT (KSh. 000')
   
1.1CORE CAPITAL 
1.1.1Share Capital 
1.1.2Capital Grants 
1.1.3Retained earnings/Accumulated losses 
1.1.4Net Surplus after Tax, current year to-date 50% 
1.1.5Statutory Reserves 
1.1.6Other Reserves(Include all loss) 
1.1.7Sub-Total (1.1 .1 to 1.1.6) 
LESS DEDUCTIONS 
1.1.8Investments in Subsidiary and Equity instruments of Other Institutions 
1.1.9Other Deductions 
1.1.10Total Deductions (1.1.8 to 1.1.9) 
1.1.11CORE CAPITAL (1.1.7 Less 1.1.10) 
1.1.12Retained earnings and Disclosed Reserves 
 
2.ON - BALANCE SHEET ASSETS 
2.1Cash (Local + Foreign Currency) 
2.2Government Securities 
2.3Deposits and Balances at Other Institutions. 
2.4Loans and Advances 
2.5Investments 
2.6Property and Equipment (net of depreciation) 
2.7Other Assets 
2.8TOTAL(2.1 to 2.7) 
2.9Total Assets (Per Balance Sheet) 
2.10Difference(2.8 Less 2.9)* 
   
3.OFF-BALANCE SHEET ASSETS 
4.CAPITAL RATIO CALCULATIONS 
   
4.1Total Asset value of on-balance sheet items as per 2.9 above 
4.2Total Asset value of off-balance sheet items as per 3 above 
4.3Total Assets (4.1 + 4.2) 
4.4Total Deposits Liabilities (As per Balance Sheet) 
4.5Core Capital to Assets Ratio (1.1.11/4.3)%0.0%
4.6Minimum Core Capital to Assets Ratio requirement8.0%
4.7Excess (deficiency) (4.5 less 4.6)-8.0%
4.8Retained earnings and Disclosed Reserves to Core capital(1.1.12/1.1.11)0.0%
4.9Minimum Retained Earnings and Disclosed Reserves to Core Capital Requirement50%
4.10Excess (deficiency) (4.8 less 4.9)-50%
4.11Core capital to Deposits Ratio (1.1.11/4.4)%0.0%
4.12Minimum Core Capital to Deposits requirement0.5%
4.13Excess/(Deficiency) (4.111ess 4.12)-0.5%
* A reconciliation for the difference to be attached on a separate sheet.
Note: This return should be received on or before the 15th day of the month following end of every quarter
AUTHORIZATION:
We declare that this return, to the best of our knowledge and belief is correct.
Sign .......................................... Date: ................................................Name of Authorizing Officer ...........................................................
Sign .................................... Date: ...................................................Name of Countersigning Officer ...................................................
COMPLETION INSTRUCTIONS ON CAPITAL ADEQUACY RETURN
1.CAPITAL COMPONENTS1.1 CORE CAPITAL1.1.1 Share CapitalThis is the value issued and fully paid members shares.1.1.3 Retained Earnings/Accumulated LossThese are reserves retained from earnings or accumulated losses from the profits/losses of prior years. They should however exclude reserves arising from revaluation of investment properties and cumulative unrealised gains and losses on financial instruments.1.1.4 Net Surplus after Tax Current Year to Date 50%This is 50% of current year to date un-audited after tax profits. The Sacco society must have made adequate provisions for loan losses, depreciation, ainortization and other expenses. In arriving at the applicable figure, any proposed dividends would have been taken into account. This should however exclude reserves arising from revaluation of investment properties and cumulative unrealised gains and losses on financial instruments. In case of a loss, full amount should be included.1.1.5 Statutory ReserveThese are accumulated reserves that have been appropriated from net surplus (revenue reserves) over the years. This is normally 20% of retained earnings after tax.1.1.5 Donations and GrantsThese are donations to the Sacco Society that are irredeemable or non-payable1.1.6 General ReservesThese are reserve provisions to cover other non-performing receivable accounts.1.1.6 Other ReservesThese are all other reserves, which have not been included above. Such reserves should be permanent, unencumbered, uncollectible and thus able to absorb losses. Further, the reserves should exclude cumulative unrealised gains and losses on available-for-sale-instruments.1.1.7 Sub-TotalEnter in this line the sub-total of all the items from 1.1.1 to 1.1.6. DEDUCTIONS FROM CORE CAPITAL1.1.8 Investment in Subsidiary and Equity Instruments of Other InstitutionsThis is investments made by a Sacco society in its subsidiary institutions and equity instruments of other institutions.1.1.9 Other DeductionsIn this line, enter any other deductible items that have not been dealt with in 1.1.8.1.1.10 Total DeductionsThis is the total of all the items from 1.1.8 to 1.1.91.1.11 Core CapitalCore Capital is the deduction of line 1.1.7 from line 1.1.101.1.12 Retained earnings and Disclosed ReservesEnter the sum of retained earnings, statutory reserves, 50% accumulated profits to date (if it is a loss enter the whole amount), and other reserves as disclosed in the balance sheet or statement of financial position
2.ON-BALANCE SHEET ASSETS2.1 CashEnter in this line cash at hand (Local + Foreign notes and coins).2.2 Government SecuritiesThese are Treasury bills and treasury issued by the Government of Kenya.2.3 Deposits and Balances Due from Lending InstitutionsThese are deposits and balances held with banks, other financial institutions, and other Sacco societies including overnight balances.2.4 Loans and AdvancesThese refer to are facilities advanced to members whether secured or not. These be reported net of provisions which must be computed in accordance with Classification of Assets and Provisioning Return. However, provisions appropriated from retained earning should not be netted off from loans and advances.2.5 InvestmentsThese are investments in a Sacco Society's subsidiary institutions and other financial institutions.2.6 Property and EquipmentThese are assets acquired for use in the operation of the business or for investment purposes, e.g. furniture, computers, freehold and leasehold land and buildings. They should be shown net of accumulated depreciation, amortized cost, or at fair value.2.7 Other AssetsThese are other assets, which have not been dealt with above.2.8 Total On-Balance Sheet AssetsEnter in this line total on-balance sheet asset i.e. total of line 2.1 to 2.7.2.9 Total Assets (As per Balance Sheet)Total asset figure as reported in the Balance Sheet for the period should be indicated in this line.2.10 DifferenceThis is the difference between total on-balance sheet assets and total assets as reported in the un-Audited Monthly Balance Sheet. The difference should be explained in the form of reconciliation.
3.OFF-BALANCE SHEET ITEMSIn this line, indicate computed off-balance sheet assets such as existing guarantee's by the Sacco Society
4.0CAPITAL RATIO CALCULATIONSCompute as per the formulae provided in the form.
4.4Total DepositsTotal deposit figure as reported in the Balance Sheet for the period should be indicated in thcs lineGENERAL: All reported items should agree with or capable of being derived from the figures reported in the Balance Sheet for the period. This is a monthly return and should be submitted by the 15th day of the following month following end of every quarter
  
  
FORM 2B(r. 15(1))
LIQUIDITY STATEMENT RETURN
 
 
 Sacco Society: CS No. ........
 Financial Year:  
 Start Date:  
 End Date:  
1.Notes and CoinsKShs '000
1.1Local Notes and Coins 
1.2Foreign Notes and Coins 
2Bank Balances 
2.1Balances with commercial banks 
 Less: 
2.2Time deposits with banks more than 90 days 
2.3Overdrafts and matured loans/ Advances from domestic banks 
3Balances with Financial Institutions other than banks 
3.1Balances with Other Sacco societies 
3.2Balances with Other Financial Institutions other than Banks and Sacco societies 
 Less: 
3.3Balances due to other Sacco societies 
3.4Balances due to Financial Institutions 
3.5Matured Loans and Advances received from Financial Institutions other than banks 
4GOVERNMENT SECURITIES 
4.1Treasury Bills 
4.2Treasury Bonds/Bearer Bonds 
5.NET LIQUID ASSETS (1-4) 
6.OTHER LIABILITIES 
6.1Matured Liabilities 
6.2Liabilities Maturing within 91 Days 
6.3Total Other liabilities 
 Less : 
7LIQUIDITY RATIO 
7.1Net Liquid Assets (5) 
7.2Total Short term Liabilities 63+7.3 
7.3Ratio of(8.1/8 2)%0.0%
7.4Minimum Holding of Liquid Assets Requirement10.0%
7.5Excess/Deficit (8.3-8.4)- 10.0%
* A reconciliation for the difference to be attached on a separate sheet.Note: Monthly return to be received on or before the 15th day of the following monthAUTHORIZATION:We declare that this return to the best of our knowledge and belief is correct.Sign ...................................... Date: .................Name of Authorizing OfficerSign ....................... Date:Name of Countersigning Officer
1.Notes and Coins1.1 LocalEnter all notes and coins on the Sacco Society's premises (including mobile units) which are legal tender in Kenya.1.2 Foreign notes and CoinsEnter the Kenyan shillings equivalent of all convertible foreign currencies held by the Sacco Society. The CBK mean rates as on the reporting dates should be applied in converting foreign currencies into Kenya shillings.
2.Balances with Banks2.1 Balances with banksEnter the total of all balances (overnight, call and time) held at domestic commercial banks excluding un-cleared effects. These balances should include accrued interest.2.2 Time Deposits with BanksEnter the amount of time deposits including accrued interest entered in 2.1 above whose maturities exceed 90 days.2.3 Overdrafts and Matured loans and advances from domestic banksEnter the total of all overdrafts and any other debit balances on matured loans and advances including guarantees and bonds issued by commercial banks.
3.Balances with Other Financial Institutions3.1 Balances with other Sacco SocietiesEnter the total of all balances placed with other financial institutions including Nacos including accrued interest.3.2 Balances with other Financial InstitutionsEnter the total of all balances (overnight, call and time) placed with the Sacco Society by financial institutions (mortgage companies, building societies etc), excluding un-cleared effects but including accrued interest.3.3 Balances due to other Financial InstitutionsEnter the total of balances received from financial institutions including accrued interest. This balance should agree with the total analysed in the table attached and should exclude balances with maturity period exceeding 90 days.3.4 Balances due to financial institutions other than banksEnter the amount held in other financial institutions whose maturities exceed 90 days.3.5 Matured Loans and Advances received from Financial InstitutionsEnter the total of matured loans and advances including guarantees, bills discounted, promissory notes and performance bonds received from financial institutions. All deposits/placements with institutions/building societies under liquidation should not be reported as part of liquid assets.
4.Government Securities4.1 Treasury BillsEnter the amortized cost of all Kenya Government Treasury Bills investments by the reportingSacco Society, net of encumbered Treasury Bills. Encumbered Treasury Bills are those pledged to secure any form of credit facility granted to the reporting Sacco Society.4.2 Treasury Bonds/ Bearer BondsEnter the amortized cost or fair value of all treasury bonds/bearer bonds traded in the Nairobi Stock Exchange acquired by the reporting Sacco Society directly from the government and its issuing agents and those discounted from third parties.
5.Net Liquid Assets Enter the sum of items 1 to 4 above 0 the reliabilities
5.1Matured Liabilities
Enter the sum of all matured liabilities (Including crystallized off-balance sheet commitments) that have cash flow implications and are due for payment.
5.2Maturing within 90 days
Enter the sum of all liabilities that will mature within 90 days from the date of the return. This should include scheduled loan repayments for the next three months.
5.3Total other liabilities
Enter the total of items 6.1— 6.2
6.Liquidity Ratio Calculate the ratios using the formula providedThe liquidity statement should be completed as per the instructions contained in this regulation, and should be submitted on the 15th of the following month.
  
FORM 2C(r. 24)
  
STATEMENT OF DEPOSITS RETURN
  
Name of Sacco Society CS No.
Financial Year:  
Start Date:  
End Date:  
No.Range* Type of DepositNo. of A/CsAmount KShs '000'
1Less than 50,000Non withdraw-able  
250,000 to 100,000Non withdraw-able  
3100,000 to 300,000Non withdraw-able  
4300,000 to 1,000,000Non withdraw-able  
5Over 1,000,000Non withdraw-able  
  TOTAL  
Note: This return should be received on or before the 15th day of the month following end of every quarter
* To include accrued interest and any other form of deposit
AUTHORIZATION:
___________________
We declare that this return, to the best of our knowledge and belief is correct. 
................................. SIGN ................................. Date: ...................
Name of Authorizing Officer
  
  
  
  
  
  
  
    
  
  
FORM 2D(r. 44)
RISK CLASSIFICATION OF ASSETS AND PROVISIONING 
RISK CLASSIFICATION OF ASSETS AND PROVISIONING
Name OfSacco Society: CS/No.
Financial Year:  
Start Date:  
End Date:  
PORTFOLIO AGEING REPORT
 ClassificationABCD
No. No. ofA/CsOutstandingLoanPortfolio(KSh.)RequiredProvisionRequiredProvisionAmount(KSh.)
1Performing  1% 
2Watch  5% 
3Substandard  25% 
4Doubtful  50% 
5Loss  100% 
 Sub-Total    
 Rescheduled/Renegotiated Loans    
6Performing  1% 
7Watch  5% 
8Substandard  25% 
9Doubtful  50% 
10Loss  100% 
 Sub-Total    
 GRAND TOTAL    
Note: This return should be received on or before the 15th day of the month following end of every quarter
AUTHORIZATION:
We declare that this return, to the best of our knowledge and belief is correct.
....................................................................................Sign ......................Date:..............................Name of Authorizing Office
.............................................................................Sign............................... Date:.......................Name of Countersigning Officer
COMPLETION INSTRUCTIONS FOR RISK CLASSIFICATION AND LOAN LOSS PROVISIONING
1.GeneralThis return should be completed strictly in accordance with the Regulation on Risk Classification and Loan Loss Provisioning.
1.Enter in column A the number of accounts under each classification.
2.Enter in column B the amount outstanding under each classification categories of Performing; Watch; Sub-standard; Doubtful and Loss.
3.Enter in column C the minimum provisions requirement in percentages in each classification category.
4.Enter in column D provisions required in each classification category.
5.Enter in column E the discounted value of securities held in each classification category.
6.Enter the difference between column D and E in column F, but for performing and watch class, enter the amount as is in column D in column F.
2.Notes for establishment and maintenance of the Allowance for loan loss accountAllowance for loan loss account shall be a one-time adjustment and shall be established as follows:a. Create a contra-asset account to be called—Allowance for Loan loss.b. Create the expense account to be known as—provision for loan loss.c. Determine the amount needed in the allowance for loan loss by completing a risk classification form and credit the amount to the Allowance for loan loss.d. Fund the amount needed in the allowance for loan loss by debiting the same to retained earnings account. This is a one-time adjustment.e. Maintain the allowance for loan loss by debiting and crediting provision for loan loss and allowance for loan loss after performing a risk classification and loan loss provisioning.f. To charge off loans, debit allowance for loan loss and credit loans to members with the same amountg. To account for recovery of charged off bad debts, debit the bank account and credit allowance for loan loss account.
FORM 2E(r.49)
  
RETURN ON INVESTMENT
Sacco Society: CS/NO:
Financial Year:  
Start Date:  
End Date:  
Ref. No.  
1.1Core capital 
1.2Total assets 
1.3Total deposits 
1.4Non earning assets 
1.5Financial assets 
1.6Financial assets -Land & Building, equipment (Per balance sheet) 
1.7Land & Building (Per balance sheet) 
1.8Subsidiary (per Balance sheet) 
1.9Related Entity (e.g Housing ) as per Balance Sheet 
2.0Land and buildings and equipment to total Assets Ratio (1.6/1,2)% 
2.1Maximum Land & Building and equipment to Total Asset requirement10%
2.2Excess (deficiency) (2.0 less 2,1) 
3.0Land & Buildings to total Assets Ratio (1.7/1,2)% 
3.1Maximum Land & Building to Total Asset requitement5%
3.2Excess (deficiency) (3.0 less 1.1) 
4.0Financial investments to Total Deposits liabilities Ratio (15/13)% 
4.1Maximum financial investments to Total Deposits liablities Ratio %30%
4.2Excess (deficiency) (4.0 less 4.1) 
5.0Subsidiary investment to Core Capital Ratio (1.8/1.1)% 
5.1Maximum Subsidiary investment to Total assets Ratio %30%
52Excess (deficiency) (5.0 less 5.1) 
6.0Subsidiary investments to Total Deposits liablities Ratio (1.8/1.3)% 
6.1Maximum Subsidiary investments to Total Deposits liablities Ratio %5%
6.2Excess (deficiency) (6.0 less 6.1) 
7.0Related Entity investment to Core Capital Ratio (1.9/1 .1)% 
7.1Maximum Related Entity investment to Total assets Ratio %30%
7.2Excess (deficiency) (7.0 less 7.1) 
8.0Related Entity investments to Total Deposits liablities Ratio (1.9/1.3)% 
8.1Maximum Related Entity investments to Total Deposits liablities Ratio %5%
8.2Excess (deficiency) (8D less 8.1) 
Note: This return should be received on or before the fifteenth day of the month following end ofevery quarter.
FORM 2F(r. 50(2)(a))
  
STATEMENT OF COMPREHENSIVE INCOME
Sacco Society: CS:
Financial Year:  
Start Date:  
End Date:  
STATEMENT OF COMPREHENSIVE INCOMEPeriod ....... Current YearKSh. '000'Period .......Prior YearKSh. '000'
Ref No.   
1.Financial Income00
1.2.Financial Income from Loans Portfolio00
2.1Interest on Loan Portfolio  
2.2Fees and Commission on Loan Portfolio  
3.Financial Income from Investments00
3.1Government Securities  
3.2Placement in Banks, Samos and similar financial institutions  
3.4Commercial Papers, notes and bonds  
3.5Collective Investments Schemes  
3.6Derivatives  
3.7Equity investments in subsidiaries and related entities  
3.8Investments in companies - shares/stocks  
4.Financial Expense00
4.2Interest Expense on Deposits  
4.3Cost of External Borrowings  
4.4Dividend Expenses(on member shares)  
4.5Other Financial Expense00
4.6Fees and Commissions expense  
4.7Other expense.  
5.Net Financial Income/(Loss)00
6.Allowance for Loan Loss00
6.1Provision for Loan Losses  
6.2Value of Loans Recovered  
7.Operating Expenses00
7.1Personnel Expenses00
7.2Governance Expenses  
7.3Marketing Expenses  
7.4Depreciation and Amortization Charges00
7.5Administrative Expenses  
8.Net Operating Income00
9.Net Non-Operating Income/ (Expense)00
9.1Non- Operating Income  
9.2Non-Operating Expense  
10.Net Income (Before Taxes and Donations)00
11.Taxes00
12.Net Income (After Taxes and before Donations)00
13.Donations00
14.Net Income/ (After Taxes and Donations)00
We declare that this return, to the best of our knowledge and belief is correct.
................................................... ...................... ..............................
................................................... ...................... ..............................
Note: This return should be received on or before the 15th day of the following quarter
FORM 2Gr.50(2)(b))
  
STATEMENT OF FINANCIAL POSITION
Sacco Society: CS:
Financial Year:  
Start Date:  
End Date:  
 Period ....... Current YearPeriod .......Prior Year
 KSh. '000'KSh. '000'
Ref No.ASSETS  
1.Cash and Cash Equivalent00
1.1Cash in Hand (Both Local and Foreign Notes and Coins)  
1.2Cash at Bank: (Placement with Financial Institutions)  
2.Prepayments and Sundry receivables00
3.Financial Investments00
3.1Government Securities - Treasury Bills/bonds,  
3.2Placement in Commercial banks, Saccos and similar financial institutions  
3.3Commercial papers, notes and Bonds  
3.4Collective Investments Schemes  
3.5Derivatives  
3.6Equity investments in subsidiaries and related entities  
3.7Investments in companies - shares/stocks  
4.Net Loan Portfolio00
4. 1Gross Loan Portfolio  
4.2Allowance for loan loss  
5.Accounts Receivables00
5. 1Tax Recoverable  
5.2Deferred Tax Assets  
5.3Retirement Benefit`Assets  
6.Property and equipment00
6. 1Investment Properties  
6.2Property and Equipment  
6.3Prepaid Lease Rentals  
6.4Intangible Assets  
6.5OtherAssets  
 Total Assets00
 LIABILITIES  
7Non withdrawable deposits (BOSA member deposits)  
8Accounts Payables & Other Liabilities00
8. 1Tax Payable  
8.2Dividends Payable  
8.3Deferred Tax Liability  
8.4Retirement Benefits Liability  
8.5Other Liabilities  
8.6External Borrowings  
 Total Liabilities00
 EQUITY  
9.Share Capital  
10.Grants & Donations  
11.Retained Earnings00
11.1Prior Years' Retained Earnings  
11.2Current Year's Surplus  
12.Other Equity accounts00
12.1Statutory Reserve  
12.2Other reserves  
12.3Revaluation Reserve  
12.4Proposed Dividends  
12.5Adjustments to Equity  
 Total Equity00
 Total Liabilities and Equity00
AUTHORIZATION
We declare that this return, to the best of our knowledge and belief is correct.
....................................................................................Sign ......................Date:..............................Name of Authorizing Office
.............................................................................Sign............................... Date:.......................Name of Countersigning Officer
Note: This return should be received on or before the 15th day of the following quarter
FORM 2H(r. 50(2)(c))
  
STATEMENT OF OTHER DISCLOSURES
 
Sacco Society:  
Financial Year:  
Start Date:  
End Date:  
OTHER DISCLOSURES31st Dec Current Year31st Dec Prior Year
 KSh. '000'KSh. '000'
Ref No.   
1NON-PERFORMING LOANS AND ADVANCES  
1.1Gross Non-Performing Loans and Advances  
 Less:  
1.2Interest in Suspense  
13Total Non-Performing Loans and Advances (1.1-1.2)00
 Less:  
1.4Allowance for loan loss  
1.5Net Non-Performing Loans (1.3-1.4)00
2INSIDER LOANS AND ADVANCES  
2.1Directors  
2.2Employees  
2.3Total Insider Loans, Advances and Other Facilities00
3OFF-BALANCE SHEET ITEMS  
3.1Guarantees and Commitments  
3.2Other Contingent Liabilities  
3.3Total Contingent Liabilities00
4CAPITAL STRENGTH  
4.1Core Capital  
4.2Institutional Capital  
4.3Core Capital to Total Assets Ratio  
4.4Minimum Statutory Ratio10%10%
45Excess/(Deficiency) (43-4.4)-10%-10%
4.6Institutional Capital to Total Assets Ratio  
FORM 2H(r. 50(2)(c))
STATEMENT OF OTHER DISCLOSURES
 
Sacco Society:   
Financial Year:   
Start Date:   
End Date:   
OTHER DISCLOSURES31st Dec Current Year31st Dec Prior Year
 KSh. '000'KSh. '000'
Ref No.   
1NON-PERFORMING LOANS AND ADVANCES  
1.1Gross Non-Performing Loans and Advances  
 Less:  
1.2Interest in Suspense  
1.3Total Non-Performing Loans and Advances (1.1-12)00
 Less:  
1.4Allowance for loan loss  
1.5Net Non-Performing Loans (13-1.4)00
2INSIDER LOANS AND ADVANCES  
2.1Directors  
2.2Employees  
2.3Total Insider Loans, Advances and Other Facilities00
3OFF-BALANCE SHEET ITEMS  
3.1Guarantees and Commitments  
3.2Other Contingent Liabilities  
3.3Total Contingent Liabilities00
4CAPITAL STRENGTH  
4.1Core Capital  
42Institutional Capital  
4.3Core Capital to Total Assets Ratio  
4.4Minimum Statutory Ratio10%10%
4.5Excess/(Deficiency) (4.3-4.4)-10%-10%
4.6Institutional Capital to Total Assets Ratio  
NOTES FOR COMPLETION OF ANNUAL AND QUARTERLY FINANCIAL STATEMENTS AND OTHER DISCLOSURESGENERAL
(a)These completion instructions are issued to ensure uniformity of reporting by all licensed Sacco societies.
(b)The accounts should be prepared in accordance with International Financial Reporting Standards.
(c)All figures should be shown in thousands of Kenya shillings.
(d)All the rows should be published irrespective of whether the licensed Sacco has a figure to report or not.
(e)Each return should be signed by at least two authorized signatories before submission to the Authority.
STATEMENT OF COMPREHENSIVE INCOME
1.Financial IncomeThe total value of all income earned from the provision of financial services. Total of Financial Income from Loan Portfolio (Line 2), Financial Income from Investments (Line 5) and Other Operating Income (Line 9)
2.Financial Income from Loan PortfolioIncome from interest, fees, commissions, and other fees earned on the loan portfolio. This includes not only interest paid in cash but also interest accrued but not yet paid. Total of Interest earned on the loan portfolio (Line 2.1) and Fees and Commission on the loan portfolio (Line 2.2)2.1 Interest on Loan Portfolio: Interest earned on the loan portfolio.2.2 Fees and Commissions on Loan Portfolio: Penalties, commissions, and other fees earned on the loan portfolio.
3.Financial Income from InvestmentsRevenue from interest, dividends, and other payments generated by financial assets other than the loan portfolio, such as interest-bearing deposits. This may.Provision for Loan Losses: This is the non-cash expense calculated as a percentage of the include net trading income (gains less losses) from securities and the recovery of any interest revenue that was previously written off.3.4 Government Securities: This covers interest and discount earned on all Government Securities3.2 Deposits and Balances with Banks and Other Financial Institutions:This includes all interest earned on placements with commercial banks and other financial institutions.Note: Interest on placements with collapsed institutions should be suspended and not recognized as income.3.3 Other Investments: These include any other investments including corporate bond, commercial paper and bearer bonds not covered in 3.1 above.3.4 Other Operating Income: All other income from the provision of financial services, including transaction fees, premiums, membership fees, passbooks, smartcards etc.
4.Financial ExpensesThe total value of all financial expenses incurred from operations. Total of Financial Expense on Funding Liabilities (Line 4.1), Dividends (4.4) and Other Financial Expenses (Line 45).4.1 Financial Expense on Deposits and External Borrowings: Total of Interest and Fee Expense on Deposits (Line 42) and External Borrowings (Line 43)4.2 Interest Expense on Deposits: Interest and fees incurred on all deposits taken by the licensed Sacco Society.4.3 Cost of External Borrowings: Include interest and fees incurred on external borrowings and overdrafts.4.4 Dividend Expense: Expense incurred on member shares4.5 Other Financial Expenses: The sum of other fees and commissions (line 4.5) and other expense (line 4.6). These are other financial expenses related to provision of financial services.4.6 Fees and Commissions expense: This includes all charges (fees) and commissions relating to account operations such as bank charges, ledger fees, cheque and money transfer commissions but excluding interest on overdrafts.4.7 Other expenses: These are any other financial expenses not specified above arising from normal business operations.
5.Net Financial Income/LossThe net value of earnings arising from financial services [i.e. Financial Income (Line l) Less Financial Expenses (Line 4)].
6.Allowance for loan LossAlso known as loan loss provision expense'. It is provision for Loan losses net of the value of delinquent Loans recovered. Provision for Loan losses (Line 6.1) Less Value of Loans Recovered (Line 6.2).Provision for Loan Losses: This is the non-cash expense calculated as a percentage of the portfolio report and is used to create or increase the Allowance for Loan Losses on the Balance Sheet.Value of Loans Recovered: Total value of principal recovered on all loans previously written off. This includes principal on partially recovered loans and those recovered in full. Subsequent recoveries of loans previously written off decrease the amount of the Provision for Loan Losses (Line 6.1), and the net amount is booked as Allowance for Loan Loss es on (Line 6).
7.Operating ExpensesThe total value of all operating expenses which include, Personnel (line 7.1), Governance (line 7.2), Marketing (line 7.3) and Administrative Expenses (line 7.4), incurred in providing financial services.7.1 Personnel Expenses: Includes total staff (permanent and casual) costs such as salaries, wages, uniforms, leave allowance, medical expenses, benefits and bonuses, as well as employment taxes. It also includes the cost of employee recruitment and initial orientation expenses.7.2 Governance Expenses: These include the cost of travel, per diem, honoraria or meetings for board members, board committee expenses, member's education, Annual general meeting expenses and national or other co-operative representation dues.7.3 Marketing Expenses: These include any expense related to marketing or promotion such as advertising, publicity campaigns, Ushirika day celebrations etc.7.4 Depreciation and Amortisation Charges: These are non-cash expenses that reduce the value of an asset over time due to wear and tear or obsolescence.7.5 Administrative Expenses: These include all other operating expenses not included in the previous four categories such as electricity, water, rent, supplies, transportation, security, equipment repair and maintenance, Audit fees, supervisory and recoverable expenses, communications and consulting fees which are necessary for conducting Sacco business. It may also include certain taxes related to administration, such as a value-added tax. These expense categories may be listed as separate line items as appropriate.
8.Net Operating Income: These are net earnings from the provision of financial services. Net Financial Income (Line 5) less allowances for loan losses (Line 6) less operating Expenses (Line 7).
9.Net Non -Operating Income/ (Expenses)The net earnings from products and services not directly related to core operations of Sacco societies derived from the total income (line 8.1) less total expenses (line 8.2). Sacco societies should disclose large material amounts of non-operating revenue separately by creating accounts under— Non-Operating Income II (Line 8.1) or— Non-Operating Expense II (Line 8.2)9.1 Non operating Income: All income not directly related to core Sacco business, such as revenue from business development services, training, consulting services, sale of merchandise and others. It also Provision for Loan Losses: This is the non-cash expense calculated as a percentage of the includes any exceptional gains and revenues. Large or relevant non-operating revenue categories should be listed as separate line items as appropriate.Note: This account does not include grants and donations.9.2 Non-Operating Expenses: All expenses not directly related to the core Sacco business, such as the cost of providing business development services or training. This account also includes any exceptional losses and expenses. Large or relevant expense categories should be listed as separate line items as appropriate.
10.Net Income (Before Taxes and Donations)All net earnings from the Sacco's operations before the inclusion of taxes and donations [Total of Net Operating Income (Line 8) and Net Non-Operating Income (Expenses) (Line 9)]
11.TaxesIncludes all taxes paid on Net Income or other measure of profit as defined by the Kenya Revenue Authority.
12.Net Income (After Taxes and Before Donations)All net earnings from the Sacco's operations, net of taxes and before the inclusion of donations (Net Income (Before Taxes and Donations) (Line 34) less Taxes (Line 35))
13.DonationsValue of all donations recognized as revenue during the period, whether restricted or not. (Total of Donations for Loan Capital (Line 40) and Donations for Operating Expenses (Line 41)13.1 Donations for Loan Capital: Value of all donations used to fund the loan portfolio.13.2 Donations for Operating Expenses: Value of all donations used to pay for operations other than funding the loan portfolio. These operations include paying personnel and administrative expenses and purchasing property and equipment.14. Net Income (After Taxes and Donations)All net earnings from the Sacco's operations, net of taxes, and after the inclusion of donations [i.e. Total of Net Income (After Taxes and Before Donations, Line 12) and Donations, Line 13)]STATEMENT OF FINANCIAL POSITIONASSETS
1.Cash and Cash Equivalent1.1 Cash in hand: Both local and foreign notes and coins held in the tills and vaults.1.2 Cash at bank: These include: Placements by the Sacco Society with banks, microfinance and other institutions (i.e. all credit balances in current accounts held with banks and other institutions).Note: Placements with collapsed institutions should be disclosed among—other assets net of provisions held, if any.
2.Prepayments and sundry receivablesThese are payments made by the Sacco Society prior to incurring the expense.
3.Financial Investments3.1 Government Securities: These include:
(i)Treasury Bills
(ii)Treasury Bonds
(iii)Government Stock
(iv)Local Government Securities
(v)Other Government Securities
These are debt securities issued by the Government of Kenya as held-to- maturity type of investments.3.2 Placement in Commercial banks, Saccos and similar financial institutions:3.3 Commercial papers, notes and Bonds:3.4 Collective Investments Schemes:3.5 Derivatives:3.6 Equity investments in subsidiaries and related entities:3.7 Investments in companies - shares/stocks:
4.Net Loan Portfolio4.1 Gross Loan Portfolio: These are loans and advances.4.2 Allowance for Loan Loss: The portion of the Gross Loan Portfolio that has been provisioned in anticipation of losses due to default. It represents the cumulative value of the impairment losses less the cumulative value of loans written off.
5.Accounts Receivables:5.1 Tax Recoverable: This is tax that is recoverable as a result of overpayment of tax in the previous periods.5.2 Deferred Tax Assets: These are taxes recoverable in future periods in respect of:
(i)Deductible temporary difference
(ii)The carry forward of unused tax losses
(iii)The carry forward of unused tax credits
5.3 Retirement Benefit Assets: These are staff retirement benefit assets computed as per IAS 19.
6.Property and equipment6.1 Investment Properties: This is as defined in lAS 40 as a property (land or a building or part of a building or both) held by the Sacco Society to earn rentals or for capital appreciation or both. For the purposes of these Regulations, the property will qualify to be investment where a Sacco occupies not more than 10%.6.2 Property and Equipment: Comprise all the immovable and other assets of the reporting Sacco Society. They include:
(i)Staff houses
(ii)Furniture, fixtures and fittings
(iii)Motor vehicles
(iv)Office equipment including computer equipment
(v)Land and buildings (excludes leasehold land and investment property)
(vi)Others not specified elsewhere including foreclosed assets.
6.3 Prepaid Lease Rentals: This relate to the cost of the leasehold land and building net of accumulated amortized amount.6.4 Intangible Assets: Include all intangible assets such as computer software etc. But do not include goodwill, copy rights and royalties.6.5 Other assets: These include assets not stated elsewhere.LIABILITIES
7.Non-Withdraw-able DepositsDeposits received from members that may be used as collateral against borrowings by the members and are refundable only when the member ceases membership.
10.Accounts Payable & Other liabilities10.1 Tax Payable: This relates to tax liability computed but not yet paid.10.2 Dividends Payable: These are dividends that have been declared but not yet paid.10.3 Deferred Tax Liability: These are taxes payable in future periods in respect of taxable temporary differences.10.4 Retirement Benefits Liability: These are the retirement benefits liability as accounted for under IAS 19.10.5 Other Liabilities: These include all other liabilities due not specified elsewhere.10.6 External Borrowings: These include all external borrowings from banks, microfinance and other financial institutions. Special loan facilities covering funds received through special arrangements between the Kenya government and other foreign governments or donor agencies for onward lending or distribution to members should be entered here.EQUITY
11.Share CapitalThis is the value of ordinary shares issued and fully paid by members.
12.Grants & DonationsThese are grants, which are not callable and donations received recognized as equity donations.
13.Retained Earnings/Accumulated losses13.1 Prior Year Retained Earnings/Accumulated losses: These are undistributed profits or losses carried forward over the years. Disclose the retained earnings carried from previous years here.13.2 Current Year's Surplus/Loss: Disclose the current year's after tax profits.
14.Other Equity Accounts14.1 Statutory Reserve: Accumulated transfer of 20% of from prior years' profits14.2 Other Reserves: Reserves other than those specified here.14.3 Revaluation Reserve: These are revaluation surpluses/losses arising from revaluation of properties, equipment and financial instruments.14.4 Proposed Dividends: These are dividends that have been proposed by the board of directors but have not been ratified by the Annual General Meeting.14.5 Adjustments to Equity: These are any adjustments to account for subsidized funds and in-kind subsidies.OTHER DISCLOSURES
1.NON-PERFORMING LOANS AND ADVANCES
1.1Gross Non-performing loans: Enter the gross aggregate of substandard, doubtful and loss accounts inclusive of interest suspended.
1.2Interest in Suspense: Enter the aggregate of interest in suspense for substandard, doubtful and loss accounts.
1.3Total Non-performing Loans Net of Interest in Suspense: Enter the difference between (1.1) and (1.2) above.
1.4Allowance for loan losses: Enter the aggregate of loan loss provisions made for substandard, doubtful and loss accounts computed as per the regulations on classification of Assets and Provisioning.
1.5Net Non-Performing Loans: Enter the difference between items (1.3-1.4) above.
2.INSIDER LOANS, ADVANCES AND OTHER FACILITIES2.1 Directors and Supervisory Committee: On-balance sheet and Off-balance sheetThese are loans and advances including off-balance sheet items to Directors and Supervisory Committee members.2.2 Employees: Enter loans and advances to employees.2.3 Total Insider Loans, Advances and Other Facilities: Enter the aggregate of 2.1 and 2.2
3.OFF-BALANCE SHEET ITEMS3.1 Guarantees and Commitments: Enter Guarantees, Commitments, etc. This should exclude off-balance sheet items to insiders.3.2 Other Contingent Items: Enter other items not covered under 3.1 above.3.3 Total Contingent Items: Enter aggregate of items 3.1 and 3.2 above
4.CAPITAL STRENGTHThe following capital items should be computed as required in the Capital Adequacy Regulations.4.1 Core Capital4.2 Institutional Capital4.3 Core Capital/Total Assets4.4 Minimum Statutory Ratio4.5 Excess / Deficiency (4.3 - 4.4)4.7 Minimum Statutory Ration4.8 Excess / Deficiency (4.6 - 4.7)4.9 Core capital/Total Deposit Liabilities4.10 Minimum Statutory Ratio4.11 Excess / Deficiency (4.9 - 4.10)
5.LIQUIDITYThe liquidity ratio should be computed as

THIRD SCHEDULE [r. 66(2)]

CODE OF CONDUCT

1.Application of the code of conductThis Code of conduct is applicable to directors, supervisory committee, chief executive officers and the management of sacco societies registered under the Act.The board of directors shall ensure that the said officers of the Sacco Society are aware and adhere to the prescribed Code of Conduct.
2.Conflict of interestDirectors, supervisory committee, chief executive officers and management should not engage directly or indirectly in any business activity that competes or conflicts with the Sacco's interest, which, among other will include the following:
(a)Outside financial interest:—
(i)Where a director, supervisory committee member, chief executive officers or senior management staff has a financial interest in a customer whether as a sole proprietor, shareholder, creditor or debtor, such an interest must be disclosed immediately. Thereafter, the affected officer shall not be directly involved in the Sacco dealing with the members so long as the interest continues to exist.
(ii)The above restriction does not apply in cases where employees are holding public quoted securities unless the management views the interest to be material, and that the financial interest is considered likely to impair the objectivity of the member of staff concerned. For the purpose of code of conduct, the holding of five percent or more of the voting share of a publicly quoted company would be regarded as material.
(b)It will be a conflict of interest if a chief executive officer or employee conducts business other than that of the Sacco Society during official working hours.
(c)An employee is not permitted to engage in any part time employment unless with express permission of the management. Such approval shall only be granted where the interest of the Sacco Society will not be in jeopardy.
(d)An employee should not serve as a director of any other institution without approval from the board of directors. Employees who hold such directorships without such approval must seek approval immediately, if they wish to remain as directors of those institutions. However, employees may act as directors of non profit public services entities such as religious, educational, cultural, social welfare and philanthropic or charitable institutions subject to policy guidelines of those institutions.
3.Misuse of position
(1)Directors, supervisory committee members, chief executive officers and employees shall not use the Sacco's name or facilities for personal advantage, be it in political or economic transactions.
(2)Directors, supervisory committee members, chief executive officers and employees shall not solicit or otherwise accept inducements either directly or indirectly whether in cash or in kind in order to provide any favours to a member in the provision of loans, acceptance of deposits or any other conduct of the business of the Sacco to which they are entrusted jointly or individually.
(3)Confidentiality of relations and dealings between the Sacco Society and members is paramount. Consequently, directors, supervisory committee members, chief executive officers and employees must take precaution to protect the confidentiality of member information and transactions.
(4)Business and financial information about any member may be used or made available to third parties only with prior written consent of the member in accordance with the arrangements for the proper interchange of information between the institutions about credit risks, or when disclosure is required by law.
(5)All business dealing on behalf of the Sacco with current or other employees and with those who may have cause to rely upon the Sacco, should be conducted fairly and equitably. Employees and Directors must not be influenced by friendship or association, either in meeting members' requirements, or in recommending that they be met. Such decisions must be made on a strictly arm-length business basis. All preferential transactions with insiders or related interest should be avoided. If transacted, such dealings should be in full compliance with the law, judged on normal business criteria basis and fully documented and authorized by the board of directors or any other independent party.Insider lending and dealing
5.A Sacco Society shall not grant or permit to be outstanding any advances loans or credit facilities which are unsecured or advances, or credit facilities which are not fully secured to any of its officers, significant members or their associates.
6.A Sacco Society shall not grant or permit to be outstanding any advances, loans or credit facility to any of its directors or other person participating in the general management of the Sacco unless it is—
(a)approved by the board of directors of the Sacco upon being satisfied that it is viable; and
(b)made in the normal course of business and on terms similar to those offered to ordinary members. The Sacco shall notify the Authority of every such approval within fifteen days of the granting of the approval.
7.No Sacco Society shall grant or permit to be outstanding any advance, loan or credit facility or give any financial guarantee or incur any other liabilities to or in favour of, or on behalf of, any associate or any of the employees, significant members, supervisory committee or directors in excess of the limits prescribed in the regulations.
8.No Sacco Society shall grant advance or credit facility or give guarantee or incur any liability or enter into any contract or transaction of conduct its business or part thereof in a fraudulent or reckless manner or otherwise than in compliance with the Sacco Act and these Regulations.
9.When a Sacco Society contravenes any of the provisions of the Act or is not in compliance with regulations made there under:—
(a)all officers of the Sacco shall be liable jointly or severally to indemnify the Sacco against any loss arising in respect of the contravention of the Act and regulations.
(b)in the case of violation of the Regulations on an advance, loan or credit facility to a person other than directors of the Sacco Society and including the directors an officer shall be so liable, provided he or she proves that, through no act or omission on his or her part, he or she was not clearly aware that the contravention was taking place and further show measures taken to avoid the contravention.
(c)the Authority may direct the suspension of any officer of the Sacco Society who sanctioned the advance, loan or credit facility if the officer violates the act or regulations on advance, loan or credit facility to a director of a Sacco Society and in addition recommend any legal action deemed fit against the said officers and the Sacco shall comply with every direction of the Authority under this paragraph immediately.
(d)Any director of a Sacco Society who defaults in repayment of any advance or loan made to him by the Sacco Society for three consecutive months or three to five installments shall forthwith stand disqualified from holding office and be liable to pay the outstanding amount.
10.PenaltiesA Sacco Society which fails to comply with any direction of the Authority or permits a disqualified director or officer to continue holding office shall be guilty of an offence and liable to fine of not more than one hundred shillings.
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History of this document

31 December 2022 this version
24 December 2020
Read this version
08 May 2020
Read this version
01 January 2020
Commenced

Cited documents 6

Act 6
1. Anti-Corruption and Economic Crimes Act 571 citations
2. Co-operative Societies Act 388 citations
3. Leadership and Integrity Act 322 citations
4. Public Officer Ethics Act 207 citations
5. Unclaimed Financial Assets Act 135 citations
6. Sacco Societies Act 82 citations

Documents citing this one 0