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The SACCO Societies Act 2008 and the Regulations thereunder defines capital and provides the minimum capital required for a SACCO Societies in the deposit taking Sacco business.

This document provides explanatory notes to deposit taking SACCO Societies on the capital adequacy requirements and their computation pursuant to Section 9 of the SACCO Societies (Deposit Taking SACCO Business) Regulations 2010.

Why capital adequacy requirement?

To ensure that each SACCO Society maintains a level of capital which is adequate to protect or cushion member deposits and creditors against losses resulting from business risks that the SACCO, as a financial institution faces. These risks include credit, investment, legislative, liquidity, interest rate and competitive risks. Thus as a measure of a financial institution’s safety and soundness, adequate capital promotes public confidence in the institution.

Is capital adequacy a new requirement?

No! it is not. Rule 52(3b) of Cooperative Society Rules, 2004 required Sacco societies operating FOSAs to maintain a capital adequacy of 10% of total liabilities.

What constitutes capital in a Sacco Society?

This is core capital and Sacco Societies Act, 2008 defines Core Capital as fully paid up members’ shares, retained earnings, disclosed reserves, grants and donations all of which are NOT meant to be expended unless on liquidation of the Sacco society. Thus, Core Capital = Fully paid up members’ share capital + statutory reserves + retained earnings + disclosed reserves + grants/donations; Institutional capital = core capital less the members’ share capital. i.e Institutional capital refers to the portion of the core capital that belongs to the SACCO society as an institution such that no one member can individually lay claim on it.

What are the capital adequacy requirements?

    1. Minimum Capital Ratios. Unless a higher minimum ratio has been set by the Authority for an individual SACCO Society based on criteria set under regulation 10, every institution shall, at all times, maintain:
      • A core capital of not less than ten per cent of total assets;
      • A core capital of not less than eight per cent of its total deposit liabilities; and
      • An institutional capital of not less than eight per cent of its total assets.

All Sacco Societies currently carrying out deposit taking business will have four (4) years to build their capital to the regulatory standards.Deposit liabilities includes member deposits in both Back Office and Front Office operations.

    1. Minimum Core Capital

The minimum core capital for a SACCO Society shall at all times be Kshs.10 million (ten million shillings). This must be met before a license is issued
A SACCO Society’s capital levels will be monitored on a continuous basis by the Authority and may be reviewed from time to time.

  1. Minimum Capital Ratios at point of licensing

    Sacco societies carrying out deposit taking business at the commencement of Sacco Societies (Deposit Taking Sacco Business) Regulations, 2010 shall at the point of applying for license be required to have:
    • A core capital of not less than 4% of total assets which shall graduate to 10% by the fourth year;
    • A core capital of not less than five per cent of its total deposit liabilities which shall gradually graduate to 8% by the fourth year; and
    • An institutional capital of not less than two per cent of its total assets which shall graduate to 8% by the fourth year.

What evidence is a Sacco Society required to provide for capital adequacy?

Sacco societies already carrying out deposit taking business will be required to complete the capital adequacy form (Form 1, SASRA2/001) as part of their license application showing the capital ratios as at 31st December 2009.

A new Sacco society applying for deposit taking license from the Authority must provide evidence of the Ksh.10 million by way of a bank statement in the name of the Sacco Society.

Who is responsible for ensuring capital adequacy?

The board of directors of each SACCO Society shall be responsible for establishing and maintaining, at all times, an adequate level of capital. The capital standards herein are the minimum acceptable for SACCO Societies that are fundamentally sound, well-managed, and which have no material financial or operational weaknesses.

How will SASRA monitor capital adequacy compliant for SACCO societies?

Upon getting a license, a Sacco society shall prepare and submit to the Authority, at the end of every month to be received by the 15th day of the following month, a return on Capital adequacy.

SASRA will validate the data provided on the returns from the balance sheet and independently compute the capital ratios. Additional information may be requited from the Sacco society in evaluating compliance with the capital adequacy requirements.

What happens if the capital level is below the regulatory threshold?

  1. Where a Sacco Society is undercapitalized the Authority may pursue any or all remedial actions as provided under Sections 51 and 66 of the SACCO Societies Act and regulations 68.
  2. In addition to the use of corrective actions noted in (a) above, the Authority may pursue any or all of the following administrative sanctions against a Sacco Society, its board of directors, or its officers:
    • prohibition from declaring or paying dividends;
    • prohibition from expanding existing activities or engaging in new activities;
    • suspension of lending, investment and credit extension operations;
    • prohibition from acquiring, through purchase or lease, additional property and equipment;
    • prohibition from accepting further deposits or other lines of credit; and
    • prohibition from declaring or paying bonuses, salary incentives, severances packages, management fees or reimbursement of expenses to directors or officers.
    • Any other action deemed appropriate by the Authority.

    The Capital Adequacy Form can be downloaded here

All enquiries on capital adequacy should be directed to:

The Chief Executive Officer
The SACCO Societies Regulatory Authority
Britak Centre, 1st Floor, Upper Hill
P.O. Box 25089 – 00100
Nairobi, Kenya.
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

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