Why Are Funds Being Delayed and Exits Blocked for Sacco Members?

The Competition Commission of Kenya (CAK) has revealed a worrying trend of increasing difficulties for SACCO members seeking to exit their memberships and receive their deposits.

According to CAK records, at least eight cases have been filed, where Saccos refused to release deposits despite receiving mandatory 60-day exit notices from members.

One such case involved KICO Sacco, which was forced to refund a member’s deposit after the CAK intervened.

“The member sought withdrawal as per the Sacco’s bylaws, but KICO initially declined to refund the deposit,” a CAK official stated. “Following our investigation, the member received a full refund, and the case was closed.”

The CAK has also referred several complaints regarding Fountain Enterprises Program (FEP) and Post mail Saccos to the Cooperative Commissioner for further investigation. Other investigations into such complaints are ongoing.

Under Sacco rules, members who intend to exit are formally required to give 60 days’ written notice. Upon receipt of this notification, the Sacco is obliged to refund the members’ deposits. However, the Sacco can refuse the withdrawal request if the member has outstanding debts.

Additionally, a Sacco society may refuse to allow withdrawals from a member’s deposit account if the deposits have been pledged against the debts of other members. This is unless those debts have been redeemed or replaced by a new guarantee.

A Sacco may further block exit and deposit withdrawal of a member in case the member fails to fulfill their obligations to the society. This includes failing to fulfill obligations stated in by-laws, general internal regulations, or a resolution of the general meeting.

The Sacco Societies Act 2008 clarifies that all deposits except share deposits are refundable on exit of a member. The share capital can be sold to a new or existing member. The Sacco can create a fund to buy back the shares of outgoing members who are unable to access customers. More importantly, the share capital remaining in the Sacco continues to earn dividends for the member.

Several factors are contributing to the rise in member exits:

• Lack of transparency and accountability: Members are increasingly questioning how Saccos manage their contributions and financial practices. Lack of transparent decision-making processes and transparent financial reporting undermines trust and explicitly forces members to seek alternative organizations.
• Poor governance and leadership: Reports of mismanagement, corruption and nepotism in some Saccos are discouraging members. They lose faith in the ability of the Sacco to protect their interests, leading them to search for well-run institutions with strong ethical leadership.
• Limited product and service offerings: Failure to adapt to evolving economic needs and expectations can lead to dissatisfaction among members. Saccos should conduct regular research and market research to understand the changing needs of their members. Based on this research, they can introduce new products and services such as mobile banking, financial options and a wide range of loan products to meet the needs of their members.
• Limited Access to Credit: If a Sacco fails to provide timely and affordable credit facilities, members can look elsewhere. Easy access to credit is a major incentive for joining a Sacco, the lack of which may lead members to seek alternative institutions with more flexible credit options Facilitating loan application process and offering competitive interest rates is an important step that Saccos can take to strengthen access to credit for their members.
• Technological Disconnect: The financial industry is embracing technology. Saccos that fail to integrate digital banking services risk being left behind. Younger members in particular expect seamless online and mobile banking experiences, allowing them to manage and manage their accounts with ease. Saccos need to invest in modernizing their services and embrace digital strategies to retain tech-savvy members and attract the younger generation.