SASRA prudential standards and returns for deposit-taking SACCOs: the 2010 Regulations
Capital adequacy, liquidity and lending limits, the five-class loan grid with its provisioning rates, and every monthly, quarterly and annual return with its SASRA form code and deadline — cited to the regulation.
What the Regulations are
The Sacco Societies (Deposit-Taking Sacco Business) Regulations, 2010 (Legal Notice No. 95 of 18 June 2010) set the "minimum operational regulations and prudential standards" (reg. 2) for SACCOs licensed by SASRA under the Sacco Societies Act, 2008. They apply to every SACCO carrying on deposit-taking business, which in practice means every SACCO with a front office (FOSA); see BOSA vs FOSA. Non-deposit-taking SACCOs above the authorisation triggers follow the separate 2020 Regulations.
Licensing in brief
Only a SACCO registered under the Co-operative Societies Act and holding a SASRA licence may take deposits (s.23(1) of the Act); unlicensed deposit-taking carries a fine up to KES 500,000, three years' imprisonment, or both (s.23(2)). The application fee is KES 3,000 (reg. 4(2)(j)); the licence fee is KES 50,000 for the head office and KES 20,000 per branch (reg. 4(6)). A licence runs to 31 December of the year of issue (reg. 4(8)) and the renewal application must be lodged at least 90 days before expiry (reg. 5(1)). Any new branch, agency, outlet, relocation or closure needs prior approval (s.32(1); regs 16–19), and so does any new loan product (reg. 34).
Capital adequacy
| Standard | Minimum | Regulation |
|---|---|---|
| Core capital | KES 10 million | reg. 9(a) |
| Core capital to total assets | 10% | reg. 9(b) |
| Institutional capital to total assets | 8% | reg. 9(c) |
| Core capital to total deposits | 8% | reg. 9(d) |
Core capital is paid-up shares, disclosed reserves, retained earnings and grants; institutional capital is core capital less share capital (reg. 3). Only half of the current year's unaudited surplus counts (Second Schedule, Form 1). SASRA may require higher ratios for a SACCO with losses, poor assets or rapid growth (reg. 10). No dividend may be paid unless the SACCO is capital-adequate (reg. 21(5)). SASRA's 2024 report shows the sector well above these floors in aggregate, with 172 of 177 DT SACCOs meeting the core-capital-to-assets ratio; see the sector in numbers.
Liquidity and lending limits
| Standard | Limit | Regulation |
|---|---|---|
| Liquid assets | At least 15% of savings deposits and short-term liabilities, measured every Wednesday | regs 13(2), 14(1) |
| Single member exposure | Not more than 10% of core capital | reg. 35(5) |
| External borrowing | Not more than 25% of total assets unless waived | reg. 35(1) |
| On-lending margin | At least two percentage points above cost of borrowing | reg. 35(4) |
| Lending against shares | Prohibited | s.34(2); reg. 32(4) |
| Land and buildings | Not more than 5% of total assets | reg. 48(1) |
| Non-earning assets, property and equipment | Not more than 10% of total assets | reg. 48(1) |
| Non-government financial investments | Not more than 40% of core capital or 5% of deposit liabilities | reg. 48(4) |
A liquidity shortfall can be penalised at up to 1% of the deficiency per day (s.30(3)) with lending, deposit-taking and dividends suspended (reg. 14(4)).
Loan classification and provisioning
| Class | Days unpaid | Instalments outstanding | Provision |
|---|---|---|---|
| Performing | Current | — | 1% |
| Watch | 1–30 | 1 | 5% |
| Substandard | 31–180 | 2–6 | 25% |
| Doubtful | 181–360 | 7–12 | 50% |
| Loss | Over 360 | Over 12 | 100% |
Source: regs 41(3) and 44(1); Second Schedule, Form 4. The portfolio is reviewed quarterly (reg. 39). A missed interest-only payment makes the whole principal delinquent (reg. 40(2)). Interest on substandard, doubtful and loss loans is suspended (reg. 42(1)), and interest on a delinquent loan is capped at the amount owing when it became delinquent (reg. 31). A loan may be restructured once and reclassified after six months or six instalments (reg. 41(4)); recoveries on written-off loans credit the allowance, not income (reg. 45(3)). Borrowers receive written reasons for a rejection within 14 days (reg. 38(1)) and 60 days' notice of changes to loan terms (reg. 28(6)).
Returns and deadlines
| Return | Form (Second Schedule) | Frequency | Deadline | Regulation |
|---|---|---|---|---|
| Capital adequacy | Form 1, SASRA2/001 | Monthly | 15th of the following month | reg. 11(1) |
| Liquidity statement | Form 2, SASRA2/002 | Monthly | 15th of the following month | reg. 14(2) |
| Statement of deposits | Form 3, SASRA2/003 | Monthly | 15th of the following month | reg. 24 |
| Financial position and comprehensive income | Forms 6–7, SASRA2/006–007 | Monthly and quarterly | 15th of each month | reg. 52 |
| Risk classification and provisioning | Form 4, SASRA2/004 | Quarterly | 15th of the month after quarter-end | reg. 46 |
| Investment return | Form 5, SASRA2/005 | Quarterly | 15th of the month after quarter-end | reg. 51 |
| Other disclosures | Form 8, SASRA2/008 | Annual | Within three months of year-end | reg. 52(3) |
| Audited accounts and auditor's report | Prescribed format | Annual | Within three months of the 31 December year-end | s.41(1); reg. 55(1) |
| Annual general meeting | — | Annual | Within four months of year-end | reg. 55(4) |
Returns are in Kenya shillings in thousands, signed by two authorised signatories (Second Schedule notes), and filed electronically where SASRA directs (s.53A(3)). A missing return can cost up to KES 100,000 and an incorrect one up to KES 100,000 per incident (reg. 75(1)). Financial statements must disclose members holding more than 20% of share capital and deposits, large exposures and insider lending (s.42) and be displayed at every place of business (s.46(1)).
Governance, audit and records
Directors are unpaid except for expenses (reg. 61), may sit on only one licensed SACCO board (reg. 62), and lose office after three consecutive unexcused absences (reg. 60(10)). The internal auditor must be a fully qualified accountant reporting to the audit committee (reg. 53), and the external auditor rotates every three years unless SASRA waives it (reg. 54(6)). Critical data must be backed up daily to a fireproof safe and weekly off-site (reg. 76(2)). An account is dormant after six months without transactions and its funds may be deemed abandoned after five years without contact (reg. 27). The Deposit Guarantee Fund covers deposits, not shares, up to KES 100,000 per member (s.59(1)), funded by a premium of the higher of KES 50,000 or 0.05% of savings and deposits (reg. 81(1)).
Where this leaves a software decision
Every figure above comes out of the ledger: the capital and liquidity ratios from the balance sheet, the provisioning grid from loan ageing, the insider and single-member limits from member and loan records. A SACCO evaluating software should ask to see the monthly Form 1 to 3 figures and the quarterly Form 4 ageing produced from the same books the tellers post to, and to see the change log behind any figure that moved. That evidence is what the SASRA IT audit circular expects of the system, and what a SACCO management system is for.