SUKARI TAMU (ST) SACCO SOCIETY

RULES AND REGULATION

FINANCE AND CAPITALIZATION POLICY

PART I – PRELIMINARY

These Regulations may be cited as the Sacco Societies (Deposit-Taking

Sacco Business) Regulations.
1. Purpose
The purpose of these Regulations is to provide minimum operational
regulations and prudential standards required of ST Sacco Society as a
deposit-taking Sacco Society.
The objective of this policy is to ensure that as we strive towards the SACCO’s growth
while remaining competitive in the marketplace. Over the past 12 years, Sukari Tamu has
continued to grow from 20 members in 2012 to 675 members in 2023. As a result, its
management has become increasingly complex and advanced.
From the start to the year 2024; there’s mix-up of shares and deposits that puts members in a
state of confusion. Members are not able to tell the purpose of their shares and to make it
worst, the organization is running on members Deposits/Savings at the expense of unutilized
shares that is a risk to the society in case there’s a mass exit or cessation. In this regard, we
believe that maintaining a steady pace of growth, in which uncertainty is minimized and
operation capital is unveiled, is the key to long-term prosperity for the Sacco. With this in
mind, the board has put in place a set of Finance policies such as the capitalization, Shares,
dividend and reserve policies. Last but not least adjustment of minimum Shares a
member owns that is stagnated at Ksh.1,000 since the beginning up to now and the
separation of shares and deposit savings function in an organization.
Our strategic objective in building financial stability will involve the following actions:
a) A separation of shares and deposit savings
b) Strategic lending rates based on competitive market rates and research.
c) Annual capitalization of part of earnings.

PART II – SHARES, DEPOSITS AND SAVINGS

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2. OVERVIEW OF SHARE CAPITAL, MEMBER DEPOSITS AND SAVINGS
2.1. Share capital
Share capital is the unit or portion of equity that a member owns in the Sacco. It
represents a unit of ownership which a member contributes to partly own a Sacco.
The amount is not withdrawable, but transferrable to another member in the case of
termination of membership.
This member’s unit of ownership of the SACCO earns dividends annually when declared.

2.2. Deposits
Member deposits are the savings that are used as eligibility for a member to get a loan.
They earn interest and are refundable upon withdrawal from the Sacco.

2.3. Savings
Savings is the money that is deposited in our FOSA accounts, including but not limited to
Fixed Deposit.

3. THE COMPARISON BETWEEN SHARE CAPITAL AND SACCO SAVINGS/

DEPOSITS
3.1. Savings/Deposits are refundable while Share Capital is non-refundable but
transferrable to a next-of-kin or another member.
3.2. Share capital earn dividends while savings/deposits earn interest.
3.3. Shares are never used as a loan security while deposits may be used as loan security.

4. SHARES
4.1. The society may sell equity shares to its members only. These shares shall be non-
withdrawable, but redeemable in case of termination of a member and
resignation/death of a member and as may be prescribed by Regulations; and the
shares shall have a par value fixed by the by-laws.

4.2. Unless the co-operative society is required by this Act or any other enactment to limit
its number of shares it shall have an unlimited number of shares.

4.3. A share in a co-operative society is personal property and a shareholder is entitled to

an annual statement showing the number of shares that he owns.

5. SHARE CAPITAL
5.1. The STS society shall express its share capital as—
(a) An amount of money divided into a specified number of shares set out; or
(b) An unlimited number of shares with a specified par value
5.2. The co-operative society shall issue qualifying shares as well as equity shares.

6. ISSUE OF SHARES
6.1. Subject to subsection (5.2), the society may issue shares at any time and for any
consideration that the directors consider appropriate.

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 6.2. Subject to the by-laws enacted, the society shall sell its shares at their par value.

6.3. The society shall redeem qualifying and equity shares; but the value of the total
shares owned by the members shall not fall below the equivalent of 5% of the total
assets of the co-operative society, as a result of any redemption of shares.

6.4. The society shall not issue a share until it is fully paid—
(a) in money; or
(b) in property that, in the opinion of the directors, is the fair equivalent of the money
that the co-operative society would have received if the share had been issued for
money.

6.5. For the purposes of subsection (6.4) (b), when determining whether property is the
fair equivalent of a money consideration, the directors may take into account
reasonable charges and expenses of organisation and reorganisation and payment for
property reasonably expected to benefit the co-operative society.

6.6. For the purposes of this section “property” does not include a promissory note or a
promise to pay.

7. TERMS/FEATURES OF SHARE PRODUCT

7.1. Share capital is the equity or core capital of the Sacco and represents each member’s
ownership of the Society in terms of shares.
7.2. In simple terms it is the sum of money the Shareholders/Owners pay into a business
entity.
7.3. A Sacco Society shall prescribe a minimum number of shares at a par value for
which an individual shall subscribe to become a member.
7.4. These funds breathe life into the business entity enabling it to commence operations
thereby achieving the objectives for which it was set up.
7.5. The ST Sacco Society shall not refund shares. Non-refundable and cannot be
withdrawn even on exit from the Sacco but can be sold or transferred to the next of
kin or another existing member of the Sacco upon termination of membership.
7.6. A member shall not pledge shares as collateral or security for a loan granted by the
Sacco Society. Cannot be used as security on loan.
7.7. Shares may earn dividends paid from net surplus after required transfers to
reserves at the end of a financial year in accordance with the dividend policy
of ST Sacco Society. Members earn dividends on the share capital profits when
declared annually after every financial year, on or immediately after AGM.

7.8. The ST Sacco Society shall not pay dividends unless it has complied with the
prescribed capital adequacy and any other requirements that the Authority may
impose.

8. ELIGIBLE PERSONS TO PURCHASE SUKARI TAMU SACCO SHARES

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 8.1. Existing Members – Currently restricted to Salaried employees of Sukari Industry who
are ST Sacco members.
8.2. New Members – individuals who wish to buy shares MUST join to be Members first
8.3. Proposal to include ALL Persons, Institutions or groups registered as Members:
(a) Salaried
(b) Farmers/Business and
(c) Group/Corporate Members.

9. SHARE VALUE
9.1. In ST Sacco, one (1) share is valued at Ksh.20.00.
9.2. From the start, each registered SACCO Member hold at least 50 shares equivalent to
Ksh.1,000
9.3. The proposed minimum share capital effective March 2025, February 2027 and
February 2030 will increase to Kshs.6,000, Ksh.14,000 and Ksh.20,000
respectively; representing an increase of 5000, 8000 and 6000.
9.4. Adjustments (maintained, Increased or Decreased) is subject to proposal by board
members meeting. Before a vote is casted, several considerations about the
organization’s finance and capitalization are taken into account based on the target
minimum share capital required. The passed proposal is then tabled for members’
approval at AGM or SGM.
9.5. The new enacted minimum share value is mandatory to all Sacco members. New
members joining MUST PAY in advance by closure of six (6) months after
registration date, before they become active shareholder members of the society and
existing members MUST TOP-UP to meet the set minimum share amount as per the
schedule.

10. SHARES PURCHASE

10.1. Members can buy unlimited number of shares subject to the following terms:
(a) Salaried Members - Minimum-1,000 shares; Ksh. 20,000/= by 2030, Plan (2024 -
2025=>Ksh.5,000{6,000}, 2027-2028=>Ksh.8,000{14,000}, 2030-
2031=>Ksh.6,000{20,000})
(b) Kilimo (Farmers) or Biashara (Business) Members - Minimum- 50 shares; Ksh.
1,000/=
(c) Institutions /Groups - Minimum- 100 shares; Ksh. 2,000/=

10.2. Members are encouraged to buy more than the set minimums in above.

10.3. There is no Maximum amount, provided that no single member buys share
capital more than one-fifth (1/5) of Total Share capital.

10.4. Each member MUST have at least minimum shares, therefore it’s mandatory
to ALL.

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10.5. The set target for vision 2030 minimum share capital challenge is 20,000 per
Salaried/employee member. This will be achieved in THREE (3) Phases
automatically as shown:

(a) Phase One - (2024 to 2025) increase to Ksh.6,000 (Top-up of 5,000)

(b) Phase Two - (2027 to 2028) increase to 14,000 (Top-up of 8,000)
(c) Phase Three - (2030 to 2031) increase to 20,000 (Top-up of 6,000)

10.6. Other member category (Farmer, Business, Corporate) shall as well upgrade to
100% increase of previous value.

10.7. Its also within practice that members upgrade before the effective date of
scheduled automatic deduction period. If paid in advance there will be null
deduction, only balances shall be slotted for collection.

10.8. NOTE: Share capital purchase can be made directly through our bank account
for members who are not in check off system, No cash money shall be accepted.
Always quote your membership number and indicate the payment is meant for
Share Capital Purchase.

10.9. Implementation plan of 2025 - 2030 share capital minimum increment order
shall be as shown.

(a) Phase One 2024-2025

YEAR CURRENT SCHEDULED SHARE CAPITAL MEMBER TOTAL SHARE
SHARE DEDUCTION INCREMENT - IND SHIP MINIMUM CAPITAL
CAPITAL - PLAN

2012 – 2017 1,000.00 0.00 0.00 523 0

2018 - 2024 1,000.00 0.00 0.00 523 0

2025 Mar 1,000.00 500.00 500 523 261500

2025 Apr 1,500.00 500.00 500 523 261500

2025 May 2,000.00 500.00 500 523 261500

2025 Jun 2,500.00 500.00 500 523 261500

2025 Jul 3,000.00 500.00 500 523 261500

2025 Aug 3,500.00 500.00 500 523 261500

2025 Sep 4,000.00 500.00 500 523 261500

2025 Oct 4,500.00 500.00 500 523 261500

2025 Nov 5,000.00 500.00 500 523 261500

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2025 Dec 5,500.00 500.00 500 523 261500

(b) Phase Two 2027-2028

YEAR CURRENT SCHEDULED SHARE MEMBERSHIP TOTAL SHARE
SHARE DEDUCTION CAPITAL MINIMUM CAPITAL
CAPITAL INCREMENT - PLAN
- IND
2027 Jan 6,000.00 0.00 0.00 523 0

2027 Feb 6,000.00 500.00 500.00 523 261500

2027 Mar 6,500.00 500.00 500 523 261500

2027 Apr 7,000.00 500.00 500 523 261500

2027 May 7,500.00 0.00 0 523 0

2027 Jun 7,500.00 500.00 500 523 261500

2027 Jul 8,000.00 500.00 500 523 261500

2027 Aug 8,500.00 500.00 500 523 261500

2027 Sep 9,000.00 0.00 0 523 0

2027 Oct 9,000.00 500.00 500 523 261500

2027 Nov 9,500.00 500.00 500 523 261500

2027 Dec 10,000.00 500.00 500 523 261500

2028 Jan 0 0.00 0 523 0

2028 Feb 0 500.00 500 523 261500

2028 Mar 0 500.00 500 523 261500

2028 Apr 0 500.00 500 523 261500

2028 May 0 500.00 500 523 261500

2028 Jun 0 500.00 500 523 261500

2028 Jul 0 500.00 500 523 261500

2028 Aug 0 500.00 500 523 261500

2028 Sep

2028 Oct

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2028 Nov

2028 Dec

(c) Phase Three 2030-2031 (Last)

YEAR CURRENT SCHEDULED SHARE MEMBERSHIP TOTAL SHARE
SHARE DEDUCTION CAPITAL MINIMUM CAPITAL
CAPITAL INCREMENT - PLAN
- IND
2030 Jan 14,000.00 0.00 0.00 523 0

2030 Feb 14,000.00 500.00 500.00 523 261500

2030 Mar 14,500.00 500.00 500 523 261500

2030 Apr 15,000.00 500.00 500 523 261500

2030 May 15,500.00 0.00 0 523 0

2030 Jun 15,500.00 500.00 500 523 261500

2030 Jul 16,000.00 500.00 500 523 261500

2030 Aug 16,500.00 500.00 500 523 261500

2030 Sep 17,000.00 0.00 0 523 0

2030 Oct 17,000.00 500.00 500 523 261500

2030 Nov 17,500.00 500.00 500 523 261500

2030 Dec 18,000.00 500.00 500 523 261500

2031 Jan 0 0.00 0 523 0

2031 Feb 0 500.00 500 523 261500

2031 Mar 0 500.00 500 523 261500

2031 Apr 19,500 500.00 500 523 261500

2031 May

2031 Jun

2031 Jul

2031 Aug

2031 Sep

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 2031 Oct

2031 Nov

2031 Dec

10.10. These periods may be adjusted and shortened should the law/regulation
demand. The one-year annual gaps (2026 & 2029) between phases for emergency/
incidents recovery that may interfere with the scheduled collections.

10.11. The timeline plan can be updated annually or from time to time when need
arises to regulate the minimum shares.

10.12. We therefore invite members to increase their share capital as per the
stipulated timelines to gain from the early bird benefits of investing with ST Sacco
Society.

10.13. After expiry of the stipulated timeline the Sacco will automatically deduct
the proportionate amount from the member savings/deposits to graduate the member
share capital to the minimum amount as per the above schedule. No deduction will be
made in respect of those who will have attained the stipulated level.

10.14. Not limited to the minimum share capital, a member/shareholder can however
buy more shares upto one-fifth (1/5) of total share Capital. As stated in part (10.3)

11. Alteration of authorized Share capital

11.1. Subject to the approval of the board through the Registrar, the co-operative
society may, by special resolution, increase or decrease its share capital and, for that
purpose, may—
(a) subdivide any shares;
(b) consolidate shares into shares of a larger par value, but the par value of
consolidated shares shall not be greater than $100;
(c) cancel any share that, at the date of registration of the by-laws, have not been
subscribed for or agreed to be issued and diminish the amount of its share capital
by the amount of the par value of the shares so cancelled;
(d) extinguish or reduce the liability on any of its shares with respect to share capital
not paid up;
(e) with or without extinguishing or reducing liability on any of its shares, cancel any
paid-up share capital that is lost or unrepresented by available assets; and
(f) with or without extinguishing or reducing liability on any of its shares and either
with or without reducing the number of such shares, pay off any paid-up share
capital that is greater than the requirements of the co-operative society.

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 11.2. The Registrar may give his approval under subsection (1) where the Registrar
is satisfied that—
(a) the resolution will not contravene the policy or the act;
(b) the holders of all shares of the co-operative society affected by the proposed
resolution have approved the special resolution passed by the members at a
general meeting called for the purpose; and
(c) in the case of a special resolution providing for a reduction in the share capital of
the co-operative society—
(i) all creditors who are liable to be affected have been notified of the
resolution and have signified their approval, or
(ii) appropriate steps have been taken by the co-operative society to
adequately safeguard the interests of its creditors.

12. Limitation on purchase of shares

12.1. Subject to the approval of the Registrar, only a registered co-operative society
may purchase more than one-fifth of the shares of another co-operative society
where—
(a) that other co-operative society is insolvent;
(b) the proposed purchase or acquisition would not render the purchasing co-
operative society insolvent; or
(c) subject to paragraph (b), the proposed purchase or acquisition would not, in the
opinion of the Board, be detrimental to the financial stability of the purchasing
co- operative society.

13. Transfer of shares generally

13.1. A share may be transferred with the approval of the Board to any person, but
if the transferee is not a member, he or she shall be approved as a member by the
Board, or by a general meeting according to the by-laws relating to the admission of
members before the transfer can be registered.

13.2. If the by-laws require a member to hold more than one share, a transferee shall
acquire by the transfer, or by the transfer and allotment, the number so required to
be held before the transfer can be registered.

13.3. A transfer of shares shall be effected in the form as the Registrar may
determine.

13.4. A transfer of a share shall not be valid and effective unless and until the
transfer has been registered by the Secretary on the direction of the Board
13.5. A transfer of a share made by a member indebted to the co-operative society
shall not be registered without the written permission of the Board and until the
transfer is registered a—
(a) right shall not be acquired against the co-operative society by the transferee; and

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 (b) claim of the co-operative society upon the transfer or shall not be affected by the
transfer.

14. Transfer of shares of member of unsound mind

14.1. Where a member or person claiming through a co-operative society has
become of unsound mind or incapable of managing his affairs and no committee,
receiver or guardian has been appointed, the co-operative society may subject to this
section and section 13 transfer the share or interest of that member to any person
nominated by the member for the purposes of next of kin or may pay to the person
nominated a sum ascertained in accordance with the value of the share or interest of
the member.

14.2. Where no nominee has been appointed, the co-operative society may pay a
sum representing the value of the member’s share or interest to the Registrar of the
High Court.

14.3. Where the value of the share or interest does not exceed $100 the Board may,
subject to any conditions it thinks fit, pay the whole or any portion thereof to the
person who appears to have the care of the member or the management of the
member’s affairs.

14.4. All transfers and payments made by a co-operative society in accordance with
this section shall be valid and effective against any demand made upon the co-
operative society by any person.

14.5. For the purposes of this section, the value of any share or interest shall be
represented by the sum actually paid for that share or interest by the member holding
it unless the by-laws of the co-operative society otherwise provide
14.6. Where the benefits of group insurance have accrued on such share or interest,
the value of the benefits shall be the amount actually received by the co-operative
society on the account of the deceased member.

15. Transfer of share or interest on death of member

15.1. On the death of a member of a co-operative society, where a person has been
nominated by the member in accordance with section 105 and the nominee is
admitted to membership of the co-operative society, the co-operative society shall
within 1 year of the death of the member by whom the nomination was made,
transfer the shares or interest of the deceased member to the nominee.

15.2. On the death of a member of STS co-operative society, where a person has
been nominated by the member and has not been admitted to membership of the co-
operative society, the co-operative society shall within 1 year of the death of the
member by whom the nomination was made pay to the nominee the sum which

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 represents the value of the deceased member’s share or interest in the co-operative
society.

15.3. On the death of a member of STS co-operative society, where the deceased
member made no nomination, the co-operative society shall within 1 year of the
death of the member pay to the legal personal representative of the deceased
member, the sum which represents the value of the deceased member’s share or
interest in the co-operative society.
15.4. This section shall be construed as prohibiting a nominee who has been
admitted to membership from electing to receive payment representing the value of
the deceased member’s shares or interest instead of accepting a transfer
15.5. Where after a period of 1 year there is no nominee or legal personal
representative of the deceased member to which the shares or interest may be
transferred or to which a sum representing the value of the deceased member’s share
or interest may be paid, the share or interest shall be transferred to the development
fund of the co-operative society.
15.6. The shares or interest transferred under subsection (4) shall remain in the
development fund for a period of 10 years during which period it shall remain
available to bona fide claimants, after which it shall constitute a part of the reserves
of the co-operative society.
15.7. From the second year after the death of the deceased until the tenth year
referred to in subsection (6) a notice to the effect that the deceased member’s share or
interest in the Co-operative society remains unclaimed shall be annually published in
the Gazette and a newspaper circulating

16. Restrictions on transfer of shares

16.1. Shares or interest or any part there of in the capital of the co-operative society
shall not be transferred unless the transfer is made to a member there of or to a
person whose application for membership has been accepted.
17. Conditions for the validity of transfer of shares
17.1. Subject to the by-laws, a transfer of shares in the co-operative society is not
valid for any purpose unless—
(a) a written application for membership by the transferee is approved and the
transfer is authorised by a—
(i) resolution of the directors, or
(ii) person authorised by a resolution of the directors to approve applications
and transfers of that kind; and
(b) notification of any approval given under paragraph (a) is sent to the transferee
and his name is entered on the register of members.

17.2. Notwithstanding subsection (17.1), a transfer of a share is valid for the

purpose of providing evidence of the rights of the parties to the transfer between the
transferor and the transferee.
18. WHY MEMBERS SHOULD BUY ST SACCO SHARES
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18.1. Participation in the ownership of a stable and steadily growing financial
institution

18.2. Lucrative dividends percentage (%)

18.3. To Finance the growth and expansion of the Sacco business as per existing
Strategic Plan.

18.4. Capital gain because of increased value of the shares.

18.5. The benefit that shares cannot be attached as security for loans.

18.6. Have your money work for you, has fast return-on-investment

18.7. Can be transferred to next-of-kin or to an existing member.

2.4. Benefits of share Capital to Members

1.4.1.1. Gives member the right to Sacco shareholding. Ownership of a stable
SACCO and strong SACCO – Be proud owner.

1.4.1.2. Earns higher rate of return

1.4.1.3. The shares continue to earn Guaranteed Dividends annually.

1.4.1.4. Dividends Rate and Value of shares will grow with growth of the
SACCO

1.4.1.5. Be highly honoured Member and leave inheritance to future generation.

1.4.1.6. Enjoy a variety of products and Services at affordable and flexible terms
1.4.1.7. Shares may be sold or transferred to another Member through the
SACCO.

2.5. Benefits of Share Capital to the ST SACCO Society

1.5.1.1. Participation in the ownership of a stable and steadily growing
financial institution.

1.5.1.2. To Finance the growth and expansion of the Sacco business as per
existing Strategic Plan.

1.5.1.3. Capital gain because of increased value of the shares.

1.5.1.4. The benefit that shares cannot be attached as security for loans.

1.5.1.5. Share capital finances the Growth of the ST SACCO Business of Savings
and Credit.
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 1.5.1.6. Lending using own funds is cheaper than Bank loans which attract huge
interest.

1.5.1.7. Reduction of Bank Loans drastically leads to good returns for Members.

1.5.1.8. Provides adequate funds for trading and stability – Improved liquidity.

1.5.1.9. A strong capital base enables the ST SACCO realize its strategic focus.

1.5.1.10. Develop products and services offered conveniently using modern

technology.

1.5.1.11. Steady growth of the ST SACCO thus attracting more Members, hence
more business.

1.5.1.12. Quick loan processing and new additional products and Services –
improved income.

1.5.1.13. Avenue for the ST SACCO to raise additional capital – strong base.

1.5.1.14. Secure Medium- to Long term investments to a minimum of six (6)

months that typically offer huge interest to the Society; i.e., Government
bonds/Treasury Bonds.

2.6. WAYS OF ACQUIRING MORE SHARES IN ST SACCO SOCIETY LTD.

1.6.1.1. Direct purchase by making deposits to your Sacco member account
and inform the Sacco by e-mail/Signed letter/doc of the specific purpose

1.6.1.2. Purchase from an existing member

1.6.1.3. Transfer from the member’s deposits

1.6.1.4. Capitalization of earned dividend and interest on deposits

1.6.1.5. Purchase or inheriting from a retired or withdrawn member

19. DEPOSITS/ SAVINGS

2.7. Non-withdrawable deposits
4.1.1.1. Non-withdrawable deposit accounts shall be operated in accordance
with the Sacco Society’s bylaws and the amount accumulated in the
account may be used as collateral against borrowings and shall be refunded

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 only when a member withdraws from membership and provided the
member has fully repaid all his debts and is free from guarantee.

4.1.1.2. ST Sacco Society operates non-withdrawable deposit accounts, where

every member MUST contribute on a monthly basis or at such prescribed
periods and in such amounts as may be determined by the Sacco Society.

4.1.1.3. ST Sacco Society may refund the amount saved by member in his non-
withdrawable deposit account within sixty days after receiving a written
notification from the member.

4.1.1.4. Non-withdrawable deposits shall attract interest at a rate to be

determined by the Sacco Society as dictated by external market forces or
internal funding needs.

2.8. It is the amount contributed monthly through checkoff for Salaried Members
employed in SIL, standing order for members transferred to other companies and wish
to continue with membership. For other members privileged as Group/Corporates or
Farmers/ Business to strictly contribute through Bank Deposits to ST Sacco account
specifying purpose and presenting receipt to accountant.

1.8.1.1. Monthly Contribution Categories

1.8.1.1.1.1. Salaried Members (2012 to 2024) minimum Ksh.500.
Proposed, effective 2025 – minimum Ksh.1000.

1.8.1.1.1.2. Farmers/ Business – Minimum Ksh.500

1.8.1.1.1.3. Group/ Corporates - Minimum Ksh.1000.

1.8.1.2. The minimum contribution is subject to review from time to time.

1.8.1.3. Savings/Deposits is withdrawable on retirement, resignation or

termination of membership.

1.8.1.4. Lien for loans – Acts as loan Security.

1.8.1.5. Deposits Earns interest annually at the end of every financial year.

1.8.1.6. The contribution amount is mandatory to all members.

2.9. Benefits Savings/Deposits

4.3.1. Deposits/Savings is personal future investment, on Retirement/ termination of
membership, a Member can withdraw all or part Savings accumulated. Retirees are
however encouraged to continue being Members of the SACCO to enjoy benefits
of a Member and Micro-credit Products.

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 4.3.2. Deposits/Savings at the end of the year earn Interests. Interest Charged on Loans
is ploughed back to the willing Member as a percentage of Shares, Savings or
Deposits.

4.3.3. Provide a Right of Membership. Ownership of the SACCO and the right to make
decisions for the Society.

4.3.4. Deposits/Savings is Security to your own and guarantee to other Members’

Loans.

4.3.5. Self Guarantee – A member with substantial Savings can be a self guarantor.

2.10. Withdrawable deposits

This is also known as Voluntary Savings Account. Account holder (any person) known us
client can exercise savings that can be withdrawn in flexible terms, i.e., Salary account,
Current Account, Fixed deposit Account and etc.

4.4.1. A Sacco Society shall establish a savings policy with minimum prescribed
terms and conditions of opening, operating and closing accounts, interest rate
calculations and payments, penalties and other charges.
4.4.2. All withdrawable deposits shall attract interest at a rate prescribed in the terms
and conditions of the deposit.

4.4.3. Interest on withdrawable deposits shall accrue on a pro-rata basis.

4.4.4. Among them, ST Sacco Society for instance, shall only implement the fixed
deposit account and Christmas/Vacation account opening first among others for
the time being, reason being it’s easy to manage with the current status of the
Sacco, others shall follow suit in future with approval from committee sitting
confirming that the society is in proper state financially to be able to run them.

2.11. Fixed Deposit Account

1.11.1.1. Short term investment plan, ranging between 1 to 12 months (Flexible
terms of 1, 3, 6, 9 and 12 months)

1.11.1.2. The customer is paid a competitive rate for the period the money is
held in the account. Interest rate is fixed during the investment
period and is calculated and paid at maturity

1.11.1.3. Interest payable advised at the time of booking the deposit

1.11.1.4. The account is locked and can only be accessed at the end of each
term.

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 1.11.1.5. Account holder allowed to borrow against their fixed deposits as
security. However, this is limited and is offered upon request and under
the ST Sacco banks’ discretion.

1.11.1.6. Minimum amount for fixed deposit account is Ksh.5,000.

1.11.1.7. Fast access to loans of up to 90% of the deposit amount

1.11.1.8. Account holder are permitted to redeem/withdraw their fixed deposit

before maturity, having in mind that the interest is forfeited. In case of
pre-mature withdrawal, Interest portion below the stated might be paid
for three Quarter (3/4) days of the term days in contract.

1.11.1.9. Deposit mode is open all except cash-in-hand deposit. Provided

transaction receipt with reference number is given.

1.11.1.10. Account holder can decide to renew or extend on maturity period.

Automatic roll-over upon maturity can be pre-arranged.

1.11.1.11. Free banking - no monthly management fees is charged on the account

1.11.1.12. Funds are available upon maturity

2.12. Christmas/ Vacation Account

(1) This account is a voluntary savings account.
(2) This account may or may not attract interest-earning, however account opening
fee for the service is charged as low as Ksh.100
(3) To help members save for Christmas, withdrawals are limited from January
1st to December 20th each year. Its a convenient way to enjoy a stress free
Christmas.
(4) While every aspect of vacation planning is important, there’s one area that
deserves extra attention: putting money aside to fund the trip. That’s where
vacation savings accounts come in.
(5) Once you deposit, the term for withdrawal is specific for end of every year
(December)
(6) The account holder has the right to total of all the savings amount accumulated at
the end of the period. No amount is deducted from the savings, if any charges
must be applied then should originate from the trading interest over the time.
(7) Both parties (the custodian of account holders money and the client) by choice
can terminate or renew contract for the following year at the end of 12 months.

2.13. Deposits return

A Sacco Society shall give a report statement of deposit return on its
non- withdrawable and withdrawable deposits set out in the Schedule
at the end of every month to be received on or before the 15th day of
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 the following month.
2.14. Record keeping
1.14.1.1. A Sacco Society shall maintain an account for each
of its members through which Shares and deposit
transactions with the member shall be recorded.

1.14.1.2. Term deposit accounts shall be evidenced by a receipt or statement that

clearly states the member’s name, the certificate and account number,
the date of the deposit, the amount of the deposit, the term of the
deposit, the interest rate, and dates of interest payments and penalties
for early withdrawal.

2.15. Savings disclosure requirements

(1) The Society shall disclose to its members and potential members, the terms and conditions
for operating each account and legal obligations attendant thereto.
(2) An advertisement in respect of the terms and obligations attendant to an account offered by
the Sacco shall not be misleading or inaccurate and shall not misrepresent the Society’s
account contract, and shall state the following information to the extent applicable, clearly
and conspicuously —
(a) the minimum amount required to open an account and the minimum balance to
maintain it;
(b) the minimum interest bearing balance;
(c) the interest rate and fees applicable;
(d) the penalty for early withdrawal, if any; and
(e) the maturity of a term account.
(3) For a joint account, disclosures made to any one of the members shall be deemed to be
made to both member.
2.16. Dormant accounts
(1) The Society shall deem an account as dormant if no transactions have been made therein
for a period of six months, and maintain a separate accounting record of all such
accounts.
(2) Savings, deposits and other sums due to a member may be deemed abandoned if the
member or his nominee has not contacted the Sacco Society in person or in writing
within a period of five years, or has otherwise not indicated an interest in the funds.
(3) Where funds have been deemed abandoned, the board of a Sacco Society shall give a
ninety days notice to the member or nominee at the last known address of its intention to
close the account and transfer the abandoned monies to the public trustee.
(4) The board of directors may transfer the abandoned funds to a person whose name
appears in the society’s records as a nominee or beneficiary.
(5) Where the member or nominee cannot be traced, the board of directors may, with
approval of the Annual General Meeting, transfer the funds to the public trustee, and
shall inform the member or other interested party by way of notice of the action taken
using the last known address.
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 PART III – CREDIT MANAGEMENT
2. General lending requirements
Except as otherwise provided, these Regulations shall apply to all credit facilities, including
loans, advances and overdrafts to members.
(1) ST Sacco Society shall have a written credit policy consistent with the relevant provisions
of the Act, these Regulations and any other applicable laws, which shall contain the following
information—
(i) loaning procedures and their documentation;
(ii) requirements for grant of a loan;
(iii) permissible loan purposes and acceptable types of collateral;
(iv) loan concentration limits;

(v) loan types, interest rates, frequency of payments and conditions;

(vi) maximum loan size per product;
(vii) where collateral is used as security for lending, maximum loan amounts as a
percentage of the values of the same;
(viii) appraisal of the borrower’s ability to repay the loan;
(ix) terms and conditions for insider/departmental lending;
(x) maximum loan approval levels for each officer and committees; and
(xi) guaranteeing requirements.
(2) A member may repay a credit facility prior to its maturity in whole or in part on any
business day without being charged full-term interest.
(3) Except as otherwise provided, no director or employee of a Sacco Society, or immediate
family member of a director or employee shall receive anything of value or other
compensation in connection with any loan made by the Sacco Society.
(4) The board of directors of a Sacco Society shall be responsible for ensuring that the written
credit policy remains up-to-date and reflect current lending practices.
(5) The Society shall provide a sixty days’ written notice to every member affected by a
change in any term disclosed in the loan contract.
(6) The Society shall provide each borrower, at least once every six months or on request a
statement for each outstanding credit facility that provides adequate detail of each
transaction made during the period.
(7) ST Sacco Society’s normal loans (Advance, emergency, education and development) shall
have an annual maximum lending period.
(a) Advance: - maximum of one (1) Month unless otherwise considered special case for
(2) months extension, given once in a month, limit amount is Ksh.10,000.
(b) Emergency: - maximum of three (3) months, applied for anytime, limit amount is

18
 Ksh.30,000
(c) Education/School Fee: - maximum of ten (10) months, applied three times a year,
limit is Ksh.100,000
(d) Development: - maximum of twelve (12) months, applied twice a year, maximum is
Ksh.200,000
(8) Loans more than Ksh.200,000 shall be considered as mortgage loans and will last for a
maximum period of three (3) calendar years provided sixty (60) percent is recovered within the
first calendar year. Applied once in a year.
(9) The maximum amount for mortgage loan type shall not be more than ten (10) percent of
the working capital.
(10) The compound interest rate for mortgage shall be discussed and agreed by the credit
committee.
(11) Mortgage loans may require security of value that can stand-in for the loan in case
loanee member employer’s contract is terminated before loan is paid in full and where
checkoff system cannot be applied. The loan security must be of same value to loan plus interest
and other charges accrued.
(12) Loan Security must have official/ original documents (logbooks, title deed) handed
over to lender (ST Sacco Society) for safe keeping until the loan period is over. Otherwise, they
will be used as evidence for auctioning rights accorded to Sacco.
(13) Interest rate for mortgage shall be set elaborately in the credit policy.
3. Lending disclosures requirements
The Society shall disclose at a minimum the following lending terms and legal obligations
between the parties as applicable—
(a) Amount to be financed;
(b) Finance charges, including interest rate, fees and any other charges that may be
imposed;
(c) Interest computation method (variable, fixed, flat or reducing) and the date interest
charges begin to accrue;
(d) conditions for refinancing of loans;
(e) frequency of issue of statements; and
(f) Collateral required to secure the lending.

4. Interest rates, fees and penalties

(1) Loan interest rates may be established by the management and shall be approved by the
board of directors.
(2) The Sacco Society may levy a late charge in connection with collecting a debt arising out
of an extension of credit which remains unpaid after its due date.
5. Limit on interest recoverable
The Society shall be limited to the interest it recovers from a debtor with respect to a delinquent
loan up to the limit not exceeding the amount owing when the loan became delinquent.
6. Security for loans
(1) The Society shall ensure that all loans granted are fully secured.
(2) The Society shall ensure that no member is allowed to over-guarantee.

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 (3) A guarantor shall be adequately informed of the nature of the liability prior to signing an
agreement creating guarantor liability.
(4) The Society shall not grant a loan or credit facility against a member’s shares.

7. Inter Sacco borrowings

The Sacco Society may borrow or lend to another Sacco for purposes of providing funding for
member loans or to finance temporary liquidity short falls provided—
(a) A borrowing Sacco Society shall not exceed the prescribed limit for external
borrowings;
(b) The Sacco Society’s board of directors or on its delegated authority shall approve the
borrowing or lending to other Sacco societies;
(c) The terms and conditions for borrowing or lending shall be evidenced by a signed
written agreement between or among the participating Sacco societies to be approved
by the Authority;
(d) Where a Sacco Society borrows for the purposes of on lending to members, it shall
retain a reasonable interest margin between its borrowing and lending rates.
8. Loan product approval
When ST Sacco Society intending to introduce a new loan product shall seek prior
(1)
approval from the board of management/CMC and further may seek guidance from
Authority.
(2) An application for product approval shall be accompanied by the following information on
the planned scope of operations—
(a) the capacity, including availability of qualified or experienced staff to disburse loans;
(b) the projected demand for the product; and
(c) the market segment that the product targets.
(d) The MOU, if it involves business with external organization.

9. External borrowing and limits on loans

(1) The Sacco Society shall not acquire external borrowings in excess of twenty five percent
of its total assets unless the limit has been waived by the Authority.
(2) An application for such a waiver shall contain a detailed explanation demonstrating the
need to raise the limit above twenty five per cent of its assets.
(3) The Board/Authority may grant the waiver request if the proposed borrowing limit is not
likely to have any adverse effect on the safety and soundness of the Sacco Society.
(4) The Sacco Society acquiring external borrowing for on-lending to members shall charge
interest at least two percentages higher than the rate it is charged in procuring the facility.
(5) The Sacco Society shall not grant to any member or permit to be outstanding any loan such
that the aggregate amount in respect of that member at any time exceeds ten percent of the
Society’s core capital.
10. Insider lending
(1) An officer of the Sacco Society shall not use that position to further his or her personal
interest.
(2) All loans to directors and employees shall be approved or ratified by the board of directors

20
 and where the applicants attend board meetings, they shall not be present in the meeting
considering their loan application.
(3) The rates, terms and conditions of any loan made to an officer, his immediate family
member, or their business associates shall not be in any way more favourable than those offered
to other Sacco Society members.
(4) The Sacco Society shall notify the Authority of every approval given pursuant to
paragraph (2) above within fourteen days of such approval.

11. Inter departmental Borrowing

(1) Where ST Sacco society has different FOSA/Varied investment categories, business to business
borrowing shall be conducted accordingly, provided:
(a) Any amount borrowed doesn’t exceed fifty (50%) percent of the business investment
capital.
(b) The two departmental representative heads must sign an agreement of terms of
lending with clear date of return and interest.
(c) The borrowed amount is to be paid back with monthly interest of ten percent (10%)
subject to review from time to time.
(d) Overdue borrowed amount shall accrue defaulter charges/fines
(2) Security of such loaning shall be disclosed before any fund is disbursed; the departmental
committee representatives involved must all agree to the terms before approval by the board of
management.
(3) Receipts of transfer, deposits, disbursement and payback must be filed for the same.
12. Foreclosed assets
Where Sacco Society holds an asset in satisfaction of a debt, disposal of such asset shall be
(1)
done within one year, failure to which the Sacco shall provide for probable loss at twenty five per
cent per annum, and where the proceeds from the sale of the asset exceed the amount owing from
the member, the excess amount shall be returned to the member after accounting for advertising
charges and any other charges related to the disposal of the asset.
(2) ST Sacco Society shall dispose of a foreclosed asset in accordance with the charge and
where the Charge document specifies disposal through public auction the Society shall advertise
the disposal of the asset in a national newspaper of wide distribution between Monday and Friday,
excluding public holidays.
(3) Any decline in the value of the property, as established by subsequent appraisals, shall be
made through provisioning for the foreclosed asset.
(4) Assets of material value received by the Sacco Society as partial or full payment for a
borrower’s indebtedness shall be accounted for at the lower of the outstanding loan balance or the
market value on the date the asset is transferred to the foreclosed account.
(5) Any losses due to the loan balance being greater than the market value shall be charged to
the allowance for loan losses when the asset is transferred to the foreclosed account.
(6) The Sacco Society shall maintain adequate written documentation which shall provide
evidence of the management’s efforts to dispose the property within the time frame established in
this regulation and include any legitimate offers to buy the asset.
13. Credit collection practices
When a loan application is rejected, the Sacco Society shall communicate to the applicant
(1)
in writing the reasons for the rejection within fourteen days.

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 (2)The Society shall not levy fees where the only amount delinquent on a member’s loan
account is attributable to late fee(s) or any other charges assessed on earlier installments or
payments made.
(3) The Society may appoint a debt collector after exhausting the normal debt collection
procedures, and a debt collector may not engage in any conduct the natural consequence of which
is to harass, oppress, or abuse any person in connection with the collection of a debt, or any of the
following—
(a) use of threat, or violence or other criminal means to physically harm the person, or
his reputation or property;
(b) use of obscene or profane language;
(c) engaging any person in a conversation on the telephone or in person with the intent to
annoy, abuse or harass until they repay the debt;
(d) any false, deceptive, or misleading representation or means in connection with the
collection of any debt, including—
(i) the false representation of the character, amount or legal status of any debt;
(ii) the false representation or implication that any individual is an attorney or that
any communication is from an attorney;
(iii) the threat to take any action that cannot be legally enforced or which is not
intended to be taken; or
(iv) communicating or threatening to communicate to any person credit information
which is known to be false.
(4) A debt collector shall not collect interest, fees, charges or expenses unless they are
mentioned in the loan agreement or contract, and shall not collect his fees directly from a debtor.

PART IV – RISK CLASSIFICATION OF ASSETS AND

PROVISIONING
14. Classification requirements
ST Sacco Society shall undertake a review of its credit portfolio at least once every quarter and
shall ensure that—
(a) loan granting and lending conforms to the approved credit policy;
(b) problem accounts are adequately identified and classified in accordance with the
classification criteria prescribed in these Regulations; and
(c) appropriate and adequate level of provisioning for potential loss are made and
maintained at all times.
15. Computing delinquency
(1) One-off loan payment shall be deemed to be delinquent if the total principal balance or
interests are not serviced at their due date.
(2) The entire principal balance shall also be deemed delinquent where the missed payment
was for the interest only.
16. Basis of classification
The Society shall classify its loan portfolio based on performance vis-à-vis the terms
(1)
provided in the loan contract.

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 Where loan interest payments are due, loan classification will be based on the defaulted
(2)
interest payments.
(3) All loans shall be classified into five categories on the basis of the following criteria—
(a) Performing loans, being loans which are well documented and performing according
to contractual terms;
(b) Watch loans, being loans whose principal or interest have remained un-paid for one
day to thirty days or where one installment is outstanding;
(c) Substandard loan, being loans not adequately protected by the current repayment
capacity and the principal or interest have remained un-paid between thirty-one to one
eighty days or where two to six installments have remained outstanding;
(d) Doubtful loans, being loans not adequately protected by the current repayment
capacity and the principal or interest have remained un-paid between one hundred and
eighty one to three hundred and sixty days or where seven to twelve instalments have
remained outstanding; and
(e) Loss loans, being loans which are considered uncollectible or of such little value that
their continued recognition as receivable assets is not warranted, not adequately
protected and have remained un-paid for more than three hundred and sixty days or
where more than twelve instalments have remained outstanding.
(4) A restructured loan may be reclassified if a sustained record of performance is
maintained for six months or six instalments have been made from the date of the restructuring.
Provided no loan shall be restructured more than once in its life cycle.
17. Accrued interest
(1) All interest on non-performing loans and advances shall be suspended once a loan is
classified as substandard, doubtful and loss and shall not be treated as income. Interest in
suspense shall be taken into account in computing provisions for non performing loan accounts.
(2) At no time shall accrued interest income arising from loans exceed thirty days earnings of
the entire loan portfolio.

18. Treatment of collateral

Where the Society obtains collateral for purposes of protecting itself against probable loan
(1)
loss, the Sacco Society shall ensure that the collateral is duly charged and adequately insured
based on an independent registered valuer’s report and revaluation shall be done every three years.
(2) The ST Sacco Society shall maintain an up to date register of all securities or collaterals
provided for securing loans.
19. Loan loss allowances
Sacco Society shall assess and provide for loan loss allowance for delinquent loans as
(1)
follows—
(a) one percent for a loan classified as performing (General Risk);
(b) five percent for a loan classified as watch;
(c) twenty-five percent for a loan classified as substandard;
(d) fifty percent for a loan classified as doubtful; and
(e) one hundred percent for a loan classified as loss.
(2) Without prejudice to the classification sequence for provisioning prescribed in paragraph

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 (1) above, Sacco Society may provide fully for accounts deemed uncollectible at any time.
20. Loan write-off
(1) Sacco Society shall write-off a loan or part of a loan from its Statement of financial
position when it loses control of the contractual rights over the loan or when all or part of the loan
is deemed uncollectible or where there is no realistic prospect of recovery.
(2) The circumstances specified in paragraph (1) shall be deemed to have arisen where—
(a) a court has ruled against the Sacco Society;
(b) all forms of securities or collateral have been called, realized but proceeds failed to
cover the entire facility;
(c) Sacco Society is unable to collect or there is no collateral;
(d) a borrower is adjudged bankrupt; or
(e) efforts to collect the debt are abandoned for any other reason.
(3) The procedure for write-off shall be detailed in the credit policy and any recovery
made from any account previously written-off shall be credited back to the allowance for loan
losses account in the financial statement and shall not be recognised as income in the year it is
recovered.
21. Risk classification return
Sacco Society shall submit to the Authority a return on the risk classification of assets and
provisioning at the end of every quarter to be received on or before the 15th day of the following
month.

PART V – INVESTMENTS
22. Investment policy
ST Sacco Society’s board of directors shall be responsible for formulating, reviewing and
(1)
amending the investment policy that is consistent with the Act, these Regulations and any other
applicable laws, which shall at a minimum—
(a) the purpose and objectives of investment activities;
(b) the types of investments that can be made;
(c) the investment characteristics including issuer, maturity and interest rate among
others;
(d) the person who has authority to make investments and the extent of this authority;
(e) the need for adequate investment diversification and concentration risk management
across investment type and or entity;
(f) the educational background and experience of officers assigned the authority to assess
the risk characteristics of investments and investment transactions;
(g) the contingencies put in place to handle investments purchased prior to
commencement of these Regulations and are outside board policy do not fulfil the
requirement of this Part;
(h) the limitations, specific type, quantity, and maturity of investments; and
(i) necessary internal controls.

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 23. Limits on property, equipment financial assets
ST Sacco Society shall not invest in non-earning assets or property and equipment in
(1)
excess of ten percent of total assets, of which land and buildings shall not exceed five percent
unless a waiver to that effect has been obtained from the Authority:
Provided donated assets and foreclosed assets shall be excluded in arriving at this percentage.
(2) The request for such waiver shall include a detailed investment appraisal showing the cost
and justification for the investment, including how it will improve members’ service and an
analysis of expected impact on the profitability and capital adequacy requirements.
(3) ST Sacco Society shall be required to dispose of the investment in property acquired for the
purpose of future expansion, if the property remains unutilised for two years from the date of
acquisition and an extension shall only be granted with prior approval of the Authority.
(4) ST Sacco Society shall not make financial investments in non-government securities in
excess of forty percent of its core capital or five percent of its total deposits liabilities.
(5) For the purposes of these Regulations, financial investments mean investments in
government securities, shares and stocks, deposits in institutions licensed under the banking Act,
and licensed Sacco societies.
24. Compliance with investment policy
ST Sacco Society shall make financial investments with the intention of "holding to
(1)
maturity", and shall not use the portfolio to trade securities for profit, placing the Sacco Society’s
capital at risk.
(2) Each investment shall have a subsidiary ledger detailing the type of investment, amount,
interest rate, maturity and parties that approved the investment/the MOU.
(3) ST Sacco Society shall keep all original investment documentation in a fire-proof safe and
shall maintain a disaster recovery site.

25.The Sacco Digital system

Digital system is an investment that doesn’t return direct interest but plays a very vital role by
managing and safeguarding organization’s funds by use of some defined commands and
guidance. This investment improves efficiency, reliability and errors.
(1) The society shall with the approval of board of management, source for a digital platform
(software) to manage the organization digitally.
(2) The digital system must be of high security enabled and protected assurance in regard to
funds/ transactions safety.
(4) The app must not be prone to access breach or hacking. The system owner or seller must
guarantee to the Sacco with evidence surety of the confidence and reliability of such
occurrences.
(5) The software must have logs for every access made to the system indicating username, date
and time of an occurrence.
(6) Different users with varying unlimited, limited and view only rights. For example, a clerk
is not allowed to do the work of accountant i.e., disbursing funds or doing payroll.
(7) The system must have an auditor option with view only rights.
(8) The software must have unlimited reliable elaborative reports as required for management
purposes.
(9) Must be able to generate members’/ Clients’ statement of accounts.
(10) Must be integrated with MPESA/ USSD transaction modules
(11) Must have SMS and Mailing option as means of communication
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 (12) The software must be worth its price in functionality coverage. Its cost benefit analysis
must be analysed and maximum period in operation before obsoleteness must be unveiled
before the purchase. At least 8-10 years minimum is acceptable, anything below is a
loss to the society.
(13) Software should be able work on phones. 95% of members/ Clients has phones hence
easy connection and access at their own convenience, promoting real time transactions.

26. Restricted investment transactions

The Society shall not acquire, sell or lease premises, without the prior written approval of
(1)
the Authority through the board, to or from the following—
(a) a member of the board of directors, or an employee or immediate family member of
any such individual;
(b) businesses in which any of the persons named in paragraph (a) is an officer or,
partner or has an interest of greater than ten percent in the entity or partnership; and
(2) All transactions with business associates or family members not specifically prohibited
must be fully disclosed, conducted at arm’s length and in the best interest of the Sacco Society.
27. Investments return
The Society shall submit to the board of management and the Authority a return on its investments
at the end of every quarter to be received on or before the 15th day of the following month as set
out in Form 5 in the Second Schedule.

Business investments
The society shall be guided with the below rules in order to conduct any kind of business
investment involving Sacco funds:
(1) Investment types shall inherit the general name Assets and will include
(a) Tangible Assets
Are assets consisting of land/plots, buildings and plant, machinery and equipment, Raw
material Plantations (Sugar Cane)
(b) Consumables
The Assets that have to be replaced regularly in an organization as they can be spent,
wasted, and dissipated are defined as Consumable Assets
Are where the context permits, Digital Print Consumables, Prepress Consumables, Gas
refill consumables, Cooking Oil Consumables, Sugar retailing and wholesale
consumables.
(c) Service Assets
A service asset is any resource or capability that could contribute to the delivery of a
service. You can select an asset to be managed for operational, financial, or contractual
purposes. Once you select an asset for management, it becomes a Configuration Item
(CI).
Asset-based lending Service is the business of loaning money in an agreement that is
secured by collateral. An asset-based loan or line of credit may be secured by inventory,
26
 accounts receivable, equipment, or other property owned by the borrower. The asset-
based lending industry serves business, not consumers.
Examples of service assets include Offering transportation, food & Catering Services,
Ploughing, harvesting, Tents and Chairs hire Services, Hostels and accommodation
Services etc.
(2) Venturing into any of the above quoted categories in part 1, shall require the use of Shares
Assets as an investment capital and any other source a part from Members’ savings.
(3) This kind of investment shall accrue profit surplus with time to the organization. A certain
percentage of the profits shall be ploughed back to grow the business and a portion to
dividend subject to consideration and observation of minimum capital requirement and the
actual business capital of which must be maintained at all cost.
(4) Financial status of the Assets business must be done quarterly to determine whether it’s
heading in the right direction (loss or gain)
(5) Asset business may have different managers (employed or appointed from council) to
manage and oversee their progress. If this provision is affected then the person shall be
responsible for every transaction and safeguarding the financial status of the said business.
(6) A single business capital should not exceed two-third (2/3) of total net-share capital. A
measure to regulate concentration in one business and ensuring risk reduction.

Payments/Accounting
(1) Payment process
(a) Identifying the payment cause by the presenter (individual, Committee, or staff)
(b) Agreeing and making decision on exact/approximate amount needed.
(c) Checking the availability of fund for the cause from the treasurer.
(d) If funds are available, the payment list is drafted by the necessary parties required to
authenticate the payment including the Sacco accountant.
(e) The list is approved by appending signatures that are required to authenticate it.
(f) The cheque is written of the same value as of the list and signed by the signatories
(g) The cheque is then released to the bank or owner.
(2) Cash Payment
(3) Cheque Payment
(4) Internet/Online Payments

PART VI - CAPITALIZATION/ CAPITAL ADEQUACY

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20. CAPITALIZATION PROGRAM TOOLS
To achieve the objective of the policy, we intend to implement immediate application of a
series of institutional tools designed to help achieve capitalization.
2.17. Calculating Institutional Capital
5.1.1.1. Capital in the broadest accounting sense is the excess of assets over
liabilities. However, the Regulating Authority requires a stricter definition of
capital in order to ensure capacity of the regulatory capital base to absorb
losses and thereby protect members’ funds.

5.1.1.2. Accordingly, this Guideline focuses on ‘Institutional Capital’ as defined

below, and requires ST SACCO to maintain a minimum Capital Adequacy
Ratio (CAR) set by the RA, calculated as follows:

Institutional Capital
Total On−BalanceSheet Assets

5.1.1.3. In determining whether an item qualifies to be included in the

computation of Institutional Capital, its permanency and loss absorbency
ability will be considered. The criteria include the following:
5.1.1.3.1.1. The instrument is permanent to the SACCO, is not meant to
be expended unless on liquidation of the SACCO;

5.1.1.3.1.2. The instrument will be available to absorb losses;

5.1.1.3.1.3. The instrument cannot be used as a security against a

member’s loan;

5.1.1.3.1.4. The SACCO has not created an expectation at issuance or in

by-laws that the instrument will be bought back, redeemed or
cancelled.

5.1.1.3.1.5. The instrument qualifies to be classified as a capital

instrument in terms of international accounting standards.

21. FUNDS OF THE SACCO SOCIETY

2.18. The funds of the Sacco Society shall consist of:
1.18.1.1. Core Capital
1.18.1.2. Paid up members shares
1.18.1.3. Retained Earnings
1.18.1.4. Disclosed Reserves
1.18.1.5. Grants, Gifts and Donations Income from other bodies, organizations or
individuals.
1.18.1.6. Interest, fees and charges, penalties, and commissions.

28
 1.18.1.7. Entrance/ Registration fee.
1.18.1.8. Funds obtained from other lawful miscellaneous sources.
1.18.1.9. Liabilities, which include deposits from members and borrowings from
other sources as may be prescribed by the Authority.

2.19. In general, the following items would qualify as part of a SACCO’s institutional
capital:
1.19.1.1. Current year surplus;

1.19.1.2. Retained surplus;

1.19.1.3. 9statutory reserves;

1.19.1.4. General reserves;

1.19.1.5. grants and donations; and

1.19.1.6. Revaluation reserves (limited to not more than 20% of Institutional Capital)
subject to prior approval of the Regulation Authority. Revaluation reserve is
limited to only land & buildings.

2.20. However, some items need to be deducted because they do not meet the criteria
for Institutional Capital:

1.20.1.1. Intangible Assets (e.g. goodwill);

1.20.1.2. Accumulated losses;

1.20.1.3. Investment in subsidiaries; and

1.20.1.4. Equity instruments in other financial institutions or SACCOs.

2.21. Increasing institutional capital

1.21.1.1. In order to mitigate against exposure to credit or interest-risk that could
negatively affect the solvency of the SACCO and in line with the new SASRA
regulations, we shall endeavor to:

- On an annual basis, the board shall review the institutional capital ratio
(a measure of the accumulated equity generated by the Sacco and its
relationship to total assets) for adequacy.

2.22. CAPITAL ADEQUACY MANAGEMENT

29
 1.22.1.1. Determining the adequacy of our institutional capitalization will be through
a process of qualitative evaluation of critical variables that directly bear on the
Sacco’s overall financial condition. These are:

1.22.1.1.1.1. Maintaining core capital of not less than 10 million

1.22.1.1.1.2. Maintaining core capital of not less 10% of total asset

1.22.1.1.1.3. Maintaining institutional capital of not less 8% of total assets

1.22.1.1.1.4. Maintaining core capital of not less 8% of total deposits

2.23. Minimum Capital Adequacy Ratio

6.6.1.1. The Board should ensure that the SACCO maintains capital buffers that
are commensurate with its size and risk profile. A SACCO shall at all
times maintain institutional capital of not less than 8 per cent of total
assets.
2.24. Redemption or Repurchases of Member Shares
6.7.1.1. Where a SACCO’s capital is below acceptable regulatory standards a
SACCO should not repurchase shares of resigned members or that payment
should be pro-rated in accordance with loss or deficiency incurred by the
SACCO.
CORE CAPITALS
1.2. ST Saccos is required to have adequate core capital which comprises share capital +
reserves or institutional capital. It is a legal requirement that all deposits taking
Saccos (DT-Saccos) maintain a minimum core capital.

22. BENEFITS OF BEING A WELL CAPITALISED SACCO

7.1. More funds available for growth and expansion

7.2. To ensure that the 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 may face.

7.3. It is a measure of a financial institution’s safety and soundness; adequate capital promotes
public confidence in the institution.

7.4. To comply with the statutory requirements: SASRA prudential guidelines already require
DT SACCOs to maintain minimum core capital (8% of core capital as a proportion of total
assets). ST Sacco Society Ltd needs to be compliant-ready as one of the societies to be
classified as a Regulated DT-Sacco whose anticipated regulation requires a minimum of
8% of core capital as a proportion of total assets. Example: If ST Sacco Society Ltd has
ratio of 5.87% as at 31st December 2019. As the amount of assets rises without
contemporaneous rise in core capital (share capital + reserves), the ratio lowers. Thus,
the rate of increase in share capital must be higher or keep in step with increase in total
30
 assets. Normally, the share capital comprises the larger proportion in core capital than the
reserves.

7.5. To ensure that the 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 may face.

7.6. It is a measure of a financial institution’s safety and soundness; adequate capital promotes
public confidence in the institution.
+++++++++++++++++++++++++++++++++++++++++++++

1. Interpretation of terms used

In these Regulations, unless the context otherwise requires—
"allowance for loan loss" means an amount set aside in the Statement of
financial position (Balance sheet) to recognise probable loan losses so
that the true value of the loan portfolio is fairly stated;
"amalgamation" means the consolidation of assets, liabilities and equity
of two or more Sacco societies to form a new entity referred to as an
amalgamated society;
"Authority" means the Sacco Societies Regulatory Authority;
"board of directors" has the meaning assigned to it under the Co-operative
Societies Act (Cap. 490);
"core capital" means the fully paid up members’ shares, capital issued,
disclosed reserves, retained earnings, grants and donations all of which
are not meant to be expended unless on liquidation of the Sacco Society;
"delinquent loan" means any loan which the principal or interest remain
unpaid after the due date;
"equity" means the difference between assets and liabilities, or the total of
institutional capital and other capital accounts;
"foreclosed assets" means real estate and assets of material value which
are transferred to the Sacco Society because of non-repayment of a loan;
"full and fair disclosure" means the level of disclosure which a prudent
person would provide to a member of a Sacco, to the Authority, or, at the
discretion of the board of directors, to creditors, to inform them of the
financial condition and the results of operations of the Sacco;
"illiquid assets" are assets that cannot be readily converted into cash due
to the nature of the asset or the condition of the market;
"institutional capital" means disclosed reserves, retained earnings, grants
and donations all of which are not meant to be expended unless on
liquidation of the Sacco Society;
"immediate family member" means a spouse or other family member
living in the same household or under the direct influence of an officer,
member or employee;

31
 "non-earning assets" are those assets that do not generate income;
"off balance sheet items" means items not shown on the balance sheet but
which constitute a risk to the Sacco Society;

"officer" means a director or any other person by whatever name or title

called or described, who carries out or is empowered to carry out
functions relating to the overall direction of a deposit-taking Sacco
Society or takes part in the general management thereof;
"ordinary men of business" shall have the meaning assigned to it under
the Co-operative Societies Act (Cap. 490);
"originating Sacco Society" means the Sacco originating the loan
participation when one or more other Sacco societies partner on a loan or
multiple loans;
"provision for loan losses" means an expense in the income statement to
reflect an increase in the probability of losses due to uncollected loans;
"savings" means deposits payable on demand;
"statutory management" means the procedure whereby the Authority
takes immediate possession and control of a Sacco Society’s business due
to unsafe and unsound practices;
"supplementary capital" means general provisions which are held against
future and presently unidentified losses that are freely available to meet
losses which subsequently materialise, twenty five percent asset
revaluation reserves as approved by the Authority, subordinated debt,
hybrid capital instruments or such other form of capital as may be
determined by the Authority from time to time.
Interest – earning that results from a member’s savings
Dividend – earnings that result from members shares
Share – generally equal stake of each member on the SACCO, as determined by the bylaws
Deposits – members savings
ST – Sukari Tamu
STSS – Sukari Tamu Sacco Society

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

CAPITAL AMOUNT (KSh.

COMPONENTS'000'

1 CORE CAPITAL
1.1.1 Share Capital
1.1.2 Statutory Reserves

32
1.1.3 Retained earnings/Accumulated losses
1.1.4 Net Surplus after Tax, current year to-date 50%
1.1.5 Capital Grants
1.1.6 General Reserves
1.1.7 Other Reserves
1.1.8 Sub-Total (1.1.1 to
1.1.7) LESS
DEDUCTIONS

1.1.9 Investments in Subsidiary and Equity

instruments of Other Institutions
1.1.10 Other Deductions
1.1.11 Total Deductions (1.1.9 to 1.1.10)
1.1.12 CORE CAPITAL (1.1.8 Less 1.1.11)
1.1.13 INSTITUTIONAL CAPITAL (1.1.12 Less
1.1.1)
2. ON - BALANCE SHEET ASSETS
2.1 Cash (Local + Foreign Currency)
2.2 Government Securities
2.3 Deposits and Balances at Other Institutions.
2.4 Loans and Advances
2.5 Investments
2.6 Property and Equipment (net of
depreciation)
2.7 Other Assets
2.8 TOTAL (2.1 to 2.7)
2.9 Total Assets (As per Balance Sheet)
2.10 Difference
3. OFF-BALANCE SHEET ASSETS
4. CAPITAL RATIO CALCULATIONS
4.1 Total Asset value of on-balance sheet items
as
per 2.8 above
4.2 Total Asset value of off-balance sheet items
as
per 3 above
4.3 Total Assets (4.1 + 4.2)
4.4 Total Deposits Liabilities (As per Balance
Sheet)
4.5 Core Capital to Assets Ratio (1.1.12/4.3)% 0.0%
4.6 Minimum Core Capital to Assets Ratio 10.0%
requirement
4.7 Excess (deficiency) (4.5 less 4.6) -
10.0%
4.8 Institutional Capital to Assets Ratio 0.0%
(1.1.13/4.3)%
4.9 Minimum Institutional to Asset Ratio 8%
requirement
4.10 Excess (deficiency) (4.8 less 4.9) -8%
4.11 Core capital to Deposits Ratio (1.1.12/4.4)% 0.0%
33
 4.12 Minimum Core Capital to Deposits 8.0%
requirement
4.13 Exces0Deficiency) (4.0 less 5.0) -8.0%

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

COMPLETION INSTRUCTIONS ON CAPITAL ADEQUACY RETURN

1. CAPITAL COMPONENTS
1.1 CORE CAPITAL
1.1.1Share Capital
This is the value issued and fully paid members shares.
1.1.2 Statutory Reserve
These are accumulated reserves that have been appropriated from net
surplus (revenue reserves) over the years. This is normally 20% of
retained earnings after tax.
1.1.3 Retained Earnings/Accumulated Losses
These are reserves retained from earnings or accumulated losses from the
profits/losses of prior years. They should however exclude reserves
arising from revaluation of investment properties and cumulative
unrealised gains and losses on financial instruments.
1.1.4 Net Surplus after Tax Current Year to Date 50%
This is 50% of current year to date un-audited after tax profits. The Sacco
Society must have made adequate provisions for loan losses,
depreciation, amortization and other expenses. In arriving at the
applicable figure, any proposed dividends would have been taken into
account. This should however exclude reserves arising from revaluation
of investment properties and cumulative unrealised gains and losses on
financial instruments. In case of a loss, full amount should be included.
1.1.5 Donations and Grants
These are donations to the Sacco Society that are irredeeinable or non payable
1.1.6 General Reserves
These are reserve provisions to cover other non performing receivable accounts.
1.1.7 Other Reserves
These are all other reserves, which have not been included above. Such
reserves should be permanent, unencumbered, uncollectible and thus able
to absorb losses. Further, the reserves should exclude cumulative
unrealised gains and losses on available-for-sale- instruments.
1.1.8 Sub-Total
Enter in this line the sub-total of all the items from
1.1.1 to 1.1.5. DEDUCTIONS FROM CORE
CAPITAL
1.1.9 Investment in Subsidiary and Equity Instruments of Other Institutions
This is investments made by a Sacco Society in its subsidiary institutions
and equity instruments of other institutions.
1.1.10 Other Deductions
34
 In this line, enter any other deductible items that have not been dealt with in 1.1.9.
1.1.11 Total Deductions
This is the total of all the items from 1.1.9 to 1.1.10.
1.1.12 Core Capital
Core Capital is the deduction of line 1.1.8 from line 1.1.11
1.1.13 Institutional Capital
Institutional Capital comprises of all items in the Core Capital less Share
Capital i.e. (1.1.12 less 1.1.1)
2. ON-BALANCE SHEET ASSETS
2.1. Cash
Enter in this line cash at hand (Local + Foreign notes and coins).
2.2 Government Securities
These are Treasury bills and treasury issued by the Government of Kenya.

35
 2.3 Deposits and Balances Due from Lending Institutions
These are deposits and balances held with banks, other financial
institutions, and other Sacco societies including overnight balances.
2.4 Loans and Advances
These refer to are facilities advanced to members whether secured or not.
These be reported net of provisions which must be computed in
accordance with Classification of Assets and Provisioning Return.
However, provisions appropriated from retained earning should not be
netted off from loans and advances.
2.5 Investments
These are investments in a Sacco Society's subsidiary institutions and
other financial institutions.
2.6 Property and Equipment
These are assets acquired for use in the operation of the business or for
investment purposes, e.g. furniture, computers, freehold and leasehold
land and buildings. They should be shown net of accumulated
depreciation, amortized cost, or at fair value.
2.7 Other Assets
These are other assets, which have not been dealt with above.
2.8 Total On-Balance Sheet Assets
Enter in this line total on-balance sheet asset i.e. total of line 2.1 to 2.7.
2.9 Total Assets (As per Balance Sheet)
Total asset figure as reported in the Balance Sheet for the period should
be indicated in this line.
2.10 Difference
This is the difference between total on-balance sheet assets and total
assets as reported in the un-Audited Monthly Balance Sheet. The
difference should be explained in the form of reconciliation.
3. OFF-BALANCE SHEET ITEMS
In this line, indicate computed off-balance sheet assets such as existing
guarantees by the Sacco Society
4.0 CAPITAL RATIO CALCULATIONS
Compute as per the formulae provided in the form.
4.5 Total Deposits
Total deposit figure as reported in the Balance Sheet for the period should
be indicated in this line.
GENERAL: All reported items should agree with or capable of being
derived from the figures reported in the Balance Sheet for the period. This

36
is a monthly return and should be submitted by the 15th day of the
following month.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++
FORM 2 (r. 14(2))
SASRA
2/001
LIQUIDITY STATEMENT
Sacco Society: CS
NO ....................
.
Financial Year:
Start Date:
End Date:

37
1 Notes and Coins KSh.
'000'
1.1 Local Notes and Coins
1.2 Foreign Notes and Coins
2 Bank Balances
2.1 Balances with banks
Less :
2.2 Time deposits with banks more than 90 days
2.3 Overdrafts and matured loans/ Advances from banks
3 Balances with Other Financial Institutions
3.1 Balances with Other Sacco societies
3.2 Balances with Other Financial Institutions other than
Banks
and Sacco societies
Less:
3.3 Balances due to other Sacco societies
3.4 Balances due to Financial Institutions
3.5 Matured Loans/Advances from Financial Institutions
4 GOVERNMENT SECURITIES
4.1 Treasury Bills
4.2 Treasury Bonds
5. NET LIQUID ASSETS (1-4)
6. DEPOSIT BALANCES
6.1 Deposits from members including interest
6.2 Deposits from all other sources including accrued
interest
6.3 Total deposits
Less :
6.4 Balances due to Sacco societies
6.5 Balances due to Banks
6.6 Balances due to other Financial Institutions
6.7 Total deductions
6.8 Net Deposit Liabilities
7 OTHER LIABILITIES
7.1 Matured
7.2 Maturing within 91 days
7.3 Total Other Liabilities
8 LIQUIDITY RATIO
8.1 Net Liquid Assets (5)
8.2 Total Short term Liabilities 6.3+7.3
8.3 Ratio of (8.1/8.2)% 0.0%
8.4 Minimum Holding of Liquid Assets Requirement 15.0%
8.5 Excess/Deficit (8.3-8.4) -15.0%

38
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+
COMPLETION INSTRUCTIONS FOR LIQUIDITY STATEMENT
1. Notes and Coins
1.1. Local
Enter all notes and coins on the Sacco Society's premises (including-
mobile units) which are legal tender in Kenya.
1.2 Foreign
Enter the Kenyan shillings equivalent of all convertible foreign currencies
held by the Sacco Society. The CBK mean rates as on the reporting dates
should be applied in converting foreign currencies into Kenya shillings.
2. Balances with Banks
2.1 Balances with banks
Enter the total of all balances (overnight, call and time) held at domestic
commercial banks excluding un-cleared effects. These balances should
include accrued interest.
2.2 Time Deposits with Banks
Enter the amount of time deposits including accrued interest entered in
4(a) above whose maturities exceed 91 days.
2.3 Balances Due to Banks
Enter the total of balances due to commercial banks including accrued interest.
2.4 Overdrafts and Matured loans and advances from domestic banks
Enter the total of all overdrafts and any other debit balances on matured
loans and advances including guarantees and bonds issued by commercial
banks.
3. Balances with Financial Institutions
3.1 Balances with Financial Institutions
Enter the total of all balances (overnight, call and time) placed with the
Sacco Society by financial institutions (mortgage companies, building
societies etc), excluding un-cleared effects but including accrued interest.
3.2 Time Deposits with Financial Institutions
Enter the amount of time deposits including accrued interest entered in
6(a) above whose maturities exceed 91 days.
3.3 Balances due to Financial Institutions

39
Enter the total of balances received from financial institutions including
accrued interest. This balance should agree with the total analysed in the
table attached and should exclude balances with maturity period
exceeding 91 days.
3.4 Matured Loans and Advances received from Financial Institutions
Enter the total of matured loans and advances including guarantees, bills
discounted, promissory notes and performance bonds received from
financial institutions. All deposits/ placements with institutions/building
societies under liquidation should not be reported as part of liquid assets.
4. Government Securities
4.1 Treasury Bills
Enter the amortized cost of all Kenya Government Treasury Bills
investments by the reporting Sacco Society, net of encumbered Treasury
Bills. Encumbered Treasury Bills are those pledged to secure any form of
credit facility granted to the reporting Sacco Society.

40
4.1 Treasury Bonds/ Bearer Bonds
Enter the amortized cost or fair value of all treasury bonds/bearer
bonds traded in the Nairobi Stock Exchange acquired by the reporting
Sacco Society directly from the government and its issuing agents and
those discounted from third parties.
5. Net Liquid Assets
Enter the sum of items 1 to 4 above
6. Deposit Balances
6.3 Total deposit
Enter total deposits (6.1 — 6.2) from the members and all other sources,
including accrued interest, but excluding un-cleared effects.
Less:
6.4 Balances Due to Sacco societies
Enter the total amount of balances due to other Sacco societies including
accrued interest.
6.5 Balances Due to banks
Enter the total of balances due to domestic and foreign commercial banks
including accrued interest.
6.6 Balances due to Financial Institutions
Enter the total amount of balances due to financial institutions including accrued interest.
6.7 Total Deductions
Enter the total of items 6.4 — 6.6
6.8 Net Deposit Liabilities
Enter the net amount of item 6.3 less 6.7
7. Other liabilities
7.1 Matured:
Enter the sum of all matured liabilities (Inchtding crystallized off-balance
sheet commitments) that have cash flow implications and are due for
payment.
7.2 Maturing within 91 days
Enter the sum of all liabilities that will mature within 90 days from the date of the return.
7.3 Total other liabilities
Enter the total of items 7.1 — 7.2
8. Liquidity Ratio
Calculate the ratios using the formula provided
The liquidity statement should he completed as per the instructions
contained in this regulation, and should he submitted on the 15 th of the
41
following month.

++++++++++++++++++++++++++++++++++++++++++++++++++++
+++++++++++++++
FORM 3 (r. (24))
SASRA 2/003
STATEMENT OF DEPOSIT RETURN
Name of Sacco Society: CS No.
Financial
Year: Start
Date: End
Date:

42
 No. Range * Type of No. of A/Cs Amount
KShs
Deposit '000'
1 Less than Non
withdraw-
50,000 able
Savings
Term
2 50,000 to Non
withdraw-
100,000 able
Savings
Term
3 100,000 to Non
withdraw-
300,000 able
Savings
Term
4 300,000 Non
withdraw-
to1,000,000 able
Savings
Term
5 Over Non
1,000,000 withdraw-
able
Savin
gs
Term
TOT
AL
Note: Monthly return to be received on or before the fifteenth day of the following
month
* To include accrued interest and any other form of deposit
AUTHORIZATION:

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
FORM 4 ( r.46)
SASRA 2/004
RISK CLASSIFICATION OF ASSETS AND PROVISIONING
Name of Sacco Society: CS/No.
43
Financial Year:
Start Date:
End Date:
PORTFOLIO AGEING
REPORT A B C D
Classification
No. No. OutstandingRequir Required
of ed Loan Provision Provisio
A/Cs Portfolio n
(KSh.) Amount
1 Performing 1% (KSh.)
2 Watch 5%
3 Substandard 25%
4 Doubtful 50%
5 Loss 100%
Sub-Total

44
 Rescheduled/Renegotiated Loans
6 Performing 1%
7 Watch 5%
8 Substandard 25%
9 Doubtful 50%
10 Loss 100%
Sub-Total
GRAND
TOTAL
Note: This return should be received on or before the fifteenth day of the
month following end of every quarter.
AUTHORIZATION:
We declare that this return, to the best of our knowledge and belief is correct.
....................................................................................Sign ......................Date:............................
..
Name of Authorizing Office
.............................................................................Sign...............................
Date:.......................
Name of Countersigning Officer
COMPLETION INSTRUCTIONS FOR RISK CLASSIFICATION
AND LOAN LOSS PROVISIONING
1. General
This return should be completed strictly in accordance with the
Regulation on Risk Classification and Loan Loss Provisioning.
1. Enter in column A the number of accounts under each classification.
2. Enter in column B the amount outstanding under each
classification categories of Performing; Watch; Sub-standard; Doubtful
and Loss.
3. Enter in column C the minimum provisions requirement in
percentages in each classification category.
4. Enter in column D provisions required in each classification category.
5. Enter in column E the discounted value of securities held in each classification category.
6.Enter the difference between column D and E in column F, but for
performing and watch class, enter the amount as is in column D in
column F.
45
 2. Notes for establishment and maintenance of the Allowance for loan
loss account Allowance for loan loss account shall be a one time
adjustment and shall be established
as follows:
a) Create a contra-asset account to be called "Allowance for Loan loss".
b) Create the expense account to be known as "provision for loan loss".
c) Determine the amount needed in the allowance for loan loss by
completing a risk classification form and credit the amount to the
Allowance for loan loss.
d) Fund the amount needed in the allowance for loan loss by
debiting the same to retained earnings account. This is a one time
adjustment.
e) Maintain the allowance for loan loss by debiting and crediting
provision for loan loss and allowance for loan loss after performing a
risk classification and loan loss provisioning.
f) To charge off loans, debit allowance for loan loss and credit loans
to members with the same amount.
g) To
account for recovery of charged off bad debts, debit the bank
account and credit allowance for loan loss account.

46
 FORM 5 ( r.51)
SASRA
2/005
INVESTMENT RETURN
Sacco CS/
Society: No.
Financial
Year: Start
Date: End
Date:
Ref No.
1.1 Core capital
1.2 Total assets
1.3 Total deposits
1.4 Non earning assets
1.5 Financial assets
1.6 Land and Building
2.0 Land and buildings to
total Assets Ratio
(1.6/1.2)% 5.0%
2.1 Minimum land and building
to
Total Assets requirement
2.2 Excess (deficiency) (2.0 less -5%
2.1)
3.0 Financial investments to
Core capital (1.5/1.1)%
3.1 Minimum Financial 40.0%
investments
to Core Capital
3.2 Excess/(Deficiency) (3.0 less -40%
3.1)
4.0 Financial investments
to Total Deposit
Liabilities
Ratio(1.5/1.3)% 5.0%
4.1 Minimum financial
investments
to total Deposit liabilities
4.2 Excess/(Deficiency) (4.1 less -5%
4.2)
Note: This return should be received on or before the fifteenth day of the
month following end of every quarter.
AUTHORIZATION
47
We declare that this return, to the best of our knowledge and belief is correct.
....................................................................................Sign ......................Date:............................
..
Name of Authorizing Office
.............................................................................Sign...............................
Date:.......................
Name of Countersigning Officer
FORM 6 ( r. 52 (3))
SASRA 2/006
STATEMENT OF FINANCIAL POSITION
Sacco
Society:
Financial
Year:
Start Date:
End Date:
Period .... Current Year

48
Period. . .Prior
Year

49
 KSh. '000' KSh.
Ref No. ASSETS '000'
1 Cash and Cash Equivalent 0 0
1. Cash in Hand (Both Local
and
Foreign Notes and Coins)
1.2 Cash at Bank: (Placement
withFinancial Institutions)
2. Prepayments and Sundry 0 0
receivables
3. Financial Investments 0 0
3.1 Government Securities
3.2 Other Securities
3.3 Other Investments
4. Net Loan Portfolio 0 0
4. 1 Gross Loan Portfolio
4. 2 Allowance for loan loss
5. Accounts Receivables 0 0
5. 1 Tax Recoverable
5. 2 Deferred Tax Assets
5. 3 Retirement Benefit Assets
6. Property and equipment 0 0
6. 1 Investment Properties
6. 2 _ Property and Equipment
6. 3 Prepaid Lease Rentals
6. 4 Intangible Assets
6. 5 Other Assets
Total Assets 0 0
LIABILITIES
7. Savings Deposits 0 0
8. Short Term Deposits 0 0
9. Non withdraw-able deposits 0 0
10. Accounts Payables & Other 0 0
Liabilities
10. 1 Tax Payable
10.2 Dividends Payable
10.3 Deferred Tax Liability
10.4 Retirement Benefits Liability
10. 5 Other Liabilities
10. 6 External Borrowings
Total Liabilities 0 0
EQUITY _
11. Share Capital
12. Grants & Donations
50
13. Retained Earnings 0 0
13. 1 Prior Years' Retained
Earnings
13. 2 Current Year's Surplus
14. Other Equity accounts 0 0
14. 1 Statutory Reserve
14. 2 Other reserves
14. 3 Revaluation Reserve
14. 4 Proposed Dividends

51
 14. 5 1 Adjustments to Equity
Total Equity 0 0
Total Liabilities and 0 0
Equity
Note: This return should be received within three months after the end of
each financial year
AUTHORIZATION
We declare that this return, to the best of our knowledge and belief is correct.
....................................................................................Sign ......................Date:............................
..
Name of Authorizing Office
.............................................................................Sign...............................
Date:.......................
Name of Countersigning Officer
FORM 7 ( r. 52 (3))
SASRA 2/007
STATEMENT OF COMPREHENSIVE INCOME
Name of Sacco
Society:
Financial Year:
Start
Date:
End
Date:
INCOME STATEMENT Period ....
Current Year

52
Period. . .Prior
Year
KSh. '000' KSh. '000'
Ref No.
1 Financial Income 0 0
2 Financial Income from 0 0
Loans
Portfolio
2.1 Interest on Loan Portfolio
2.2 Fees and Commission on
Loan
Portfolio
3 Financial Income from 0 0
Investments
3.1 Government Securities
3.2 Deposit and Balances with
Banks and Other Financial
Inst.
3.3 Other Investments
3.4 Other Operating Incom
4 Financial Expense 0 0
4.1 Financial Expense on 0 0
Funding
Liabilities
4.2 Interest Expense on Deposits
4.3 Cost of External Borrowings
4.4 Dividend Expenses
4.5 Other Financial Expense 0 0
4.6 Fees and Commissions
expense
4.7 Other expens
5 Net Financial Income/(Loss) 0 0
6 Allowance for Loan Loss 0 0
6.1 Provision for Loan Losses
6.2 Value of Loans Recovered
7 Operating Expenses 0 0

53
 7.1 Personnel Expenses 0 0
7.2 Governance Expenses
7.3 Marketing Expenses
7.4 Depreciation and 0 0
Amortization
Charges
7.5 Administrative Expenses
8 Net Operating Income
9 Net Non-Operating Income/
(Expense)
9.1 Non- Operating Income
9.2 Non-Operating Expense
10 Net Income (Before Taxes 0 0
and
Donations)
11 Taxes 0 0
11.1 Current Tax
11.2 Deferred Tax
12 Net Income (After Taxes 0 0
and
before Donations)
13 Donations 0 0
13.1 Donations for Loan Capital
13.2 Donations for Operating
Expense
14 Net Income/ (After Taxes
and
Donations)
Note: This return should be received within 15 days after end of the
month or three months after the end of each financial year
AUTHORIZATION
We declare that this return, to the best of our knowledge and belief is correct.
....................................................................................Sign ......................Date:............................
..
Name of Authorizing Office
.............................................................................Sign...............................
Date:.......................
Name of Countersigning Officer
FORM 8 ( r. 52 (3))

54
SASRA 2/008
OTHER DISCLOSURES
Sacco
Society:
Financial
Year:
Start Date:
End Date:
OTHER DISCLOSURES 31st Dec
Current Year

55
31st Dec Prior Year

Ref No.
1 NON-PERFORMING LOANS AND ADVANCES
1.1 Gross Non-Performing Loans and Advances
Less:
1.2 Interest in Suspense

56
KSh. '000' KSh. '000'

57
1.3 Total Non-Performing Loans 0 0
and Advances (1.1-1.2)
Less:
1.4 Allowance for loan loss
1.5 Net Non-Performing Loans 0 0
(1.3-1.4)
2 INSIDER LOANS AND
ADVANCES
2.1 Directors
2.2 Employees
2.3 Total Insider Loans, 0 0
Advances
and Other Facilities
3 OFF-BALANCE SHEET
ITEMS
3.1 Guarantees and
Commitments
3.2 Other Contingent Liabilities
3.4 Total Contingent Liabilities 0 0
4 CAPITAL STRENGTH
4.1 Core Capital
4.2 Institutional Capital
4.3 Core Capital to Total Assets
Ratio
4.4 Minimum Statutory Ratio 10% 10%
4.5 Excess/(Deficiency) (4.3- -10% -10%
4.4)
4.6 Institutional Capital to Total
Assets Ratio
4.7 Minimum Statutory Ratio 8% 8%
4.8 Excess/(Deficiency) (4.6- -8% -8%
4.7)
4.9 Core Oapital/ Deposit
liabilities
Ratio
4.10 Minimum Statutory Ratio 8% 8%
4.11 Excess/(Deficiency) (4.10- -8% -8%
4.11)
5 LIQUIDITY
5.1 Liquidity Ratio
5.2 Minimum Statutory Ratio 15% 15%
5.3 Excess/(Deficiency) (5.1- -15% -15%
5.2)
6 INVESTMENTS
58
 6.1 Land & Buildings/Total
Assets
6.2 Minimum Statutory Ratio 5% 5%
6.3 Excess/(Deficiency) (6.1- -5% -5%
6.3)
6.4 Financial Investments/Total
Assets
6.5 Minimum Statutory Ratio
6.6 Excess/(Deficiency) (6.4-
6.5)
Note: This return should be received within three months after the end of
each financial year
AUTHORIZATION:
We declare that this return, to the best of our knowledge and belief is correct.
.................................................................................... Sign
...................... Date: ..............................
Name of Authorizing Office

59
 ............................................................................. Sign
............................... Date: .......................
Name of Countersigning Officer
NOTES FOR COMPLETION OF ANNUAL,
QUARTERLY AND MONTHLY FINANCIAL
STATEMENTS AND OTHER DISCLOSURES
GENERAL
(a)These completion instructions are issued to ensure uniformity of
reporting by all licensed Sacco societies.
(b)The accounts should be prepared in accordance with International
Financial Reporting Standards.
(c) All figures should be shown in thousands of Kenya shillings.
(d)All the rows should be published irrespective of whether the licensed
Sacco has a figure to report or not.
(e)Each return should be signed by at least two authorized signatories
before submission to the Authority.
STATEMENT OF FINANCIAL POSITION
ASSETS
1. Cash and Cash Equivalent
1.1 Cash in hand: Both local and foreign notes and coins held in the tills and vaults.
1.2Cash at bank: These include: Placements by the Sacco Society with
banks,microfinance and other institutions (i.e. all credit balances in
current accounts held with banks and other institutions).
Note: Placements with collapsed institutions should be disclosed among "other assets"
net of provisions held, if any.
2. Prepayments and sundry receivables
These are payments made by the Sacco Society prior to incurring the expense.
3. Financial Investments
3.1 Government Securities: These include:
(i) Treasury Bills
(ii) Treasury Bonds
(iii) Government Stock
(iv) Local Government Securities
(v) Other Government Securities

These are debt securities issued by the Government of Kenya as "held-to-

60
maturity" type of investments.
3.2Other Securities: These include investments that have a fixed
maturity date or items held to maturity by the Sacco Society but exclude
government securities.
3.3 Other Investments: These include investments with no fixed or
determined payment maturities such as share investments in the
National cooperative societies, deposits in central finance programme
and shares in other financial institutions.
4. Net Loan Portfolio
4.1 Gross Loan Portfolio: These are loans and advances.

61
4.2 Allowance for Loan Loss: The portion of the Gross Loan Portfolio
that has been provisioned in anticipation of losses due to default. It
represents the cumulative value of the impairment losses less the
cumulative value of loans written off.
5. Accounts Receivables:
5.1Tax Recoverable: This is tax that is recoverable as a result of
overpayment of tax in the previous periods.
5.2 Deferred Tax Assets: These are taxes recoverable in future periods in respect of:
(i) Deductible temporary difference
(ii) The carry forward of unused tax losses
(iii) The carry forward of unused tax credits

5.3Retirement Benefit Assets: These are staff retirement benefit assets

computed as per IAS 19.
6. Property and equipment
6.1 Investment Properties: This is as defined in IAS 40 as a property
(land or a building or part of a building or both) held by the Sacco
Society to earn rentals or for capital appreciation or both. For the
purposes of these Regulations, the property will qualify to be investment
where a Sacco occupies not more than 10%.
6.2Property and Equipment: Comprise all the immovable and other
assets of the reporting Sacco Society. They include:
(i) Staff houses
(ii) Furniture, fixtures and fittings
(iii) Motor vehicles
(iv) Office equipment including computer equipment
(v) Land and buildings (excludes leasehold land and investment property)
(vi) Others not specified elsewhere including foreclosed assets.

6.3Prepaid Lease Rentals: This relate to the cost of the leasehold land
and building net of accumulated amortized amount.
6.4 Intangible Assets: Include all intangible assets such as
computer software etc. But do not include goodwill, copy
rights and royalties.
6.5 Other assets: These include assets not stated
elsewhere. LIABILITIES
7. Savings (Withdraw-able) Deposits
62
These are deposits payable on demand and include all funds received
from its members that the Sacco Society is liable to pay on demand.
8. Term (Withdraw-able) Deposits
Deposits mobilized from members that the Sacco Society is liable to pay on a fixed date.
9. Non-Withdraw-able Deposits
Deposits received from members that may be used as collateral against
borrowings by the members and are refundable only when the member
ceases membership.
10. Accounts Payable & Other liabilities
10.1 Tax Payable: This relates to tax liability computed but not yet paid.
10.2 Dividends Payable: These are dividends that have been declared but not yet paid.

63
 10.3Deferred Tax Liability: These are taxes payable in future periods in
respect of taxable temporary differences.
10.4 Retirement Benefits Liability: These are the retirement behefits
liability as accounted for under IAS 19.
10.5 Other Liabilities: These include all other liabilities due not specified elsewhere.
10.6 External Borrowings: These include all external borrowings from
banks, microfinance and other financial institutions. Special loan
facilities covering funds received through special arrangements between
the Kenya government and other foreign governments or donor agencies
for onward lending or distribution to members should be entered here.
EQUITY
11. Share Capital
This is the value of ordinary shares issued and fully paid by members.
12. Grants & Donations
These are grants which are not callable and donations received recognized
as equity donations.
13. Retained Earnings/Accumulated losses
13.1 Prior Year Retained Earnings/Accumulated losses: These are
undistributed profits or losses carried forward over. the years. Disclose
the retained earnings carried from previous years here.
13.2 Current Year's Surplus/Loss: Disclose the current year's after tax profits.
14. Other Equity Accounts
14.1 Statutory Reserve: Accumulated transfer of 20% of from prior years' profits
14.2 Other Reserves: Reserves other than those specified here.
14.3Revaluation Reserve: These are revaluation surpluses/losses arising
from revaluation of properties, equipment and financial instruments.
14.4 Proposed Dividends: These are dividends that have been proposed
by the Board but have not been ratified by the Annual General Meeting.
14.5 Adjustments to Equity: These are any adjustments to account for
subsidized funds and in-kind subsidies.
STATEMENT OF COMPREHENSIVE INCOME
1. Financial Income
The total value of all income earned from the provision of financial
services. Total of Financial Income from Loan Portfolio (Line 2),
Financial Income from Investments (Line 5) and Other Operating Income
(Line 9)
64
 2. Financial Income from Loan Portfolio
Income from interest, fees, commissions, and other fees earned on the
loan portfolio. This includes not only interest paid in cash but also interest
accrued but not yet paid. Total of Interest earned on the loan portfolio
(Line 2.1) and Fees and Commission on the loan portfolio (Line 2.2)
2.3 Interest on Loan Portfolio: Interest earned on the loan portfolio.
2.2 Fees and Commissions on Loan Portfolio: Penalties, commissions,
and other fees earned on the loan portfolio.
3. Financial Income from Investments

65
Revenue from interest, dividends, and other payments generated by
financial assets other than the Ian portfolio, such as interest-bearing
deposits. This may include net trading income (gains less losses) from
securities and the recovery of any interest revenue that was previously
written off.
3.4 Government Securities: This covers interest and discount earned on
all Government Securities
3.2Deposits and Balances with Banks and Other Financial Institutions:
This includes all interest earned on placements with commercial banks
and other financial institutions.
Note: Interest on placements with collapsed institutions should be
suspended and not recognized as income.
3.3 Other Investments: These include any other investments including
corporate bond, commercial paper and bearer bonds not covered in 3.1
above.
3.4 Other Operating Income: All other income from the provision of
financial services, including transaction fees, premiums, membership
fees, passbooks, smartcards etc.
4. Financial Expenses
The total value of all financial expenses incurred from operations. Total
of Financial Expense on Funding Liabilities (Line 4.1), Dividends (4.4)
and Other Financial Expenses (Line 4.5).
4.1 Financial Expense on Deposits and External Borrowings: Total of
Interest and Fee Expense on Deposits (Line 4.2) and External
Borrowings (Line 4.3)
4.2Interest Expense on Deposits: Interest and fees incurred on all
deposits taken by the licensed Sacco Society.
4.3Cost of External Borrowings: Include interest and fees incurred on
external borrowings and overdrafts.
4.4 Dividend Expense: Expense incurred on member shares
4.5 Other Financial Expenses: The sum of 'other fees and
commissions' (line 4.5) and 'other expense' (line 4.6). These are other
financial expenses related to provision of financial services.
4.6 Fees and Commissions expense: This includes all charges (fees) and
commissions relating to account operations such as bank charges, ledger
fees, cheque and money transfer commissions but excluding interest on
overdrafts.
4.7 Other expenses: These are any other financial expenses not specified
66
 above arising from normal business operations.
5. Net Financial Income/Loss
The net value of earnings arising from financial services [i.e. Financial
Income (Line 1) Less Financial Expenses (Line 4)].
6. Allowance for loan Loss
Also known as 'loan loss provision expense'. It is provision for Loan
losses net of the value of delinquent Loans recovered. Provision for Loan
losses (Line 6.1) Less Value of Loans Recovered (Line 6.2).
Provision for Loan Losses: This is the non-cash expense calculated as a
percentage of the value of the loan portfolio that is at risk of default. This
value is calculated in the portfolio report and is used to create or increase
the Allowance for Loan Losses on the Balance Sheet.
Value of Loans Recovered: Total value of principal recovered on all loans
previously written off. This includes principal on partially recovered
loans and those recovered in full. Subsequent recoveries of loans
previously written off decrease the amount of the Provision

67
for Loan Losses (Line 6.1), and the net amount is booked as Allowance
for Loan Losses on (Line 6).
7. Operating Expenses
The total value of all operating expenses which include, Personnel (line
7.1), Governance (line 7.2), Marketing (line 7.3) and Administrative
Expenses (lihe 7.4), incurred in providing financial services.
7.1Personnel Expenses: Includes total staff (permanent and casual) costs
such as salaries, wages, uniforms, leave allowance, medical expenses,
benefits and bonuses, as well as employment taxes. It also includes the
cost of employee recruitment and initial orientation expenses.
7.2Governance Expenses: These include the cost of travel, per diem,
honoraria or meetings for board members, board committee expenses,
member's education, Annual general meeting expenses and national or
other co-operative representation dues.
7.3Marketing Expenses: These include any expense related to
marketing or promotion such as advertising, publicity campaigns,
Ushirika day celebrations etc.
7.4 Depreciation and Amortisation Charges: These are non-cash
expenses that reduce the value of an asset over time due to wear and tear
or obsolescence.
7.5Administrative Expenses: These include all other operating
expenses not included in the previous four categories such as electricity,
water, rent, supplies, transportation, security, equipment repair and
maintenance, Audit fees, supervisory and recoverable expenses,
communications and consulting fees which are necessary for conducting
Sacco business. It may also include certain taxes related to
administration, such as a value-added tax. These expense categories
may be listed as separate line items as appropriate.
8. Net Operating Income: These are net earnings from the provision of
financial services. Net Financial Income (Line 5) less allowances for
loan losses (Line 6) less operating Expenses (Line 7).
9. Net Non-Operating Income/(Expenses)
The net earnings from products and services not directly related to core
operations of Sacco societies derived from the total income (line 8.1) less
total expenses (line 8.2). Sacco societies should disclose large material
amounts of non-operating revenue separately by creating accounts under
"Non-Operating Income" (Line 8.1) or "Non-Operating Expense"
(Line 8.2)
9.1 Non operating Income: All income not directly related to core Sacco
business, such as revenue from business development services, training,
68
 consulting services, sale of merchandise and others. It also includes any
exceptional gains and revenues. Large or relevant non-operating
revenue categories should be listed as separate line items as appropriate.
Note: This account does not include grants and donations.
9.2Non-Operating Expenses : All expenses not directly related to the
core Sacco business, such as the cost of providing business development
services or training. This account also includes any exceptional losses
and expenses. Large or relevant expense categories should be listed as
separate line items as appropriate.
10. Net Income (Before Taxes and Donations)
All net earnings from the Sacco's operations before the inclusion of taxes
and donations [Total of Net Operating Income (Line 8) and Net Non-
Operating Income (Expenses) (Line 9)]
11. Taxes
Includes all taxes paid on Net Income or other measure of profit as
defined by the Kenya Revenue Authority.

69
 11.1 Current Tax: Enter tax charged for the current accounting period.
11.2 Deferred Tax: Enter the deferred tax charge
12. Net Income (After Taxes and Before Donations)
All net earnings from the Sacco's operations, net of taxes and before the
inclusion of donations (Net Income (Before Taxes and Donations) (Line
34) less Taxes (Line 35))
13. Donations
Value of all donations recognized as revenue during the period, whether
restricted or not. (Total of Donations for Loan Capital (Line 40) and
Donations for Operating Expenses (Line 41)
13.1 Donations for Loan Capital: Value of all donations used to fund the loan portfolio.
13.2Donations for Operating Expenses: Value of all donations used to
pay for operations other than funding the loan portfolio. These
operations include paying personnel and administrative expenses and
purchasing property and equipment.
14. Net Income (After Taxes and Donations)
All net earnings from the Sacco's operations, net of taxes, and after
the inclusion of donations [i.e. Total of Net Income (After Taxes and
Before Donations, Line 12) and Donations, Line 13)]
OTHER DISCLOSURES
1. NON-PERFORMING LOANS AND ADVANCES
Gross Non- performing loans: Enter the gross aggregate of substandard,
doubtful and loss accounts inclusive of interest suspended.
Interest in Suspense: Enter the aggregate of interest in suspense for
substandard, doubtful and loss accounts.
Total Non-performing Loans Net of Interest in Suspense: Enter the
difference between (1.1) and (1.2) above.
Allowance for loan losses: Enter the aggregate of loan loss provisions
made for substandard, doubtful and loss accounts computed as per the
regulations on classification of Assets and Provisioning.
Net Non-Performing Loans: Enter the difference between items (1.3-1.4) above.
2. INSIDER LOANS, ADVANCES AND OTHER FACILITIES
2.1 Directors: On-balance sheet and Off-balance sheet
These are loans and advances including off- balance sheet items to Directors.
2.2 Employees: Enter loans and advances to employees.
2.3 Total Insider Loans, Advances and Other Facilities: Enter the aggregate of 2.1 and 2.2

70
 3. OFF-BALANCE SHEET ITEMS
3.1 Guarantees and Commitments: Enter Guarantees, Commitments,
etc. This should exclude off-balance sheet items to insiders.
3.2 Other Contingent Items: Enter other items not covered under 3.1 above.
3.3 Total Contingent Items: Enter aggregate of items 3.1 and 3.2 above
4. CAPITAL STRENGTH
The following capital items should be computed as required in the Capital
Adequacy Regulations.
4.1 Core Capital

71
 4.2 Institutional Capital
4.3 Core Capital/Total Assets
4.4 Minimum Statutory Ratio
4.5 Excess / Deficiency (4.3 - 4.4)
4.6 Institutional capital/Total Assets
4.7 Minimum Statutory Ration
4.8 Excess / Deficiency (4.6 - 4.7)
4.9 Core capital/Total Deposit Liabilities
4.10 Minimum Statutory Ratio
4.11 Excess / Deficiency (4.9-4.10)
5. LIQUIDITY
The liquidity ratio should be computed as prescribed in the regulations in
liquidity and asset liability management.

+++++++++++++++++++++++++++++++++++++++++++
a. Dfh
b.
23. ss

24. GHDH
25. VFGFJH
26.

RA - Regulating Authority
ICA – Instituional Capital Adequacy

72