Delay by Savings and Credit Cooperative Societies(SACCOs) in refunding cash to members who have exited the Society or intend to transfer their shares to another SACCO, tops the list of grievances that flow into the complaints portal of SACCO Societies Regulatory Authority(SASRA)

A glimpse of similar claims over delayed cash refunds have been lodged at the Cooperatives Tribunal, the apex court that deals with disputes arising in the Cooperatives sector. A case in point is the insolvent Metropolitan Deposit-Taking SACCO, formerly Muranga Teachers SACCO, now facing a mountain of suits from members who have since withdrawn from the Society.

In its latest bulletin, SASRA said cases of delay in settling claims arise from individuals who have withdrawn their membership from their respective SACCOs and were thus entitled to claim refund of their savings or deposits in accordance with the prevailing law.

Delay in refunds to exiting members has hit many insolvent SACCOs

Delay in refund complaints rose to 64.27% of all the complaints and inquiries made to SASRA or a total of 491 complaints in 2024 from 411 in 2023. This jump is probably due to huge claims against the insolvent Metropolitan Deposit-Taking SACCO whose liquidity crisis has led to ballooning members’ refund claims.

The Cooperatives Tribunal has for the past few months been awarding  members who have lodged refund claims.

Other complains flooding SASRA include Loan and Loan issuance at 92 or 12.04%, delayed payments of pensions, Suspected Fraud, irregular deduction of deposits, Guarantors and guarantee for loans, CRB Listing, Failure to pay dividends on time, Misuse of security/collateral by SACCOs, Elections & Electoral processes disputes, Non-remittance of SACCO dues by employers and Irregular FOSA Account Transactions.

SASRA’s supervision mandate, apart from being concerned with the solvency, safety and soundness of the regulated SACCOs, also addresses any frosty relationships between the SACCOs and their members. These include how such members are treated as well as the level of appropriateness of financial products and services offered to them by their SACCOs.

Some of the key reasons giving rise to poor relations between SACCOs and their members, according to the regulator, include inadequate awareness by complainants that claims for refunds are only due after giving a notice of not less than sixty (60) days of withdrawal from membership.

Most members also seem unaware that delay in settling claims for refunds does not happen where such savings or deposits were pledged by the complainants as security for loans or credit facilities to another member, unless that other member has obtained and furnished the SACCO with alternative security.

SACCOs such as Metropolitan SACCO is in the hole due to its failure to adequately provide for liquidity contingency plans to cater for members’ withdrawals and claims for refund of savings (deposits) due to several factors mostly associated with liquidity constraints.

Complaints associated with transfer of shares mostly emanate from the lack of understanding of members of SACCOs that share subscriptions are equity capital and are therefore not refundable upon withdrawal and exit from membership.

Additionally, although theoretically the shares are transferrable, the absence of a ready market for the sale and transfer of such shares is practically impossible, and this conundrum has often resulted in friction between some SACCOs and their membership.

The Nairobi Securities Exchange(NSE) has already hinted that it is toying with the idea of creating a platform where SACCO members can unlock value by trading their shares. Large SACCOs with huge membership and large balance sheets stand to benefit by trading their shares at the bourse.

SASRA is also pushing SACCOs to undertake awareness creation campaigns to the members’ rights and obligations through its social media platforms or regular member educational meetings.

SACCOs are also urged to maintain their prescribed minimum share capital at minimum levels due to the absence of a market to transfer the same upon members’ exit as well as price discovery mechanisms for their par value.