Kenya

Legal framework

The legal framework analysis aims to provide general knowledge of the national cooperative legislation and of its main characteristics and contents, with particular regard to those aspects of regulation regarding the identity of cooperatives and its distinction from other types of business organisations, notably the for-profit shareholder corporation.

It aims to evaluate whether the national legislation in place supports or hampers the development of cooperatives, and is therefore “cooperative friendly” or not, and the degree to which it may be considered so, also in comparison to the legislation in force in other countries of the ICA region, or at the supranational level.

In addition, the research aims to provide recommendations for eventual renewal of the legal frameworks in place in order to understand what changes in the current legislation would be necessary to improve its degree of “cooperative friendliness”, which is to say, to make the legislation more favourable to cooperatives, also in consideration of their specific identity. This webpage presents a snapshot of the legal framework analysis results for Kenya.

The history of the co-operative movement in Kenya dates to 1908 when the first dairy co-operative was established by white settlers in Kenya.

Cooperatives are regulated by laws enacted by Parliament to govern the operations of cooperatives. These laws require the cooperative societies to incorporate the cooperative principles in their by-laws before registration. The existing laws are presented in the Table below:

Existing Regulations in Kenya

Regulation

Type of cooperative and nature of regulation

Key Components

 Link to Full Text

The Constitution Kenya, 2010.

All co-operatives

Devolvement of cooperative mandate   from the national government to the counties

 http://kenyalaw.org

The Co-operative Societies Act Cap. 490

Rev. 2005

 

All cooperatives

Relates to the constitution, registration, regulation and management of co-operative societies.

 

www.kenyalaw.org

 

By-laws of cooperatives

All cooperatives

Governs management of the societies

www.ushirika.ke

 

Sacco Societies Act, 2008

Deposit-taking Sacco’s

Licensing and governance by SASRA.

www.kenyalaw.org

 

Income Tax Act, Chapter 470

All cooperatives

Taxation

www.kenyalaw.org

Cooperative friendliness 

From the view of the expert, the implementation of national cooperative legislation has been characterized by some tensions between cooperatives and the government. This is an indication that the degree of cooperative friendliness is not satisfactory. There is over regulation of cooperative societies by the Commissioner for Cooperative Development who has enormous powers under the Cooperative Societies Act in relation to various aspects.

Despite the hindrances in the law, the cooperative movement in Kenya is very successful. Cooperatives comply with the law and as a result they are able to achieve their objective of promoting members’ interests, social and economic welfare. There are incentives given by the government for cooperatives in form of debt waivers, grants to boost production and economic activities of members. With regards to the degree of ‘cooperative friendliness’, the Cooperative Societies Act is more cooperative friendly than not.

Key recommendations for improvement

The Cooperative Societies Act and the SACCO Societies Act as national laws governing cooperatives in Kenya need review in order to enhance growth, expansion and development of cooperative societies. The review should be done in the nine areas listed in the report. Also, there is need to improve the national law to give cooperatives autonomy and independence. The government should be limited to exercise its control over cooperative business to make cooperative law friendly to the users. The Cooperative Societies Act and the SACCO Societies Act require improvement because over time, the manner of doing business in some sectors especially housing, marketing, transport, finance, and the service sector has changed.

There is need to make changes in relation to the national legislation in the following sectors:

- Marketing cooperatives due to market dynamism of the produce

- Housing cooperatives due to challenges in development and land concerns

- Sacco’s- both deposit taking and non- deposit taking to be competitive

- Transport cooperatives- to harmonize national transport and safety rules

- Service cooperatives to tap talents

- Consumer cooperatives

- Technology and industrialization

- International trade

- Online marketing

Conclusions

There is need to reform the cooperative laws to enhance growth of cooperatives in the dynamic world. The main areas that require consideration include legal and regulatory framework, cooperative structure and financing, cooperative governance, cooperative production and value addition, ICT cooperative education and research and other emerging issues in the sector. The State Department for Cooperatives have developed a cooperative policy and once finalized, it will pave the way for the review of the Cooperative Societies Act.

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