Supreme Court Rules Against SACCO Societies (Amendment) Act

The Supreme Court has upheld a ruling by the Court of Appeal, declaring the SACCO Societies (Amendment) Act unconstitutional.

In a verdict delivered on Friday by Chief Justice Martha Koome, the Supreme Court found that the law directly affected the functions and powers of county governments.

As a result, the Act should have undergone scrutiny by the Senate before being passed. The court ruled that its enactment without Senate involvement made it unconstitutional.

“We therefore uphold the decision of the Court of Appeal that the Senate should have been included in the process of reviewing and enacting the SACCO Societies (Amendment) Act No. 16 of 2018,” stated Chief Justice Koome in part of the ruling.

Key Aspects of the SACCO Societies (Amendment) Act

The SACCO Societies (Amendment) Act was designed to regulate, license, and oversee SACCO societies in Kenya. The law introduced several reforms aimed at improving governance, streamlining operations, and aligning the sector with modern financial and cooperative standards. Some of the major changes included:

• Revisions to Licensing Rules: The Act introduced new requirements for SACCOs to obtain and maintain licenses.
• Enhanced Regulatory Oversight: It granted the Sacco Societies Regulatory Authority (SASRA) more power to monitor and enforce compliance within the sector.
• Governance and Insider Lending Measures: The amendments sought to address governance issues within SACCOs, including restrictions on insider lending to reduce financial mismanagement.

Court Suspends Ruling for 18 Months

Despite ruling that the Act is unconstitutional, the Supreme Court suspended the invalidation of the law for 18 months, starting from March 21.

This means that the law will remain in effect during this period, giving stakeholders, including Parliament, time to resolve the constitutional concerns raised.

The delay in nullifying the law is crucial because it prevents regulatory uncertainty in the SACCO sector. However, since the Act’s legal status is in limbo, SACCOs may face challenges in compliance and governance, potentially leading to confusion in the industry.

Parliament’s Next Steps

With the court’s decision, lawmakers now have a window of opportunity to address the legal issues raised.

If Parliament wants the law to remain in force beyond the 18-month suspension, it will have to submit the Bill to the Senate for proper legislative approval before re-enacting it.

Supreme Court Strikes Down Other Laws

In addition to the SACCO ruling, the Supreme Court also declared two other laws unconstitutional—the Equalisation Fund Appropriation Act and amendments to Sections 3 and 4 of the KEMSA Act made through the Health Laws (Amendment) Act.

Chief Justice Koome, in her ruling, stated that the National Assembly acted unlawfully by passing these laws without involving the Senate.

“The exclusion of the Senate in the enactment of the Equalisation Fund Appropriation Act, No. 3 of 2018, and the amendments to the KEMSA Act under the Health Laws (Amendment) Act was unconstitutional,” the ruling stated.

The verdict was collectively delivered by a panel of Supreme Court judges, including Chief Justice Martha Koome, Deputy Chief Justice Philomena Mwilu, and Justices Mohammed Khadhar Ibrahim, Njoki Ndung’u, Smokin Wanjala, Isaac Lenaola, and William Ouko on Friday, March 21.

This ruling reinforces the importance of Senate participation in laws that impact county governments, ensuring that legislative processes adhere to the constitutional framework.

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