SACCO Constitution (By-Laws) (Kenya)

A SACCO Constitution (By-Laws) in Kenya evidences corporate authority for specified acts approved by the board or shareholders.

SACCOs in Kenya are a fundamental pillar of financial inclusion. As of 2024, Kenya had over 17,000 registered SACCOs with a combined asset base exceeding KES 1 trillion, making the sector the largest in Africa. SACCOs operate under two regulatory tiers: deposit-taking SACCOs (DTSACCOs) licensed by SASRA under the Sacco Societies (Deposit-Taking Sacco Business) Regulations 2010, and non-deposit-taking SACCOs overseen by the Commissioner for Co-operative Development in the Ministry of Co-operatives and Micro, Small and Medium Enterprises (MSMEs) Development. Both tiers require a valid constitution or by-laws.

Section 14 of the Sacco Societies Act No. 14 of 2008 requires that SACCO by-laws address a mandatory list of subjects including the society's name and registered office, objects, admission and withdrawal of members, shares and subscriptions, the powers and duties of the committee of management, meeting procedures for general meetings and special meetings, the manner of appointing and removing officers, audit requirements, the investment and loan policies, and the distribution of surplus. SASRA has published model by-laws that licensed SACCOs may adopt with modifications appropriate to their membership base and operational context.

The Co-operative Societies Act Cap. 490, which provides the general co-operative framework applicable to all SACCOs, defines a co-operative society under Section 2 as a society whose object is the promotion of the economic interests of its members through a co-operative effort. SACCOs are required to uphold the International Co-operative Alliance (ICA) principles of voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education and training, co-operation among co-operatives, and concern for community — principles that should be reflected in the SACCO constitution.

The Income Tax Act Cap. 470 provides tax relief for SACCOs: dividends paid to members from SACCO surplus are subject to withholding tax, and SACCOs are required to maintain proper books of account under the Co-operative Societies Rules as a condition of tax compliance. The Kenya Revenue Authority (KRA) requires SACCOs to file annual returns and, where applicable, remit pay-as-you-earn (PAYE) for employees under Section 37 of the Income Tax Act Cap. 470.

The Proceeds of Crime and Anti-Money Laundering Act No. 9 of 2009 (POCAMLA) and the Counter-Terrorism and Prevention Act No. 30 of 2012 impose anti-money laundering and counter-terrorism financing (AML/CTF) obligations on deposit-taking SACCOs as reporting institutions. SASRA requires licensed SACCOs to maintain AML/CTF policies as part of their governance framework. A well-drafted SACCO Constitution should reference these obligations and commit the SACCO to compliance with SASRA's Prudential Guidelines and the POCAMLA reporting obligations.

A SACCO Constitution is needed at the formation stage of every Savings and Credit Cooperative Society in Kenya and is a statutory requirement under Section 14 of the Sacco Societies Act No. 14 of 2008 before registration can be completed.

A SACCO Constitution is required when a group of at least ten persons sharing a common bond — employment in the same organisation, membership in the same profession, residence in the same area, or membership of the same religious body — decide to form a SACCO under the Co-operative Societies Act Cap. 490 and the Sacco Societies Act No. 14 of 2008. The founding members must adopt a constitution at the inaugural general meeting before applying for registration to the Commissioner for Co-operative Development.

A SACCO Constitution is needed when an existing SACCO applies to SASRA for a deposit-taking licence. SASRA's licensing requirements under the Sacco Societies (Deposit-Taking Sacco Business) Regulations 2010 include submission of the SACCO's current by-laws. If the existing by-laws do not meet SASRA's minimum standards, the SACCO must amend and re-adopt the constitution before the licence will be granted.

A SACCO Constitution must be updated when a SACCO proposes a material change to its operations — for example, expanding its common bond to admit a new category of members, changing its name, altering its share structure, amending loan policies, or changing the composition of the committee of management. Amendments to a SACCO constitution in Kenya require a two-thirds majority resolution at a special general meeting under the Co-operative Societies Act Cap. 490 and must be filed with the Commissioner for Co-operative Development or SASRA, as applicable.

A SACCO Constitution is required when a non-deposit-taking SACCO seeks to upgrade to deposit-taking status. The transition requires a new or amended constitution that meets SASRA's specific requirements for DTSACCOs, including minimum capital, governance provisions, and internal audit structures under the Sacco Societies (Deposit-Taking Sacco Business) Regulations 2010.

A SACCO Constitution is needed when a workplace SACCO formed by employees of a single employer — a common structure in Kenyan government ministries, parastatals, and large private employers — wants to formalise its governance after operating informally. A formal constitution enables the SACCO to open a bank account, acquire property, enter contracts, and sue or be sued in its own name as a body corporate under Section 28 of the Co-operative Societies Act Cap. 490.

A Kenya SACCO Constitution under the Sacco Societies Act No. 14 of 2008 s.14 must address the following essential provisions to comply with statutory requirements and SASRA's governance standards.

Name and Registered Office: The full official name of the SACCO including the word 'Sacco' or 'Savings and Credit Co-operative Society', and the physical address of the registered office in Kenya. The name must be approved by the Commissioner for Co-operative Development and must not be identical or deceptively similar to an existing registered co-operative under Section 14(a) of the Sacco Societies Act.

Objects: A clear statement of the SACCO's objects — primarily to promote the economic interests of members by pooling savings, mobilising deposits, and providing credit — aligned with Section 2 of the Co-operative Societies Act Cap. 490 and the International Co-operative Alliance (ICA) principles.

Membership: The common bond defining eligibility for membership (e.g. Employees of a named employer, residents of a named locality, members of a named professional body), the minimum qualification requirements, admission procedure, membership fee and minimum share subscription, the circumstances for withdrawal or expulsion of members, and members' rights and obligations. SASRA requires the common bond to be clearly defined and consistently enforced.

Shares and Capital: The nominal value of each share (typically KES 100 or KES 200 in Kenyan SACCOs), the minimum number of shares a member must hold, the process for issuing, transferring, and redeeming shares, and the restriction on transferability of shares (shares in a co-operative are generally non-transferable to non-members). SASRA's Prudential Guidelines set minimum core capital requirements for deposit-taking SACCOs.

Deposits and Savings Products: For deposit-taking SACCOs, the types of deposit products offered (savings accounts, fixed deposit accounts, holiday accounts), minimum deposit amounts, withdrawal terms, and the applicable interest rates on deposits. Non-deposit-taking SACCOs record member savings as shares or non-withdrawable deposits per the Co-operative Societies Rules.

Committee of Management: The composition of the committee of management (board of directors), the number of elected members (typically 9 to 15 in Kenyan SACCOs), the term of office (usually two to three years, staggered), the election procedure at the Annual General Meeting (AGM), grounds for disqualification (including criminal conviction and financial impropriety under the Sacco Societies Act), and the committee's powers and duties including oversight of management and approval of loans above a threshold.

Officers and Management: The roles and responsibilities of the chairperson, vice-chairperson, treasurer, secretary, and chief executive officer (CEO) or manager. SASRA's fit and proper requirements under the Sacco Societies (Deposit-Taking Sacco Business) Regulations 2010 apply to senior officers of licensed DTSACCOs, requiring academic and professional qualifications and clear criminal records.

General Meetings: The procedure for Annual General Meetings (AGMs) required under the Co-operative Societies Act Cap. 490, the quorum (typically 10% of members or a minimum number specified in the by-laws), notice requirements (at least 21 days' written notice for AGMs), the business transacted at AGMs (election of committee, approval of audited accounts, declaration of dividends and interest on deposits, amendment of by-laws), and the procedure for special general meetings called for urgent business.

Loans and Credit Policy: The types of loan products offered (development loans, emergency loans, school fees loans, asset finance), the maximum loan multiple (typically 3× to 6× member shares and deposits), loan interest rates, repayment periods, the security required (member guarantors, shares, or external collateral), the loan approval authority (committee sub-committee or management below a threshold), and the recovery procedure for defaulting borrowers. Section 41 of the Sacco Societies Act empowers SACCOs to hold security from members against loan obligations.

Accounts, Audit, and Dividends: The obligation to maintain proper books of account under the Co-operative Societies Rules, the appointment of an external auditor under Section 60 of the Co-operative Societies Act Cap. 490, the financial year end (typically 31 December), the procedure for distributing surplus as dividends on shares and interest on deposits, and the minimum reserve fund requirement.

Dissolution: The procedure for voluntary dissolution of the SACCO including the required majority resolution, notification to the Commissioner for Co-operative Development or SASRA, realisation of assets, settlement of liabilities, and distribution of surplus assets to members in proportion to their shareholding.

Governing Law: The SACCO is governed by the Sacco Societies Act No. 14 of 2008, the Co-operative Societies Act Cap. 490, the Co-operative Societies Rules, SASRA's Prudential Guidelines and Regulations, and the laws of Kenya generally. The forms-legal.com Kenya SACCO Constitution template covers all sections required for registration with the Commissioner for Co-operative Development and for SASRA licensing.