Government regulation and performance of small Saccos in Nairobi City County, Kenya

Direct government regulation of Saving and Credit Cooperative societies (Saccos) in Kenya came about through legislation enacted by the Kenyan parliament, the Sacco Act of 2008. The regulations were necessitated by the need to give proper structures and prudential standards to Saccos especially those involved in deposit taking activities referred to as Front Office System Administration (FOSA). The FOSAs carry out banking business with members of the public most of whom are not their members. Since the Saccos were not regulated by Central Bank of Kenya or the Banking Act, the government forged direct regulation through Sacco Society Regulation Authority (Sasra). This study therefore sought to investigate the effect of government regulation on performance of small Saccos in Nairobi City County, Kenya. Specifically the study sought to determine the effect of regulation requirements: statutory deposit fund, management qualification, and quality and membership on the performance of small Saccos. The study used survey research design while the target population comprised of all small licensed deposit taking Saccos in Nairobi City County. Data was collected by use of structured questionnaires. The main finding of the study is that implementation of government regulations has improved performance of the Saccos. Statutory deposit regulations positively affect Sacco liquidity while members also showed confidence in qualified managers based on performance but felt that membership regulation is punitive. In conclusion the regulation has positive effects on Saccos and hence the study recommends compliance by Saccos to the regulations.