CHALLENGES TO REGULATION COMPLIANCE BY DEPOSIT TAKING SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN KENYA

Abstract

With the introduction of the SACCO Societies Regulatory Authority (SASRA) in Kenya there is optimism that the SACCOs will control most of the financial services in the country. This is because SACCOs are strategically placed and are member owned. This is demonstrated by the membership served by the SACCOs, which in December 2013 was at 3.3 million. This is in addition to 12 million that indirectly benefited from the subsector as family members of the households. In the same period total assets for the sector was Ksh.335 billion which was funded by member deposits (70.5%) and capital. The total number of SACCOs in Kenya stood over 6,000 as at December 2013. The SACCO sector comprised of over 5,785 non-Deposit Taking SACCOs (non-D.T.S) and 215 Deposit Taking SACCOs (D.T.S). The D.T.S contributed more than 70% of the assets, member deposits, loans and 78% turnover of the total sector. The main objective of this study was to assess the challenges to regulation compliance by D.T.S in Kenya. This research incorporated a descriptive research design in soliciting information. The study collected data from 139 D.T.S using questionnaires that were administered by mailed questionnaires or the drop and later pick method. A composite index of measuring each of the operationalised constructs as a percentage of the indicator was provided. Since the variables were dichotomous in nature, binary logistic regression was done. Study findings indicated that in order of significance the most challenging factors to regulation compliance were; the legal environment, resource availability, senior management skills, corporate governance and management information skills. Secondly it was found that SACCO size had a significant intervening influence in this relationship with both large and medium SACCO size being significant in regulation compliance, however, small SACCO size was not found to be significant. The study recommends that SACCOs need to; separate the role of the B.O.D from that of the C.E.O, have dynamic MIS systems with regular updates, embrace capacity building and training of senior management, ensure all internal stakeholders adhere to the relevant Acts, regulations and by-laws, mobilise members to increase savings, grow members deposit portfolio and to operate and adhere to the regulators set standards.