Why Saccos Blocking Members from Exiting

A growing number of savings and credit cooperative societies (Saccos) in Kenya are under scrutiny for blocking members from exiting and stalling refunds of deposits. Recent complaints filed with the Competition Authority of Kenya (CAK) have shed light on a troubling trend where members, despite adhering to the required 60-day exit notice as per the society’s by-laws, are not receiving their rightful funds. This article explores the key aspects of why Saccos blocking members from exiting is becoming a pressing issue and what this means for cooperative governance in Kenya.

Understanding the Issue: Why Saccos Are Blocking Members from Exiting

Many Saccos have been accused of refusing to release member deposits even after a proper exit notification. The by-laws of these societies clearly state that a member wishing to exit must provide a 60-day notice, after which Sacco is obligated to refund the member’s deposits.

However, reports indicate that several Saccos are neglecting this legal requirement, suggesting possible mismanagement and poor administrative practices.

Key Facts:

• Exit Notice Requirement: Members are mandated to provide a 60-day notice before exit.
• Deposit Refund Stalling: Despite the notice, some Saccos have been refusing to refund deposits, effectively blocking the member’s exit.
• Implications of Poor Administration: The inability or unwillingness to process refunds on time could point to deeper issues of governance and financial management within these societies.

CAK Intervention and Notable Case Studies

The CAK has been actively investigating cases where Saccos have blocked members from exiting. In the year ended June 2023 alone, the authority handled at least eight cases where Saccos did not honor the 60-day notice rule.

KICO Sacco Intervention:

• Case Highlight: A member of KICO Sacco, after officially seeking withdrawal, was initially denied the refund of deposits. Following CAK intervention, KICO Sacco was compelled to refund the member’s deposit, leading to the closure of the case.
• Impact: This incident underscores the CAK’s role in enforcing compliance and safeguarding member rights.

Kencom Sacco Ongoing Probe:

• Case Highlight: A member of Kencom Sacco lodged a complaint after the society refused to honor the 60-day exit notice. The member’s failure to receive a refund despite following the procedural by-laws has prompted further investigation by the CAK.
• Impact: This ongoing probe highlights the persistence of the issue and calls for stricter regulatory oversight.

Other Investigations:

• The CAK has also referred cases involving other Saccos, including those linked to Fountain Enterprises Programme (FEP) and Post Mail Saccos, to the Commissioner of Cooperatives. These cases are indicative of a broader pattern of non-compliance among some cooperative societies.

Why Transparency and Accountability in Saccos Are Crucial

The refusal to refund deposits not only disrupts the financial plans of individual members but also erodes trust in the cooperative model. Here are some reasons why it’s essential to address the issue of Saccos blocking members from exiting:

• Financial Security: Members rely on their savings for personal and family financial security. Blocking exits can have severe implications for their liquidity and financial planning.
• Good Governance: Compliance with by-laws and transparent operations are the cornerstones of a well-governed cooperative. Failure to adhere to these principles undermines the integrity of the Sacco.
• Regulatory Oversight: Effective intervention by bodies like the CAK is vital to enforce accountability and ensure that cooperative societies operate within the legal framework.
• Member Confidence: When members see that their rights are protected and that there is recourse in the event of non-compliance, it builds confidence in the cooperative movement.

What Members Should Do

For members facing issues with Saccos blocking members from exiting, knowing your rights and the procedures stipulated in your Sacco’s by-laws is crucial. If a refund is delayed or withheld after the appropriate notice period, filing a complaint with the CAK or the Commissioner of Cooperatives can help ensure that your case is investigated and resolved.

Conclusion

The phenomenon of Saccos blocking members from exiting and stalling refunds is a wake-up call for the cooperative sector in Kenya.

As the CAK continues to enforce compliance and address grievances, all Saccos must uphold the principles of transparency, accountability, and good governance.

Members should remain vigilant and exercise their rights to ensure that their hard-earned savings are protected and accessible.

By understanding why Saccos blocking members from exiting is not only a breach of by-laws but also a threat to financial stability, stakeholders can push for reforms that strengthen the cooperative system for all.

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