Part 3:Governance

PART 3: Governance

Before I proceed with the licensing of SACCOs, I want us to go back a little and look at one or two developments the proposed SACCO Act is bringing into the lives of SACCOs in this country. I will start with the supervisory committee. Any body who has worked with co-operatives in general and SACCOs in particular will realize the important role this organ can play in improving governance in SACCOs and in strengthening self-regulation among SACCOs. To get an inner understanding of the difference between the board and supervisory committee, let’s look at the primary functions of each of those organs.

3.1 The Board

According to the credit union supervisory committee hand book², the primary function of the board is to ensure that it is legally accountable to the SACCO. Ensure long-term security and viability of the SACCO by overseeing its operations and planning for its future; make decisions in the best interests of the SACCO and its entire membership

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3.2 The Supervisory committee

The supervisory committee on the other hand has the primary function of ensuring that reviews and audits are carried out on an on-going basis, to confirm that the SACCO’s records are maintained properly, honestly, and accurately; that policies established by law and by the board of directors are carried out faithfully; and that members’ assets are safeguarded and used according to the purposes of the SACCO. This committee is expected to be fully informed on the financial condition of the SACCO. It has the duty to carry out an examination of all loan applications, verify pass books and accounts, audit the books, and report to the AGM, board and the SRA when necessary. So important is the role of the supervisory committee that Molloy, President of the Credit Union League of Saskatchewan (1938-1952) described the supervisory committee as “the guardian of the equity which each individual member has in the credit union”³ (credit union equates to SACCO in our context).

It goes without saying that this is one of the most important safeguards that has been put in the proposed Act. And it is a new development, the Statute had not provided for this before. Many of the SACCOs having realized the importance of the Supervisory Committee decided to include this committee in their bylaws. The only problem was that the commit did not have enough powers to exercise its authority and in some cases compromised its functions to the extent that it became an appendage of the board. Now that the functions and roles of this committee have been legislated, all SACCOs will be required to have one such committee and indeed the proposed Act gives the committee the powers it requires to perform its duties without hindrance.

The proposed Act also spells out how the Supervisory Committee will come into being; namely through an election by the AGM (Section 1.30 Subsection j). In the 1990s SACCO Boards used to appoint this committee and it took a concerted member education for this to change. In fact it was in 1996 when UCSCU amended SACCO model by laws to bring about this change when SACCO supervisory committees started being elected by the annual general meetings.

3.3 Probationary registration

While the co-operative statute provided for a SACCO to be registered as a probationary SACCO (Section 5: 1-5), the proposed Act does not provide for this.

Summary: governance, safety and soundness issues

A new and very important structure that has been added to the SACCO structures in the SACCO Act is the Supervisory Committee. The introduction of the Supervisory Committee with clearly spelt out roles, responsibilities and performance expectations well defined in the Act will go a long way in improving the standards of SACCO operations. According to the proposed SACCO Act, the members of the committee shall be responsible for reviewing financial statements on a monthly basis, work with internal and external auditors to review the SACCOs activities and processes.

This is an important check on the both the board and the management of the SACCOs. Supervisory committees were not provided for in the Act but many SACCOs adopted them following a revision of the SACCO model by laws by UCSCU in 1996. Because the by laws are subsidiary to the Act, the Supervisory Committee did not really have the matching authority to really fully check on the activities of the board. Now that both organs have been legislated in the Act each with matching powers to carry out its roles, this committee will really help check any excesses of the board and managers of SACCOs.

Oluka Peter