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MANAGEMENT AND
FINANCE OF HOUSING
COOPERATIVES IN KENYA
The Organisation,
Management and Finance
of Housing Cooperatives
in Kenya
Sec1:i
The Global Urban Economic Dialogue Series
The Organisation, Management and Finance of Housing Cooperatives in Kenya
HS/153/10E
ISBN (Series): 978-92-1-132027-5
ISBN (Volume) 978-92-1-132268-2
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not imply the expression of any opinion whatsoever on the part of the Secretariat of
the United Nations concerning the legal status of any country, territory, city or area
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Views expressed in this publication do not necessarily reflect those of the United
Nations Human Settlements Programme, the United Nations, or its Member States.
Excerpts may be reproduced without authorization, on condition that the source is indicated.
Acknowledgements:
Director: Oyebanji Oyeyinka
Principal Editor and Manager: Xing Quan Zhang
Principal Author: Juvenalis Baitu
English Editor: Roman Rollnick
Design and Layout: Andrew Ondoo
ii
FOREWORD
iii
The Organisation, Management and Finance of Housing Cooperatives in Kenya
iv
Contents
Contents
foreword iii
Table of Contents v
v
The Organisation, Management and Finance of Housing Cooperatives in Kenya
Bibliography 69
Appendices 71
vi
List of Abbreviations and Acronyms
vii
The Organisation, Management and Finance of Housing Cooperatives in Kenya
List of Tables
viii
chapter one Introduction
Chapter 1 Introduction
1
The Organisation, Management and Finance of Housing Cooperatives in Kenya
This study will aim at examining the A housing cooperative is a form of home
development of housing cooperatives and ownership in which people join to form a
SACCOS in Kenya, their organization, cooperative corporation which owns share in
management and evaluation. It will also aim buildings in which they live. The shareholders
at focusing on the challenges faced by new of the cooperative society are entitled to:
cooperatives and some of the strategies designed
by the government and other institutions to • Lease and occupy a specific dwelling unit
support the housing cooperatives. • Vote in the operations of the cooperative
inequality and promote equitable sharing membership. They enter into agreements
of the costs and benefits of sustainable or raise capital on terms that ensure
development.” democratic control of their members.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
4
chapter one Introduction
All these activities enhance income generating • Can build up own resources which make
activities that lead to wealth and employment them truly autonomous, able to survive
creation thus eradicating poverty and raising independently of external support and able
the standard of living for all. It is important to compete in the relevant markets
to note that a distinguishing characteristic
of cooperative societies to companies is that • Can become important local financing
its shares cannot be bought and sold by the institutions, combining the local need for
general public and they are not quoted on the safe-keeping with that of entrepreneurial
stock exchange. access to credit
The keystone to any cooperative is • Are the first to face the needs of the local
democratic control by members to achieve population, are responsible and accountable
an agreed common objective. For housing to them and can rely on the knowledge of
cooperatives, this means creating a home for local circumstances as well as development
individual members and the community as a potentials in planning their actions
whole. • Instil a high level of identification of the
In addition, the following are the comparative group with the organizational aims
advantages that cooperatives have over other • Promote local knowledge and
types of organization in that they: understanding of democratic processes
• Develop a transaction cost advantage • Are capable of managing communal
in mobilizing member initiative and properties without either widening the
resources gap between the ownership and control
• Show a particularly high level of flexibility rights or squandering precious resources
and adaptability to changing market by merely administering what should
situations be wisely utilized, both in terms of local
economy and ecology
• Can successfully produce for or develop
demand in niche markets due to their
limited size
5
The Organisation, Management and Finance of Housing Cooperatives in Kenya
6
Chapter Two Development of Housing Cooperatives in Kenya
7
The Organisation, Management and Finance of Housing Cooperatives in Kenya
Indeed, the cooperative movement only rich and educated – and sometimes also the
gained much recognition after independence, unscrupulous and powerful to profit at the
since it was discovered that it offered the best expense of the weaker sections of society:
machinery for mobilization and in raising a classic scenario for the development of
the much needed capital for the acquisition cooperatives.
of businesses and farms which were formerly
owned by non-citizens (Ouma, 1988). During the process of structural adjustment,
it has become obvious that independent,
However, the cooperative movement had self-reliant service cooperatives and savings
taken a different approach and outlook and credit cooperatives can make important
mainly because of expediency. The colonial contributions to human resources development
government merely wanted to use it as a cheap by helping their members enhance their
means of business and never involved the general education and professional skills. They
indigenous people who already were familiar can also help to alleviate the negative effects of
with the cooperative effort. adjustment affecting the weaker groups of the
population.
To enable the government to have a sufficient
measure of control, the Cooperative Societies Although due to lack of finances and
Act was introduced in 1966 in order to organisation, the housing sector did not feature
empower the Commissioner for Cooperative significantly as an area capable of bringing
Development and his staff to guide and control solution to the housing problem, it has in the
the activities of the cooperative societies recent past gained an impetus, particularly
accordingly but in the interest of the members. in urban areas. By 1990, there were over 20
Kenya, like many other developing countries, active housing cooperatives in Kenya. Some
experienced several decades of working of the pioneer housing cooperatives include
with state-sponsored and state-controlled the Gikomba Housing Cooperative which
cooperatives – which had been introduced by has provided houses for its 45 members, and
the colonial powers as development tools and the Ismailia Housing Cooperative, which
subsequently used by the governments of the managed to allocate houses for all its members
independent states for similar purposes. built on the basis of estates.
Unsuccessful and costly experiments were The Government of Kenya has been
carried out on the basis of joint agricultural committed to progressive realization of the
production, collectives and state farms as a right to adequate housing for all its citizens.
way of increasing peasant production and It is the Government’s long-term objective
productivity. Alongside attempts at radical to move towards a situation where every
reform, such as the creation of cooperatives individual or family lives in decent affordable
for the production of cash for export, service housing, whether publicly or privately
cooperatives for food production, savings developed. Indeed, the National Housing
and credit and housing cooperatives have Policy for Kenya of 2004 states that:
developed independently and gradually have
had remarkable success. “…improvement of housing for the
Kenyan population is a major concern
The structural adjustment programmes also to the Government. This concern
caused hardship, especially to the lower income has been influenced by the fact that
strata of the population. These programmes the improvement in housing stock is
advocate liberalization in economic affairs, a strategically important social and
thus providing a golden opportunity for the economic investment. In addition, well-
8
Chapter Two Development of Housing Cooperatives in Kenya
9
The Organisation, Management and Finance of Housing Cooperatives in Kenya
We can decipher from the table that there has of commodities and activities. A cooperative
been a steady increment in the registration of union can thus be defined as a registered
housing cooperatives and SACCOs. This can society whose membership is restricted to
best be understood in the framework of what primary cooperative societies.
has been discussed in section 2.0., whereby
due to the adverse effects of the structural The National cooperative organisations
adjustment programmes, it became evident provide technical and specialised services in
that cooperative societies were providing an both agriculture and financial sectors. These
impetus for economic development to the organisations are the Cooperative Bank of
common man. Kenya (COOP Bank), Kenya Union of
Savings and Credit Cooperatives (KUSCO),
In fact, as is evident, the SACCOs, have cooperative Insurance Company (CIC),
been the most popular, due to the economic National Cooperative Housing Cooperative
challenges the country has experienced, which Union (NACHU), Kenya Rural SACCOs
has inadvertently rendered a majority of its Societies Union (KERUSSU) and Kenya
citizenry in dire need of credit societies to Planters Cooperative Union (KPCU).
enable them cope with the inflation rates.
At the apex level is the Kenya National
Federation of Cooperatives (KNFC) at
which the primary, secondary and national
2.2 The Organizational cooperative organisations are affiliated. The
Structure of Cooperative mission of KNFC is to propagate cooperative
Movement principles, values and ideals, promote
corporate unity and development and act as
In Appendix 1, the diagram portrays the
a link between cooperative organisations and
organizational structure of the Cooperative
the various stakeholders.
Movement in Kenya right from the
International Cooperative Alliance (ICA) up The financial sub-sector consists of the
to the individual members of the cooperative Cooperative Bank, Urban and Rural Savings
societies at the grassroots. and Credit Cooperative Societies and the
Cooperative Insurance Company. Urban
There are generally two types of cooperative
SACCOS are formed by salaried and wage
societies: primary and secondarycooperative.
earners, whose employers have agreed to put
A primary cooperative society is defined as a
into effect a monthly check-off system for
cooperative organisation whose membership
members’ contributions and loan payments.
is composed of individual persons and is
The cooperative societies in this sector
usually smaller both in terms of membership
were initially promoted within government
and in its area of operation than a secondary
ministries, local authorities and parastatals but
cooperative society whose membership
today they are found in all institutions both in
consists of at least two primary cooperative
the private and public sectors.
organisationscooperative.
The Kenya Union of Savings and Cooperatives
A primary cooperative society may thus be
union (KUSCO) is an umbrella organisation
single-purpose or multi-purpose and a union
of Savings and Credit Cooperatives. It
may be either a commodity union when it
supports both rural an urban cooperative
deals in one particular type of commodity,
societies. KUSCO was established to promote
or a district cooperative union when it deals
the establishment and development of viable
with and comprises of a number of primary
Savings and Credit cooperatives societies. It
cooperative societies catering for different types
10
Chapter Two Development of Housing Cooperatives in Kenya
11
The Organisation, Management and Finance of Housing Cooperatives in Kenya
2. Financial services
NACHU offers various financial schemes,
which cater for the various needs of its
members.
3. Technical services
This services include the process of
purchasing land, land surveying, building and
development plans that include evaluations,
12
Chapter Two Development of Housing Cooperatives in Kenya
13
The Organisation, Management and Finance of Housing Cooperatives in Kenya
14
Chapter Three Savings and Credit Cooperative Society
15
The Organisation, Management and Finance of Housing Cooperatives in Kenya
Following the formation of the apex average share capital per member. For instance,
organization, Kenya Union of Savings and the average share capital in Harambee is Ksh.
Credit Cooperatives, in 1973, there has been 5,469, in Mwalimu (teachers) it is Ksh.
a rapid growth of SACCOs not only in the 11,685 and in Tembo (breweries) it is Ksh.
number of societies registered but also in the 20,877. It’s been evident that SACCOs based
size (membership, savings and borrowing) of upon private organizations do have a higher
the individual societies. share capital per member as compared to those
based on government officials.
Due to the rapid growth, and because of lack
of a standardized procedures, some SACCOs
fell victim problems that included inefficiency, B. SACCOs based on employer in a given
locality
errors and embezzlement. The Government
intervened through the Cooperative These SACCOs make up the majority of
Development Department in order to develop societies in Kenya. From the CHF study
standardized loan criteria and procedures. In (1989), an analysis of 1000 societies showed
addition to these manuals for management that a total membership of 430,000, Ksh.
and accountancy, policies for lending 2,251 million in share capital and Ksh.
bookkeeping, management committees and 2,262 million in loans outstanding. Among
internal audit were developed and distributed. these societies, those formed by teachers on
Several steps were also undertaken to improve a district basis were particularly successful. In
training of the management of new SACCOs Embu, the Embu Teachers SACCO (Eastern
and to be more cautious in the registration of Province) had 2,839 members with a share
new societies. capital of Ksh. 24 million and lent Ksh. 15.6
million in 1987. Some of the members had
formed a housing cooperative society and
3.2 Categories of SACCOs bought land for housing.
SACCOs fall into two principal categories:
countrywide societies and those based on
employer in a particular locality.
3.3 Rights of a SACCOS
member
A. Countrywide Societies A member of a cooperative society has rights
These SACCOs are normally based in in the day-to-day running of the society. Some
Nairobi but have members throughout of the rights of members include to:
the country, following the pattern of their • Attend general meetings and vote at those
employment. According to CHF (1989), the meetings
largest SACCO is Harambee, which is for
civil servants and has a membership of over • Be heard in the general meetings
75,245 with over Ksh. 413 million shares and
Ksh.311 million in outstanding loans. The • Elect the committee, share in the society’s
second largest is the Ukulima, which has over surplus at the end of the year, inspect
37,948 members with Ksh. 223 million in the books of accounts of the cooperative
shares and Ksh. 208 million in loans. society
While Harambee has the largest share capital • Appoint nominees, transfer shares in
in total, the SACCOs with higher salaries and the society with the approval of the
a higher propensity to save do have a greater committee
16
Chapter Three Savings and Credit Cooperative Society
• Withdraw as a member of the society, • Not be members of more than one society
apply for a loan if it is a SACCO society, with the same or similar objectives
exemption from attachment of his share or
interest in the society • Not hold more than one fifth (1/5) of the
share capital of the society
• Approve, reject or defer the budget,
participate in the amendment of the • Be liable for society’s debts for debts
society’s bylaws incurred while still a member, for two
years after ceasing to be a member, or until
• Fix the maximum borrowing powers of the the first audit after ceasing to be a member
society, fix the honoraria for committee discloses the society as solvent
members, if any
• Appoint a nominee(s) and change as and
• Request for an inquiry to be conducted when need arises, represent and vote for
on the society by an officer appointed the society in a secondary society
by the Commissioner, for cooperative
development • Not have more than one vote, and serve
the cooperative society with honesty
• Demand for a special general meeting after and dedication when elected into the
fulfilling the requirements committee.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
18
Chapter Three Savings and Credit Cooperative Society
• Fix the honoraria, if any, for committee 3.7 Salient Features of the
members for the approval of the
Commissioner
Lending Policy
SACCOs lend without tangible collateral,
• Elect delegates to represent the society in a
the security of loans is provided by the check-
cooperative union or apex body
off system; the deductions from wages and
• Transact any other business of the society salaries by employers for savings and for loan
repayment. Each loan should be guaranteed by
Special General Meeting at least one or more members of the SACCO
When an urgent matter occurs in a as is regulated in the SACCOs by-laws.
Cooperative Society before an Annual General The SACCOs are allowed to lend for a
Meeting is due, an Special General Meeting period of up to 48 months, though most give
(SGM) may be called. At least 15 days’ written loans for up to 36 months as they wish to turn
notice of the resolution and of the meeting have over loans quickly in order to serve as many
to be given to each member or representative. members as possible. The interest rates on
A Special General meeting can be called by loans are one percent per month (12% p.a.)
any of the: on the declining balance. The loan eligibility,
besides the factors which will note below, is
• Management Committee also based upon the amount of the applicant’s
shares and savings and their wage.
• Members of the Societyr
• Commissioner or his representative Most SACCOs divide their savings between
shares and deposits. This is because the
The matters to be discussed in such a dividends paid on the shares are subject to
meeting are: 15% withholding tax. The SACCOs do not
pay fixed interest on savings but rather declare
• Amendment of the By-laws
a dividend at the end of the financial year.
• Report of the auditor or Commissioner
The recent Kenyan loan policy and
• Reducing or increasing income and guidelines were issued by the Commissioner
expenditure hems of the society for Cooperative Development, in a circular
• Fixing maximum amount the society can letter number MCID/ORG/7/Vol. 11/55,
borrow in case of further borrowing dated 6th August, 1992. The new policy was
effective from 1st September, 1992. Some of
• Informing members on matters that
the salient features of the loan policy are:
require their attention
• Finding ways of improving the running of A. Lending requirements
the society’s business
For a member to qualify for a cooperative
• Confirming or rejecting a decision or loan:
action by the committee
• A society must have been in existence for six
Whereas the First General Meeting is held
months from the date of its registration
once in a lifetime of a society, the Annual
General Meeting is held every year, while the • A member must have completed at least six
Special General Meeting may be held in case months
of urgent need in between the AGMs. • A member must have contributed not less
than Kshs. 600/= in shares/deposits
19
The Organisation, Management and Finance of Housing Cooperatives in Kenya
• Ordinary loans
• School Fees Loans
20
Chapter Three Savings and Credit Cooperative Society
A. The main objectives of KUSCCO are to: • KUSASA and KUSCCO Insurance services
are incorporated in Central Finance
• Promote the organisation and development
Department and Risk Management
of viable cooperative savings and credit
Department respectively
societies
• Disseminate information concerning C. KUSCCO’S Services
savings and credit societies and co-ordinate
their operating methods and practice to The Kenya Union of Savings and Credit
maintain basic uniformity Cooperatives Limited renders a variety of
services to its affiliates as detailed below:
• Foster education, training of members,
officials and employees of savings and • Spokesman ship and Advocacy
credit societies • Representation
• Act as the sole local and international • Promotion of SACCO Societies
representative and mouthpiece of savings
and credit societies • Risk Management Services
21
The Organisation, Management and Finance of Housing Cooperatives in Kenya
• Facilities for management and Board in- • A member must raise 25% of cost of
house training construction or purchase of already built
house and must continue to save with
• Meeting facilities for the delegates and
the fund for the entire period of the loan
Branch Officials
advanced
• Dispatch of cheques to the SACCO
• Interest charged on the loan will be 14%
Branches through KUSCCO offices
per annum and will be calculated on
• Communication facilities such as mails, reducing balance basis
faxes, parcels
• Minimum interest earning savings balance
• Marketing of large SACCOS will be Kshs. 75,000
• Common legal facilities through • Minimum monthly savings will be
KUSCCO’s approved advocates Kshs. 2000/=. A member may save more
according to his/her ability
D. The KUSCCO Housing Fund
• The minimum loan granted shall be
The KUSCCO Housing fund has been Kshs. 300,000 and the maximum Kshs.
innovated to help SACCO members mobilize 3,500,000
funds for the construction of residential houses
• Loan repayment period shall be ranged
in the urban centres.
between three to 15 yearsThe following
shall form security for the loan
Qualification for Membership in KHF
a) The members saving with KHF
The membership in KUSCCO Housing
Fund is open to all willing SACCO members. b) The house and the land on which the house
A potential member must get a letter of is built or any other acceptable security
introduction from his/her SACCO. It is also c) KUSCCO will have a first legal charge on the
a requirement that all members willing to property during the period of repaymen.
participate in the scheme should pass their
• All KHF membership application
funds through their SACCOs. The SACCO
forms must be forwarded through
will then prepare a list of names indicating
the respective SACCOs Monthly
the amount each member has contributed and
remittances could also be done through
forward the payment cheque to KUSCCO
the SACCO, or other acceptable
Housing Fund.
modes
Other requirements for membership include • The applicant’s current age plus the
the following: repayment period should not exceed
• One must be a bona fide member of 60 years
SACCO The following table illustrates expected
• A membership fee of 1000/= must be paid monthly repayments for various loan amounts
on admission to the fund of 14% interest.
22
Chapter Three Savings and Credit Cooperative Society
23
The Organisation, Management and Finance of Housing Cooperatives in Kenya
24
Chapter Four Formation of Housing Cooperatives
In this phase, the need for either upgraded • location where the cooperative will be
housing or building or buying new houses situated
has been established by members of the • legal implications and requirements
community. The financial constrains which needed
would hinder individual undertakings in this
• type of equity model to use for the
project are widely felt by most members and
cooperative
thus the idea of establishing a cooperative
emerges as an important means to achieve the Several meetings, by the interested parties
goal as a community. will be required to discuss all matters and to
make sure that there are still enough interested
In order to develop the housing cooperative people. The main principle in the meetings
concept, some of the persons interested should is to ensure that the community members
first hold a meeting with other parties in order interested in forming a cooperative society
to find out whether there is enough interest are able to offer their sentiments, ideas, and
to forming a cooperative society. In organizing critics to matters relating to the formation of a
the groups, if it is a large community it is cooperative society.
important that the groups should comprise of
individuals who are familiar with each other, The meetings, which can be held at a public
have mutual trust and confidence and know space or even at a member’s home, enhance
each other well and reside within the same communal participation and good relations
zone. The membership size of the cooperatives between the members through ironing out the
can run from 20 to200 some can even be differences and developing the concept based
larger, but it is recommended to have a smaller upon the needs of the community.
size for effective management.
25
The Organisation, Management and Finance of Housing Cooperatives in Kenya
As we noted from the case studies, other Phase 3 – Contact the Ministry of
activities that could be undertaken may be the Cooperatives
development of mobilization and education It would be necessary for the members to
materials to sensitise the community contact the Ministry of Cooperative Society so
oncooperatives. Cooperative education and that they may be guided in drawing up the by-
training could include structures, principles and laws of their cooperative and also be informed
practices, history and philosophy, registration about other requirements by the Ministry.
and law, cooperative accounting, auditing and The by-laws state explicitly the rules of the
taxation, budgeting, management, law and cooperative, the rights and responsibilities of
financial policy. This training and mobilization the members.
could be undertaken by NACHU or other
relevant organizations that would be able to The officers may be interested in:
offer the required technical assistance to the
communities. • The proposed name of the cooperative
• The location for the proposed cooperative
Phase 2 - Co-ordinate the Pre-Cooperative’s • The purpose of the cooperative and how it
Activities is going to reach the goals set
This phase involves holding more meetings • The plan of action that has been drawn up
in order to address and co-ordinate the pre- by the committee to get the cooperative
cooperatives activities. In order to facilitate this started
phase, the members should choose a steering
committee that will foresee the delegation and • The number of persons (management
regulation of these activities. The selection of committee) required to manage the
these members could be done through voting cooperative
or appointment by the members. • The number of persons interested in
The key to this should be members who forming the cooperative
are well known by all and have the vision and Through the assistance of the officers at the
interests of all at heart. The members of the Ministry the committee should now draw up
committee will then elect a chairman and a its aims and purpose, the kind of business they
vice-chairman, a secretary and other office intend to undertake and how the cooperative
bearers from among their number. intends to realize its goals.
This committee will be responsible for setting
up the cooperative by ensuring that formation Phase 4 – Hold a Formation Meeting
meetings are held and that the members In this formation meeting all the members
are informed and involved in all business and the committee meet to share the
pertaining to the formation and registration development of the cooperative, its aims and
of the cooperative society. A viability study how they intend the cooperative to be self-
may be undertaken in order to ensure the sustaining in achieving its objectives.
possible effectiveness of the cooperative once
registered.
26
Chapter Four Formation of Housing Cooperatives
The committee should answer all questions • The members should then pay to the
about the cooperative by the members. Commissioner of Cooperatives the
registration fee of Ksh. 3,500.
In this formation meeting the members can
elect the executive of the cooperative society, • They are also required to come up with
who will then elect the chair and other office a letter of commitment if the society is
bearers. The secretary of the cooperative should independent or a check-off if the members
also be appointed since s/he will be responsible are employed to show the financial
for submitting the application for registration sustainability of the cooperative
of the cooperative to the Commissioner at the • The last step is for the members to present
Ministry of Cooperative Societies. to the commissioner the registration form
with all the requirements
After all issues have been discussed and dealt
with by the members they can now proceed to • Upon registration the Commissioner of
register the cooperative. Cooperative Societies will present the
members with:
Phase 5 – The Registration Process a. A certificate of registration
The following steps are required to registe b. A certified copy of the cooperatives by-
Housing Cooperatives in Kenya: laws
• Present a letter of introduction to the c. A copy of the act and the rules made
Ministry of Cooperative Society, stating d. A copy of the application for
the cooperative society’s concept and registration
intention and briefly describing its plan
The cooperative society becomes a body
• After the letter of introduction, the corporate by the name under which it is
cooperative should then present to the registered, with perpetual succession and a
Ministry the proposed list of names of common seal, and with power to hold movable
members who should meet the required and immovable property of every description,
limit, which is more than ten persons. to enter into contracts, to sue and be sued and
The list should include each individual’s to do all things necessary for the purpose of, or
names, date of birth, date of application for in accordance with, its by-laws.
membership, postal address, occupation
and date admitted to membership. The by-laws of a cooperative society shall
• An officer from the Ministry will attend now bind the cooperative society and the
the pre-registration meeting where by members thereof, to the same extent as if they
he/she gets to meet the members and to were signed by each member and contained
witness the meeting. covenants on the part of each member for
himself and his personal representatives to
• The members are then required to present observe all the provisions of the by-laws.
to the Ministry the cooperatives by-laws
that will guide their society As we noted above, cooperatives operate
democratically (one person, one vote) through
• The next stage is filling in the registration two measures: general meetings of the members
form5 which requires details of the or delegates and the board of directors. The
formation of the organisation, the type delegate structure may reflect the size of the
and intent, supplement information about organization or the distance covered by the
the society and economic viability cooperative and may include more than one
delegate for each region represented.
5
Registration form in Appendix
27
The Organisation, Management and Finance of Housing Cooperatives in Kenya
The cooperative’s start-up capital usually Since the cooperative agents are custodians,
comes from cooperative shares purchased by trustees and stewards of the societies, they
members. Each member’s liability is limited to are accountable and answerable to members,
the amount of his or her share in the capital and are expected to be efficient, effective,
and s/he has only one vote regardless of his or responsible, responsive, honest, faithful,
her capital contribution. After the registration diligent and prudent. In the management
of the cooperative, there is the initial general of cooperatives there has been an overlap of
meeting and thereafter the following meetings duties between the management committee
are held: the annual general meeting, and management staff. This reflects poor
special general meeting, committee meeting leadership and non-adherence to good
and training meetings. It is essential that management practices. For cooperatives to be
cooperatives communicate regularly with their efficient and productive, they should apply
members to solidify a sense of ownership. good corporate governance practices framed
All cooperatives need to find ways to solicit on the pillars of:
member input as well as distribute information
and build community spirit. To offer a • Accountability
positive alternative to other forms of housing, • Efficiency and effectiveness
cooperatives must have sound finances and be
• Probity and integrity
in relatively good physical condition.
• Responsibility
4.1 Management of Housing • Transparency and open leadership
Cooperatives There should be an effective body responsible
for cooperative governance that is separate and
Most of the problems bedevilling
independent of management to promote these
cooperatives arise from bad governance and
pillars of corporate governance. There should
poor economic management. While leaders
be an all-inclusive approach to governance that
direct and control the organizations and
recognizes and protects the rights of members
managers run them, members have authority
and stakeholders. Cooperative societies will
to demand and enforce good governance in
be governed and managed in accordance
their organizations. Corporate governance
with the mandate granted by the members
principles seek to ensure that leaders act in the
in a general meeting. Below is an outline of
best interest of the organization that they lead
how the members of the cooperative society
in order to achieve the objectives for which they
are involved in the governance of the society
were founded. If cooperatives have to remain
in accordance to the Kenyan Cooperative Act
commercially viable and sustainable enterprises
(1998):
for socio-economic development, they must
embrace good corporate governance.
1. The members
Cooperatives are governed and managed
by elected committees, entrusted with the The members are the key stakeholders of
management of societies on behalf of members, their cooperative. They have the following
and employ managers and staff to carry out the duties in facilitating an effective running of
day-to-day functions of the societies. In such the cooperative: to attend meetings and other
instances, the leadership provides the guidance cooperative activities; assist in amending by-
and delegates the powers of implementation laws as required; help to finance the cooperative
to the staff, leaving them to act as members’ by purchasing shares; communicate complaints
agents. and suggestions to the committee; support
the development of other cooperatives; elect
directors; participate on committees and in
28
Chapter Four Formation of Housing Cooperatives
other activities of the organization and use the on land or at premises outside the area of
services provided by the cooperative. operation of that cooperative society may be
a member of a cooperative society in whose
The following are the rights and liabilities of area of operation that land or those premises
members in a cooperative society according to are situated, notwithstanding that its objects
the Kenyan Cooperative Act (1998): are the same as or similar to those of the first-
1. A person will only be eligible for mentioned society.
membership of a cooperative if: 6. Each member of a cooperative society
• He is 18 years or older shall have one vote only in the affairs of
the society, irrespective of the number of
• His employment, occupation or shares he or she holds:
profession falls within the category
or description of those for which the Provided that a cooperative society which is
cooperative society is formed a member of a cooperative union or an apex
society shall have as many votes as may be
• He is resident within, or occupies land
prescribed by the by-laws of the cooperative
within, the society’s area of operation as
union or apex society of which it is a member,
described in the relevant by-law
and may, subject to such by-laws, appoint
2. No member other than the cooperative any number of its committee members, not
society should hold more than one-fifth of exceeding the number of such votes, to exercise
the issued and paid up share capital of any its voting power.
cooperative
7. The transfer or charge of the share or
3. No company incorporated or registered interest of a member in the capital of a
under the Companies Act and no cooperative society shall be subject to such
unincorporated body of persons shall conditions as the maximum holding.
be entitled to become member of a
cooperative society except with a written 8. In the case of a cooperative society registered
authorisation through a resolution by an with unlimited liability, a member shall not
annual general meeting of that cooperative transfer or charge any share held by him or
society. his interest in the capital of the society or
any part thereof, unless:he or she has held
4. No member of a cooperative society shall such a share or interest for at least one year
exercise any of the rights of a member andthe transfer or charge is in favour of the
unless he has made such payment to the society or a member of the society.
society in respect of membership or has
acquired such interest in the society as may 9. A member of a cooperative society shall
be prescribed under this Act or under the have the right to:
by-laws of the society.
• Attend and participate in decisions
5. No person shall be a member of more than taken at all annual, general and special
one cooperative society with unlimited meetings of the society and vote
liability and, no person shall be a member
• Be elected to organs of the society,
of more than one cooperative society
subject to its by-laws
having the same or similar object;
• Enjoy the use of all the facilities and
Provided that a person whois a member of
services of the society subject to the
a cooperative society and arries on business
society’s by-laws
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
• All legitimate information relating to the committee until the next general meeting
society, including: internal regulations, of the society
registers, minutes of general meetings,
supervisory committees, reports, annual • Where the entire committee has been voted
accounts and inventories, investigation out under the proviso above, the special
reports at the society’s head office. general meeting passing the resolution
shall elect a new committee to hold office
10. A member of a cooperative society shall as prescribed in the Act, Rules and these
have the obligation to: by-laws. Provided that a duly convened
Special General Meeting may, by a three
• Observe and comply with all the quarters majority of the members’ present
society by-laws and decisions vote out the entire Committee and the
taken by the relevant organs of the Committee shall thereupon vacate office.
cooperative society in accordance
with the by-laws of that society; • Meetings of the Management committee
shall be held regularly once a month and
• Buy and pay for shares or make any at any other time when necessary. The
other payments provided for in the minimum of five members shall be a
by-laws of the society. quorum provided that either the chairman
• Meet the debts of the society in case of the secretary or the treasure shall be one
of bankruptcy in accordance with of the quorums. Each member including
the provisions of the Cooperatives the Chairman shall have one vote.
Act and the by-laws of the society. The committee is aimed at directing the
affairs of the cooperative society with powers
2. The Committee to:
The members elect a committee from • Enter into contracts
their midst as the governing organ of the
cooperative. It is subject to any direction • Institute and defend suits and other legal
from a general meeting or the by-laws of the proceedings brought in the name of or
cooperative society. The by-laws of Housing against the cooperative society
cooperative society limited indicate that:
• Do all other things necessary to achieve
• The management Committee shall consist the objectives of the cooperative society in
of nine members of the society, including accordance with its by-laws
the Chairman, Secretary and the Treasurer
The following are the additional requirements
• The members of the Management for committee members as regulated by
committee shall hold office for three Kenyan laws6:
years but shall be eligible for re-election
provided no member shall be elected to the • Should be a member of the cooperative
committee for more than two consecutive society
terms • Is not a committee member in two other
• If during the term of office of a committee cooperative societies
a vacancy occurs in the committee, the • Should be able to read and write
committee may, and shall if the number
of members drop below five, co-opt a
member of the society to serve on the Ibid
6
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Chapter Four Formation of Housing Cooperatives
• Does not receive any remuneration, salary • To keep a Register of members correct and
or other payment from the cooperative up to date
society save in accordance to the Kenya
• To prepare and lay before the Annual
Cooperative Act.
General Meeting a profit and loss Account
• Is not a member of a cooperative society and the Balance Sheet duly audited.
that lends money to its members, lends
• To examine the accounts sanction,
money on his own account
contingent expenditure and supervise the
• Is not a member of a cooperative society maintenance of all books of accounts
which trades in goods or produce, trades
• To review each quarter:
either on his own account or some other
person’s account in the same type of goods • Obligation to creditors of the Society
or produce • Obligation by debtors of the Society
• Should have within thirty days declared • The position of all outstanding loans
his wealth to the commissioner in the against or to the society.
prescribed manner
• To co-opt members to fill, till the next
• Is not undercharged bankrupt election at a meeting, vacancies arising in
• Is not of unsound mind the course of the year among members of
the management committee including the
• Has not been convicted of any offence
Chairman, Secretary and the Treasurer.
involving dishonesty or is sentenced to
imprisonment for a term exceeding three • To summon meetings
months • To arrange for the examination and
• Has not been convicted of any offence checking of all stock received by the
under the Kenyan Cooperatives Act society.
• Does not have any un-cleared debt owing • To decide with the consent of the meeting
to a cooperative society at the end of its the terms of purchase and sale of any goods
financial year other than in respect of a or stock which the society may require for
loan under the provision of any rules made its members and to arrange for the safe
under the Kenya Cooperatives Act custody of such assets while in stock.
• Is not a person against whom any amount • To assist the inspection of the books by
of money if due under a decree or order or any person authorized to see them.
is pending recovery under the Cooperatives • To appoint, suspend or dismiss employees,
Act to fix their scales or salaries and to obtain
The Committee has the following powers security from them where necessary.
and duties: • Through any member or Officer or
• To observe in all their transactions the Act, employee of the society or any person
Rules and the By-laws specially authorized to institute, conduct,
defend compromise, refer to arbitration or
• To maintain true and accurate accounts of abandon legal proceedings by or against
all monies received and expended the Society of Committee or the officers
of employees concerning the affairs of the
• To keep a true account of the assets and society.
liabilities of the society
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
• When authorized by the General meeting prudence and diligence of ordinary men of
to acquire on behalf of the society shares business and shall be responsible for any
in other registered societies, and to appoint loss sustained through acts contrary to the
delegates to represent the society at such law, its rules and by-laws.
meetings or societies to which the society
may be affiliated. 3. Non-members
• With the consent of the General Meeting The non-members of the society are
to make, revoke and alter from time to time only recognised for the roles they play in
and at all times enforce such regulations, undertaking and facilitating the society’s
terms and conditions relating to the tenants tasks. They can only acquire a house or land
of the society and property of the society belonging to the society, unless authorized by
and the letting (including restrictions as to the Annual General Meeting.
sub-letting) and the sale thereof including
the making and guaranteeing of advances It is important to note that the membership
to members as the committee may think of a cooperative society and its relationship
fit. with its board and management will determine
how successful a cooperative is.
• To contract for loans for the society up to
such maximum as the General meeting The member input should be solicited by
may decide. the committee who have the authority to
make decisions: when developing budgets,
• To enter into contracts on behalf of the
when assessing the condition and maintenance
society. Such contracts shall bear on behalf
needs of the buildings and grounds and
of the society, the signature of the chairman
when soliciting participation in committee
and of either the honorary treasurer of
assignments. Smooth communication should
the society. Any contract so signed and/
be maintained between the board and members
or executed shall, notwithstanding that if
at all times as obligated by the by-laws. Most
it be afterwards discovered that there was
cooperatives also keep communication by a
some defect in the appointment of any
newsletter that keeps members informed of
such chairman, secretary or treasure of that
what is happening in their community. The
they or any of them were disqualified, be
board should maintain a two-way channel of
valid and binding on the society and the
communication with members in connection
members thereof as if every such person
with the usual monthly meetings: notify all
had been duly appointed and was qualified.
members well before the meetings, conduct an
Such an official shall thereafter be liable to
open meeting at which all members can attend
the society.
and be heard and finally it would be necessary
• To arrange for the custody of books to allocate time at meetings for all member
• Subject to the provisions of the Act, to concerns.An important pre-requisite for a
impose fines on the members. successful housing cooperative is that members
and directors should receive adequate training
• To draw up a set of working rules subject due to the complexity of developing and
to the approval of the general meeting operating a cooperative. The basic education
• To collect rents, repayments, instalments must be in the training to make members
and interest on loans from members, aware of their rights, responsibilities and
tenants and purchasers. obligations within the cooperative as expressed
in the by-laws and house policies. Ongoing
• Generally to carry on the business of the training should be built into the cooperatives
society. In conduct of the affairs of the operating budget.
society the committee shall exercise the
32
Chapter Four Formation of Housing Cooperatives
33
The Organisation, Management and Finance of Housing Cooperatives in Kenya
1. Geographical Location
One factor that determines a cooperative
structure is the size of area served, for
instance:
34
Chapter Five Role of Law in Housing Cooperatives
7
Cooperatives : A tool for community development (1998)
35
The Organisation, Management and Finance of Housing Cooperatives in Kenya
b. Membership – The by-law identifies the h. Equity redemption – The by-law provide
qualifications for member eligibility and the authority to the management on
procedures for joining the cooperative, how, when, and where the cooperative
rights and responsibilities and membership will redeem members’ equity in the
fee. cooperative.
36
Chapter Five Role of Law in Housing Cooperatives
37
The Organisation, Management and Finance of Housing Cooperatives in Kenya
38
Chapter Five Role of Law in Housing Cooperatives
39
The Organisation, Management and Finance of Housing Cooperatives in Kenya
In Kenya, there are currently more than In essence, the main role of cooperatives
10,000 cooperatives with a membership is community mobilization in the following
of 6 million. The membership dependants areas:
are 24 million, which is 80 per cent of the
current population in Kenya. Cooperatives’ • Mobilization and savings
employment creation amounts to 240,000 • Facilitation of credit facilities
people and the amounts of savings mobilized
• Resource mobilization
is Ksh102 million, which is 31 per cent of
national savings, and contributes to 45 per • Production, processing and marketing
cent of the GDP.
• Foreign exchange earner
i) Some of the benefits of cooperatives • Indigenous economy
have been researched and published in
various academic journals. For example, • Acquisition of property or instance housing
DeFourney (1992) argues that cooperatives units
and other similar organisations have assets • Human settlements
and qualities in areas, which cannot be
claimed by other types of organisations. • Source for external funding
These include: Self-initiative, sensitivity to • Tap economies of scale
local needs and reducing the need for
• Creation of awareness
public regulation
• Provision of technical assistance
In other words, the sense of ownership among
members creates a stronger commitment to • Facilitation in implementation of
the organisation while their knowledge of Government development agendas.
local conditions ensures that local needs are All these activities enhance income
addressed. Since decisions are taken collectively generating activities which lead to wealth
for mutual benefit, and indirectly for local and employment creation and thus poverty
community benefit, the need for regulation eradication which then raises the living
of their activities is not as great as it would standards for all members.
be, if the activities were undertaken for private
profit.
40
Chapter Six Financing Housing Cooperatives
41
The Organisation, Management and Finance of Housing Cooperatives in Kenya
42
Chapter Six Financing Housing Cooperatives
We shall briefly describe the operation of 2. The K-REP Development Agency’s group-
three financing institutions, which in spite of based housing microfinance product: The
the obstacles have been able to have impeccable Kenya Affordable Shelter Project is one of
achievements: the product design efforts of the K-REP
Development Agency (KDA), a subsidiary
1. Cooperative Bank of Kenya of the K-REP Holding Company that also
As we noted in Chapter Two, the Cooperative includes the K-REP Bank, one of the largest
bank of Kenya was founded in 1965, after micro-finance institutions in Kenya.
cooperative societies realised that the existing In 1997, it launched a pilot that still operates
banks were not about to relax their stringent in a single town, Nakuru. The loans ranged
lending conditions to allow the emerging from $385 to $3,300, with a flat interest rate
indigenous cooperatives societies to access of 15% and a repayment period of up to five
funds. years. As of May 2002, the project had 13
In particular, cooperatives could not access registered groups with a total of 105 members,
credit for the reason that majority of them 41 outstanding loans, had disbursed $60,300
at the time could not raise collateral that in loan capital and was maintaining an on-
was required to secure loans. Indeed, the time repayment rate of 81%.
establishment of the Cooperative Bank greatly 3. The National Cooperative Housing Union
facilitated the growth and strengthening (NACHU) as we noted in Chapter Two, also
of agricultural cooperatives whose success offers financial services to its members. One
inspired the spread of the cooperative system of the schemes relevant to this study is the
to working class savers in urban centres, Nyumba savings scheme, which is a tailor
which saw the emergence of savings and credit made housing improvement loan scheme. It is
cooperatives (SACCOs). designed for those who want to save specifically
In tandem with the robust growth of for housing development. The actual products
cooperatives, the Cooperative Bank has risen under this scheme include:
to become the forth largest bank in Kenya • The cooperative housing mortgage
with total assets in excess of Ksh 48 billion, programme, which facilitates purchase of
share capital of Ksh 3.1 billion, and a customer land and construction of new and decent
base of over 400,000. The bank is owned shelter with emphasis on affordability
by solely by cooperatives with over 54,000
individual co-operators and over 300 societies • The house rehabilitation programme, which
as shareholders countrywide. aims at improving existing semi-permanent
structures, built on land that is owned by
The role of Cooperative bank as the apex the cooperatives or their members. The
financial institution becomes even more critical scheme enables households to meet the
when viewed against the fact that one in five demand for interior improvements and
Kenyans is a member of a cooperative which furnishings, neighbourhood upgrading,
implies that the bank touches the livelihoods etc
of more than 22 million Kenyans. The Banks
vision is to have a prosperous Kenyan nation • The resettlement programme assists
with the cooperative movement as the engine people threatened with evictions, to access
of its growth. The bank is geared to developing credit to buy land and put up some basic
a fully integrated C-operative Financial structures to allow immediate occupation.
System. They are later able to borrow to construct
permanent houses
44
Chapter Six Financing Housing Cooperatives
• Infrastructure programme is expected to which the loan is made. Thus even if interest
assist in installing basic infrastructure like rates were to fall to 7% and the terms of loans
drainages, drinking water, toilets, etc extended to 30 years, Kenyans who work in the
informal sector and lack a clear credit history
• Income generating housing programme and who live on land that is not recognized
assists groups that intend to put up houses will not qualify for housing finance.
as a group for income generating purposes
Though the Cooperative Bank has grown
immensely it is yet to become the central
6.4 Challenges of Financing source of capital for cooperatives. Due to
this, some cooperative members are unable
Housing Cooperatives to borrow as much as they would need for
Over the past decade there has been housing purposes.
a substantial growth of housing finance
institutions which has attempted to cater for Affordability by a majority of the citizenry
the high demand for housing especially in due to the inflation rates – many members
the urban regions. However, there are still a strive to buy land over a period of years after
few challenges which have rendered a slow which again they encounter financial constrains
development in this. in looking for funds for construction.
In the 1980s, the interest rates on mortgages The charges keyed to loans have also been
were over 30%, making it almost impossible a source of discouragement for many willing
for individual borrowers to finance their to undertake loans, for instance in the stamp
housing through banks. With the fall in duty payment.
government treasury bills in 2003, interest
The laws and rules that govern land
rates fell considerably.
administration in Kenya are complex,
The long-term mortgage products now fragmented and overlapping. The country
available on the market offer interest rates that has a number of land tenure categories that
range from 15-20% with repayment periods include: customary/trust land, which is held
ranging from 7-20 years. Despite the relative in trust by county councils; private leasehold/
fall in interest rates, however, mortgage finance freehold land held by individuals, companies
is generally available only to high-end, formal- and corporations; government land and non-
sector workers or business owners. formal de facto tenure. There are also temporary
forms of tenure that include occupancy rights
Borrowers must incur not only 20% interest and temporary occupation rights.
rate payments but also down payments of
between 20-40% of the value of the property, The non-formal de facto tenure (squatting)
as well as significant legal and valuation fees. mostly occurs on government land and
These expenses render mortgage finance undeveloped private land, and is the dominant
simply unaffordable to the vast majority of the existing tenure system in the informal
population. settlements. As a result of the lack of clear titles
and policy on tenure guarantees to households
The terms of housing finance also discourage in informal settlements, the reach of housing
many Kenyans from borrowing. The banks finance and practice of progressive housing are
offering mortgage finance require evidence limited.
of credit worthiness such as a detailed
employment history, as well as a form of
collateral, usually the land or property for
45
The Organisation, Management and Finance of Housing Cooperatives in Kenya
The availability of serviced, affordable land In fact, financial institutions have been
in close proximity to employment for housing risk averse to the building and construction
remains a major hurdle in the development industry in particular, and to lending in
housing market. According to a UN- general, given the havoc of non-performing
HABITAT report, 20% of the population loans of the 1990s.Existing data shows that the
in Nairobi occupies 80% of residential land, amount of money lent to this sector averages
indicating that there is limited land available only 6% of total loans to the private sector.
for the majority of the population, including
the poor. Land prices are expensive. The rules Legislation pertaining to the banking
and fees for sub-division, development and sector further complicates the problem. The
registration are cumbersome and expensive. Banking Act, Building Societies Act as well
as the new legislation Donde Act (despite its
The costs of superstructure are relatively implementation being stayed by courts), which
expensive, thus making it unaffordable to the were developed in response to financial crisis
majority of the population. The country's of the late eighties, do not provide adequate
building codes are based on the English system incentives to banks to enter the housing
that fails to take into consideration the local finance market and instead place constraints
environment and relies heavily on European on the diversification of mortgage products to
design standards. low-income populations.
There have been attempts to implement Consolidation in the banking sector poses a
flexible standards for affordable housing, in further threat to housing finance. The recent
particular using inexpensive building materials planned merger between Housing Finance
and techniques. These standards were gazetted – the country's most vibrant mortgage
in 1995, but local authorities have not adopted institution – and Development Bank of
them. Further, the complicated building Kenya, will cause the institution to become
by-laws, planning regulations, protracted a commercial bank. Equity Building Society
approval procedures further compound the recently converted into a commercial bank,
housing problem. and the East Africa Building Society (EABS),
the oldest provider of mortgages in the market,
The housing finance companies have has announced that it will also be converting to
traditionally invested in the development of a commercial bank. Family Finance Building
housing for high and middle-income buyers Society has also indicated it might convert
but, under pressure from falling interest rates, to a commercial bank. An irony of Kenya is
recognize the need to move down market and that while commercial banks lack long-term
develop new lending products with greater finance, the country is flush with investment
reach. Commercial banks and housing finance capital.
institutions, however, lack long-term capital for
housing finance and cannot incur significant
long term liabilities when their asset base is
predicated on short-term deposits.
46
Chapter Seven Case Studies
47
The Organisation, Management and Finance of Housing Cooperatives in Kenya
48
Chapter Seven Case Studies
of their project. Additionally, their living The area is a very highly densely populated
standards have improved greatly due to a better area with houses in very bad condition and
living environment as compared to where they lacking in all forms of services. Apart from the
were living before. Other achievements can be rapid urbanization, densities rose very much
summed up as: in the area due to internally displaced people
moving from the land clashes in 1992 into the
• A sense of security as a result of ownership town.
of land
The housing cooperatives were formed in
• Gender equity has prevailed
1998 after the communities approached the
• Improved and planned physical National Housing Cooperative Union with
environment as compared to the crowded a view to organizing the communities in
unhygienic environment of the slum order to help themselves in acquiring decent
• Improved structures motivated by security shelter. This process involved community
of tenure discussions, introduction to the cooperative
housing approach, and savings for housing
• Blossoming of small-scale enterprises and eventual taking of loans for construction.
which has led to notable improvement of
their income levels There are currently 110 members of two
cooperative societies, 60 of whom have
E. Challenges taken loans and improved their houses and
sanitation.
• Provision of services that are not within
reach of the members affordability,
for instance in raising funds to build B. Objectives and strategies
infrastructure and other social amenities. The main objective of the project was two-
• Slow change of attitude by some fold. One was to provide access to credit for
members from dependency syndrome to housing improvement through the cooperative
independence syndrome approach. And secondly to empower the
community to discuss other areas of shelter
• Economic empowerment through related issues with other actors in an urban
strengthening of the members sources of environment.
income
Once the members were formed, trained
• Regularization of repayment (some of the
and properly registered as legal housing
members are not used to procedures of
cooperatives, discussions were held on issues
loan repayment).
relating to their problems especially the
• Strengthening the community cohesion community design approach for their buildings,
savings mobilization, group management and
• Acceptance of the real neighbourhoods
exposure to new and innovative appropriate
building technologies. The members were
7.2 Kwa Rhoda Neighbour- also exposed to issues relating to general
community building, waste management,
hood housing cooperatives water and sanitation, through linking them
with non-governmental organizations working
A. Project background in those fields.
The housing cooperative is situated in Kwa
Rhoda neighbourhood at Nakuru town.
49
The Organisation, Management and Finance of Housing Cooperatives in Kenya
ii). NACHU and other NGOs • During the training for the communities
emphasis was laid on social strengthening
The responsibility of NACHU was training and neighbourhood cohesion in order
in cooperative management, cooperative to tackle the many aspects that befall a
registration, savings and provision of loans neighbourhood of that nature.
for house improvements. A local NGO, • It is worth noting that residents of the
Intermediate Technology Development Group area were from diverse backgrounds both
(ITDG) partnered with NACHU in training culturally and geographically and about
and exposure on the use of stabilized soil 40% of them had only in 1992 migrated
blocks, ferro-cement construction, innovative into the neighbourhood from the land
designing on sanitation especially low cost clashes in Molo through forceful evictions.
septic tanks (the soils on the site are very It now appears that the municipalities
unstable). Both organizations also organized willingness to enter into collaboration
for community training and building of with the NGO’s and the communities in
linkages with the municipality. the neighbourhood is considered a success
iii). Government • The whole purpose of shelter improvement
for this particular neighbourhood was
The role of the local authority in the
economic improvement. The members
neighbourhood was to facilitate re-planning
of the cooperative had decided to use the
with minimum disruption and permissions
land which is now valuable for both their
on the desired forms of construction based
own housing and income rental.
on the community’s wishes. This was because
the neighbourhood was initially outside the the same time, the materials productions
municipal boundaries and thus the houses has provided employment to the already
had been done without the municipal’s trained youths who now produce stabilized
involvement. The other role for the soil blocks for sale and the pre-cast concrete
Nakuru municipal council was to guide the septic tanks for virtually every plot. The
improvement of the area in both the qualities project has introduced a savings culture within
of housing environment and sanitation. both the cooperatives and the community in
general, which is a very important component
iv). International Co-operation for access to other resources through credit.
UN-Habitat already had an ongoing Those members who did not take up loans
project with the Nakuru municipality (see for housing improvement have been able to go
httpt://www.unhabitat.org/) on localizing into micro-credit NGOs. The community has
Agenda No.21 so NACHU’s involvement also received empowerment in micro-business
in the neighbourhood fitted well with the operations.
municipality’s stated intentions.
50
Chapter Seven Case Studies
51
The Organisation, Management and Finance of Housing Cooperatives in Kenya
52
Chapter Seven Case Studies
A. New Vision
I. The Cooperative
To be a leading, stable and self-sustaining
Income of cooperative comes mainly from SACCO offering competitive financial
the fees it asks for services for the members services.
balloting, giving out certificates, registration
of members, registration of transfer of plots
etc. The savings from the cooperatives are not B. New Mission
used for running the cooperative. To mobilize savings, offer affordable credit
and other financial services to members/
J. Conclusions and recommendations customers.
Naivasha Traders Housing Cooperative is an
active and prospering cooperative. It has the C. Central Office Services Activity (COSA)
advantage of a substantial scale in members Regular savings with interest/dividends
and plots. Another major advantage is that and bonus are payable from surplus of each
all plots are located close to each other, at a financial year. In 2005, the rate of payment
strategic place along the highway to Nairobi. was 8% and 6%. There are also Normal/
The cooperative has a major challenge to development loans granted three times against
develop a completely new settlement. savings/shares held. The loans are payable in 40
months with an interest rate of 1% per month
or12% per year on a reducing balance.
53
The Organisation, Management and Finance of Housing Cooperatives in Kenya
School fees loans are repayable separately • Eldama Ravine FOSA(Koibatek District).
within 12 months of a calendar year. They
• Kabarnet FOSA (Baringo District).
are granted in December to March every year.
There are also emergency loans offered and • Marigat FOSA (Strategically located
repayable separately in 12 months. between lakes Baringo and Bogoria)
Baringo district.
Refinancing is not encouraged, but serious
problems may lead to consideration for this The Five-year Strategic Plan (2006-2011)
loan at an interest rate of 18% per annum. proposes opening of three more FOSA
The Credit Advisory Services are offered on the branches. The total account holders are 13,400
Co-op Bank Personal Loan and the SACCO with a savings and deposits valued at Ksh.214
Quick Loan. million as of August, 2006.
This is security for loans and savings. The personal Savings Account
Members contribute Ksh 200 monthly, (requirements):
included in the shares contribution and in case • Opening with Ksh.500 only.
a member passes away, the loan is written off
against the fund. Savings/deposits in COSA is • National identity card (photocopy).
doubled and paid to next of kin. • 2 colour passport-size photos.
When a member is bereaved by death • Fill application forms, specimen signature
of father/mother he/she is consoled with card and nominee card.
Ksh.8,000 and if child or spouse they are
• Operating minimum balance Ksh.3,000.
given Ksh.20,000. The total claims limit is
Ksh.36,000 in a financial year. Other services include the following:
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Chapter Seven Case Studies
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
This mission and vision is motivated by Finally, all public relations, correspondences
the love of God and the Gospels of Christ; and society’s records are placed under the
“That they may have life and have it more custody of this committee.
abundantly.”
F. The Credit Committee
C. Objectives
This is the committee that deals with
Waumini operates mainly on the following members’ loans. The role of this committee is
three broad objectives. to receive, screen, ascertain and certify all the
information in the loan application form then
• receive deposits and advance loans to approve the members’ request for loans
members.
In order to reduce bureaucracy in Waumini,
• promote economic and social development
the powers of approval have been vested in
by availing affordable credit to members.
the loans approving committee (LAC). This
• continuously educate members on committee is created by the chairman of the
cooperative and economic development. credit committee. The chairman of LAC is
also empowered to co-opt any other official
D. Management Structure from the Education Committee.
The management committee is elected
from the general membership at the Annual G. The Education Committee
Delegates Meeting. This is the supreme The role of this committee is to collect
and overall committee of the society and its and disseminate cooperative information to
function is mainly administrative, financial members. The members of this committee also
and welfare control. serve as the education officers of the society and
The management is therefore divided into their obligation is to build cooperative literacy
three committees namely, Executive, Credit capacity within the society. This committee is
and Education. also referred to as the inspectorate.
The committee is comprised of chairman, The role of this committee is great even
vice chairman, secretary and treasurer. These though it is not part of the management. The
executive officials are legally the signatories of members of this committee are the internal
the society. They are also the representatives of auditors. They are the watchdog of the
the society to the Government. society.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
recovery, a copy of loan repayment schedule guarantors with more shares and deposits
will be given to the loanee where the employer will bear the liability over and above those
fails to comply with loan recovery schedule, guarantors with less shares and deposits.
it is the duty of the loanee to remind the
employer failure to which the loanee shall be Members Shares Contribution
deemed to have defaulted repayment. A member can contribute as much share/
The interest on loans will be 12% p.a. (1% deposits as he/she wishes, whether through
per month) on reducing balance accrued payroll check-off or otherwise. However shares
monthly. Any change in interest rate shall be and deposits contributions in any one month
determined by members at the ADM. that is in excess of one-third of the member’s
gross salary will be considered as a booting.
The loan repayment period as specified and
approved on the loan application form will not Excess shares or deposits contributed by
be varied up-wards, even if the period is less way of boosting will not be considered when
than the maximum (48 months). However a computing member’s loan entitlement under
member may at his or her discretion vary the such shares or deposits have been invested
repayment period downwards. with the SACCO for not less than six months
cumulatively.
Loans disbursed by the 15th day of the
month will qualify for recovery in the same A member who transfers his / her shares
month. Loans disbursed after the 15th will or deposits from another SACCO will only
qualify for deduction in the next month’s qualify for a loan after a six-month waiting
payroll. period, as is the case for new members.
Guarantors
58
Chapter Seven Case Studies
remain in the improved units without further appropriate levels of rent. The highest
subsidies for maintenance and operation. The decision-making body is the Grassroots
programme is financed by the German State and Consultative Board, with membership
Bank (KFW). drawn from the target groups. Group-
specific project design to benefit and serve
Mathare 4A is located about six kilometers current residents
from Nairobi’s central business district. It
covers an area of about 18 hectares and is • User-centered project financial planning
home to 20,000-25,000 people, comprising to ensure that project costs do not exceed
about 8,000 households. affordability
• A two-tier approach combining short-
The average household income was Kshs
term improvements with long-term formal
1,980 per month in 1992, well below the
housing development
minimum salary for Nairobi of Kshs 3,000.
Tenants comprise 92 per cent of residents and • Independence of the community based
pay rents ranging between Kshs 250 and 300 project body with it being given the
per room per month. long-term responsibility of developing,
administering and maintaining Mathare
Houses were constructed of mud and wattle 4A within a non-profit framework and
by generally absentee owners. The area lacked following the principle of safeguarding
infrastructure with only one rudimentary earth the public interestLand requirements for
track motorable during dry weather. There reallocated households to be met within
were two public toilets, one non-functional, the project area.
the other rehabilitated by residents. There
were a few sub-standard “private” toilets and An initial study had been carried out in a
the few small open spaces between structures pilot area with 2,000-2,500 inhabitants, which
were used for waste disposal. Clean water was showed that the immediate construction of
available from private water kiosks but the formal multi-storey houses would require
supply is intermittent and unreliable even massive subsidies unaffordable by current
from these sources and costs three to four residents, thereby leading to out-migration
times more than water supplied by Nairobi and the replacement of current residents by
City Council. wealthier ones.
Tenure of the site was secured by government In order to improve housing conditions
transfer of the land to the church which took whilst ensuring that existing residents
over the existing structures from absentee continued to remain in the settlement, a
landlords on payment of compensation. two-tier strategy was developed. In the first
The rights of residents to benefit from the phase, infrastructure was to be improved
project are guaranteed provided they pay the immediately to alleviate problems in the most
same level of rent as before. With the church basic areas of need, for example the provision
playing the role of “benefactor landlord,” the of toilets, and conditions were to be improved
following principles were agreed on for the so that residents could carry out their normal
successful implementation and maintenance economic activities.
of the project:
Members of the community would
• Comprehensive community participation contribute labour and tenants would be able
at all levels and stages of decision-making to generate enough income to pay Kshs 400
including identifying priorities, developing a month in rent to the project. They would
implementation strategies, deciding on also pay an additional Kshs 400 per month for
members to be relocated and determining administration and maintenance charges.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
60
Chapter Seven Case Studies
• The legal mechanisms to ensure that The CLT concept is based on two principles.
beneficiaries’ property will be inherited by The first is the recognition and acceptance
their rightful heirs of the physical conditions and community
networks prior to project implementation.
Tanzania-Bondeni settlement is located in
Therefore, any changes introduced by the
Voi, about 150 kilometers from Mombasa.
project must be made in consultation with the
The settlement has existed since the 1950s
community.
and, by 1991, had a population of 4,730 on
a site of about 22 hectares. It was a squatter The second principle is that beneficiaries
settlement on land owned by the government, should pay for secure tenure and infrastructure
Kenya Railways and a private sisal company. improvements. The owners of structures,
The community lived in the fear that their including landlords, are the first group of
houses could be demolished at any time beneficiaries. Tenants are the second level
without notice. The housing structures were and are allocated the remaining plots. The
mostly occupied by the squatters but 30 per improvement was completed in several
cent were occupied by tenants of absentee phases.
landlords. Forty-one per cent of households
were headed by women. Outside support was sought and a partnership
between government, Voi Municipal Council
The insecurity of tenure was reflected in the and the local community was developed. Each
housing conditions. Less than one per cent of of the partners was assigned specific rights and
the total of 530 structures could be considered duties and the community was involved in the
permanent. Structures were overcrowded and design of infrastructure. Credit was secured
most lacked basic sanitation facilities. from a local bank after consultations with
the community. Different options for land
Environmental health problems were
tenure were explored. A school, a market, a
widespread and malnutrition caused high
social centre and recreational open spaces were
rates of infant mortality. The nearby sisal
provided.
factory discharged raw waste into the Voi river
from which residents drew their water. Most An intensive community mobilization
residents had lived in the settlement for a long process followed and landlords were organized
time, 47 per cent of them for more than 30 into a self-help group registered with the
years. Unemployment and under-employment Ministry of Culture and Social Services.
were extremely high, 30 per cent of residents Consultations between the community, Voi
were jobless and 52 per cent earned less than Municipal Council and the government
Kshs 2,000 per month. Residents had no led to the residents selecting a community
access to credit and there was no community land trust as the most suitable strategy for
organization. security of tenure. Land would belong to
the community but individual members
The CLT project was initiated after Voi
would own developments on their plots and
Municipal Council approached the Small
these could be inherited by wives, children
Towns Development Project (STDP) at the
or relatives incase of the demise of the men.
Ministry of Local Government for assistance.
Developments on plots would be open for sale
This came at a time when the Ministry was
but not the land itself.
embarking on a five-year Local Authority
Development Programme (LADP) for Voi
Town.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
The innovation in this model is the separation Project Sustainability and Replicability
of development from land. As yet, there is
no Act of Parliament in Kenya providing a The management charges moderate fees to
legal basis for securing tenure based on CLT. meet recurrent expenditure and has the right
However, CLT has been registered under the to buy dwelling units and other improvements
Trustee (Perpetual Succession) Act. (37). in the community to ensure that the land
and other improvements are retained by the
A committee with representatives from community. The lessees can use their sub-
the community, the council and central leases as collateral for loans to improve their
government was formed to coordinate the dwelling houses.
implementation of the project. Upgrading was
undertaken through a partnership between The government and Voi Municipal Council
the government, a local bank and the Housing now recognize existing housing structures
and Building Research Institute (HABRI) of and owners are encouraged to make gradual
the University of Nairobi. HABRI trained improvements according to the municipal
community members in appropriate building building by-laws. All of those (both owners
techniques. The project is administered by and tenants) given a plot have to make a
registered trustees who are its policy-making contribution of Kshs 17,000 towards the cost
body. Trustees serve a two-year term, renewable of infrastructure over a two-year period and
for an additional two years. there is considerable flexibility in making
these repayments.
Results
Upon repayment, members obtain their
The Voi CLT project started in 1992. Since sub-leases. The money is converted to a
then, the following changes have taken place: development fund for the community and
lessee members have priority in all land
• Construction activity has increased and allocations.
security of tenure has been enhanced
Tenants are required to become members
• Appropriate building materials are being
of the society before they are eligible for
used in the construction of new houses
plot allocation. Replanning has also created
• Four housing cooperative societies have extra plots which have been allocated to new
been formed to rehabilitate existing members who had previously been tenants. A
houses series of workshops and public meetings were
• The community has saved Kshs 1.7 million held to create awareness on the obligations
in a special bank account. This money will and responsibilities of the community in CLT.
pay for cadastral survey work and other Legal documentation has also been prepared
CLT operations to ensure that only modest modifications will
be required to replicate the Voi CLT model
• About 300 families have been resettled in other urban squatter communities on
within the trust area government or trust land.
• Five kilometers of murram roads have been
built to open up the settlement to allow
Voi Municipal Council workers to collect
the garbage regularly
• A number of construction jobs have been
created for residents
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Chapter Eight Conclusion and Recommendations
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
Members own the cooperative together and cooperative’s board of directors should keep its
have the security of being able to remain in members informed of all its actions. A regular
their homes for as long as they wish, as long communication system for instance, through
as they meet their monthly obligations, and frequent newsletter, information bulletins,
abide by the cooperative bylaws, rules, and special meetings, solicitation of members
regulations. for opinions and priorities-strengthens the
relationship between the board of directors
Cultural diversity: many cooperative and the members.
members indicate that the possibility for
interaction with people from different The cooperative society must maintain
backgrounds, cultures, and income levels is a adequate financial reserves to protect the
positive factor in their decision to become a cooperative and its members’ interests. These
member. usually include a general operating reserve
and a reserve for replacing components of
Extended Services: by establishing buildings as they deteriorate. Such reserves
cooperative procedures and working together, reduce the possibility of members having to
people are able to provide services for pay unexpected special charges in emergencies.
themselves that otherwise would be impossible An annual audit should be conducted by
to obtain. When one cooperatively organized professional accountants and made available
venture is successful it often becomes clear to all members.
that people can be successful in another area
as well. As a result, the original effort often can To protect the interests of the remaining
be strengthened. residents, the cooperative board must have the
right to approve incoming members who take
C. Physical benefits the place of those leaving the cooperative. A
credit check and a visit with the membership
Shared maintenance responsibilities: committee are usually required. This process
cooperative members usually have limited also helps orient the incoming member to their
direct maintenance responsibilities. The rights and responsibilities as coop members.
cooperative association is responsible for major
repairs, insurance, replacement of worn-out
buildings, and upkeep of common grounds 8.1 Challenges
and facilities.
There are many challenges that continue
Vandalism and Security: cooperative to inhibit the formation and management of
members vigorously protect their association’s housing cooperatives in Kenya.
property. An important benefit of converting
rental properties to cooperative ownership Some of these include:
is reduction in vandalism and abuse of
• Inadequate advice on cooperatives’
property and improved and shared security
formation and operation
arrangements. Recent studies show that the
cooperative’s presence in the neighbourhood • An increasingly unfavourable broad public
brings neighbourhood crime down. policy environment, which indirectly
promotes ‘for-profit’ forms of organisation,
Standard cooperative practices: it is evident may have affected the general thrust of
that cooperative housing associations are forming cooperatives. Most cooperatives
most successful when operated in accordance are small-scale organisations and a
with specific recommended practices, in majority is engaged in socially beneficial or
addition to the general co-op principles. The
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Chapter Eight Conclusion and Recommendations
65
The Organisation, Management and Finance of Housing Cooperatives in Kenya
Due to past experiences of government too abruptly. Cooperatives and their apex
control, some members still consider organizations need time to mobilize their
cooperatives as ‘government affairs’ and they resources, build their strength and managerial
frequently do not know their rights since they capacities, and learn to cope with the pressures
have never been given a chance to use them of competitive markets.
in practice. In such cases, the members felt
exploited by the cooperatives. However, new Cooperatives must recognize that they have
cooperatives have been established which to maintain their local community base to
are firmly based on cooperative principles be able to respond to the qualitative issues
and voluntary membership. The training on service delivery. At the same time they
of cooperative members have also played a must achieve all the leverage and economies
big role in improving and strengthening the they can to stay competitive. The decision to
relationship between cooperative members merge is vital for many cooperatives. However,
and the management and in developing new developing the will to merge, the management
cooperative activities attuned to members’ capacity to merge, and maintaining links
needs. to the membership require leadership
and professionalism and an appropriate
According to an ILO report (2001), the organizational culture.
mere transfer of western policy, legislation or
organizational models will not suffice. The Cooperatives that simply grow big and fall
development of a truly autonomous and self- to the threat of management take-over will
reliant cooperative sector means that there fail commercially as well as cooperatively, if
must be room for experiments and mistakes. they fail to capitalize on their best competitive
resource, which is their unique cooperative
However, in order to reverse the negative identity and membership. Competition will
trends produced by too much state intervention remain intense and the capital resources
in past cooperative affairs, there must be potentially available to their rivals are too great
recognition – if it is accepted that cooperatives for them to survive without a competitive
form an integral part of overall socio-economic stance that differentiates them and mobilizes
and political development – that the kind of their stakeholders.
support structures and political representation
they need in developing countries go beyond A shared culture and objectives could
those required by cooperatives in industrialized greatly facilitate the smooth implementation
countries. The relationship between members of mergers between the cooperatives that were
and cooperative management, as well as those value rather than institutionally oriented.
between cooperatives and local authorities Ensuring regular contact with the members on
are – for a whole host of reasons – different terms that make sense to them and the other
and the educational tasks ahead of institutions stakeholders could ensure that cooperatives
promoting cooperative development are much enjoy leverage and locality after having
greater than in the past. merged.
Without members’ sustained support Need for research which will produce data to
and involvement in business, capital and be used as a basis of deciding which cooperative
management, cooperatives simply cannot housing type is needed, the location, and the
survive. This realization has been dawning most suitable group.
upon those who set agendas for social and Need for a progressive national housing
economic development. It is vital though that strategy which aims to eradicate unfit homes
the governments do not withdraw support and modernise those which do no provide
66
Chapter Eight Conclusion and Recommendations
adequate comfort or amenity. The National achievable for poor households can reduce
Housing Policy will need to review the current rather than increase the quality and volume
legislative and regulatory framework which of housing available to the poor. Instituting
impedes on the acquisition of housing. regulations that reflect how the poor build
can encourage lenders to develop innovative
In terms of creating enabling environment products, improve the quality of the guarantees
that would enable the widespread development taken by these institutions and allow the poor
of housing microfinance, thus increasing poor to improve their living conditions.
household’s ability to access decent shelter,
CIVIS (2003) has delineated the following Greater dissemination of existing experience
key lessons. is needed; this would enable practitioners
to share experiences and emerging ‘good
Land security does not have to mean full practices’ that is needed to help expand and
legal title – land security, which is the degree grow the housing industry.
of confidence that a household will not be
forcefully evicted, can be more relevant and
available for poor household than legal title
deeds. Potential housing lenders can service
8.3 General Conclusion
poor household with secure tenure not based This study has attempted to show the
solely on full, legal title. development of housing cooperatives and
SACCOS in Kenya, the challenges encountered
Mortgages are not necessarily the most and how they have changed over time to be
secure guarantee, particularly when financing more inclusive and participatory. The study
the housing needs of poor household. Given has also highlighted the formation process of
the instability of poor households’ income, housing cooperatives, and the requirements
high foreclosure costs, weak resale market for registration as stated in the Housing
for repossessed properties and liquidity risk Cooperative Act (1998). The roles of all the
of longer term loans, mortgage guarantees in stakeholders in the housing cooperatives have
Kenya and many developing countries provide been discussed including also the impact the
substantially less real security for lenders than housing cooperative movement is having on
in developed markets. In these environments, national development.
shorter-term loans for progressive construction
with household asset guarantees are often less Through the case studies, we have been able
risky than long-term mortgages. to highlight some of the underlying challenges
within the cooperative movement in Kenya
Progressive building increases affordability. which serve as a learning board for best
Given poor households’ limited incomes and practice management of housing cooperatives.
high costs of land, building and housing, The government’s commitment is evident in
smaller short-term loans that support its initiatives and participation in improving
progressive building practices already the state of cooperatives in Kenya such as in
employed by the poor can make housing loans the KENSUP project and in the Cooperative
more affordable. College.
A progressive-build friendly policy In the discussion on financing institutions,
environment may produce better results we have highlighted some of the challenges
than strict enforcement of high minimum encountered by members in starting and even
standards. Strict housing and financing establishing housing cooperatives due to the
laws (and enforcement of these laws) that high costs involved.
establishes high minimum standards that are
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
68
BIBLIOGRAPHY
BIBLIOGRAPHY
African Population and Health Research Centre (APHRC). 2002. Population and Health
Dynamics in Nairobi’s Informal Settlements. APHRC: Nairobi.
Brown, W. et al. (2003). The Enabling Environment for Housing Finance in Kenya. CIVIS: Cities
Alliance: Cities Without Slums. Issue 4. [Available Online] www.citiesalliance.org
Centre on Housing Rights and Evictions (2005). Listening to the Poor? Housing Rights in Nairobi,
Kenya.
GOK (2000): Interim Poverty Reduction Strategy Paper for the Period 2000-2003. Government
Printers, Nairobi.
GOK (2001). 1999 Population and Housing Census. Vol. 1. Government Printers.
International Labour Organization. (June, 2001). Promotion of Cooperatives. Report V (1). Fifth
Item on the agenda. International Labour Conference. 89th Session. http://www.ilo.org/public/
english/standards/realm/ilc89rep-v-1.htm
Jayo, Wickremarachchi (2003). New cooperatives: Motivations and Barriers. ACCORD. CSU
Printing services.
Kennedy, T. et al. (1995). Cooperatives: A Housing Alternative for Rural America. Report 45.
USDA Rural Development.
Lee, Jong-Soo (2000). Cooperative Identity in terms of members, objectives and methods. Paper
presented at the Mapping Cooperative studies in the New Millennium.
Mwangi, K.I., (October, 1997). The Nature of Rental Housing in Kenya. Environment and
Urbanization, Vol. 9, No. 2.
More than Shelter: Housing as an instrument of Economic and Social Development. A Harvard Joint
Centre for Housing Studies. (May 9-14, 2005). International Housing Conference. Bellagio,
Italy
NACHU. (Sept. 2005). Innovations in Housing and Livelihoods for low income communities in
Kenya. NACHU.
Oriaro, M. & Kerre, M. (2001). NACHU: Needs Assessment for the formation of Cooperative
Housing Finance Institutions. NACHU.
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Ouma, S.(1988). A History of the Cooperative Movement in Kenya 1908-1978. Bookwise Ltd.
Reynolds, A. (1999). An assessment of loan regulations for rural housing cooperatives. Univ. Of
Wisconsin Centre for Cooperatives
Syagga, P., Mitullah, W. & Karirah, S. (2002). Nairobi Situation Analysis Supplementary Study: A
Rapid Economic Appraisal of Rents in Slums and Informal Settlements. GOK & UN-Habitat
UN-HABITAT. (2003). The Challenges of Slums: Global report on Human Settlements 2003.
United Nations Human Settlements Programme. Earth scan Publications Ltd.: London.
UN-HABITAT. (2004). A Study to conduct Kibera Social and Economic Mapping. Household and
Business Survey Report. Research International.
70
Appendices
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
72
APPENDIX I THE ORGANIZATIONAL STRUCTURE OF THE COOPERATIVE
mOVEMENT IN KENYA
INTERNATIONAL COOPERATIVE
ALLIANCE (I.C.A.)
WORLD COUNCIL OF
CREDIT UNION (W.C.C.U.)
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
1. NAME AND AREA OF OPERATION OF THE (iv) By-laws – means By-Laws made by
HOUSING COOPERATIVE society and registered under the act and
includes any registered amendment of
2. THE REGISTERED OFFICE AND POSTAL such By-laws.
ADDRESS
(v) Share – means the amount of money
contributed by each member towards
3. DEFINITIONS/INTERPRETATIONS
the capital of the society and which is
a) Interpretation not refundable to the member, it is the
permanent capital of the society.
(i) In these By-laws, unless the context
otherwise requires, words or phrases shall (vi) Supervisory Committee – means an
be defined or interpreted in accordance oversight committee elected at a general
with cooperative societies Act of 1997 as meeting.
amended in cooperative societies Act 2004 (vii) Member in Good Standing – means a
and cooperative society rules 2004 made member who is current in payment of
there under, hereinafter referred to as the his required contribution and has not
‘the Act’ and ‘the rules’ respectively. Any in any way acted in a manner, which is
questions concerning interpretation of potentially damaging to the society and
these By-Laws or any other matters not has fully compiled with the policies and
provided for therein, errors and unions Rules set forth by the society.
should be referred to cooperative tribunal.
(viii) Members Deposits – means the amount
ii) In these By-Laws where masculine gender of money contributed by each member as
is referred to, it will be construed to include Savings with the society. This amount shall
the feminine gender. be taken as instalments towards creating
a fund for the purpose of acquisition of
b) Definitions land or house by an individual member.
(i) Common Bond – means the basis for (ix) Net Surplus – means the amount of income
cooperative between members of the in excess of expenses of the society. It is
society (what makes members of society computed before an allocation is made
come together). for payment for member’s dividend/
(ii) Cooperative Tribunal – means a judicial interest on shares/deposits respectively.
court that is charged with powers of (x) Member of Immediate Family – includes
handling cooperative society disputes. but it is not limited to the spouse, parents
(iii) Commissioner – means commissioner and children of the members, whether
for cooperative development. or not residing in the same household.
They also include any other relative of the
member or spouse of the member if the
74
appendix
relative resides in the same household as ii) Lend money to members for any
the member. purpose directly concerned with
the acquisition of land or living
(xi) Minister – means a Government Minister
accommodation for themselves on such
in charge of Cooperative affairs.
terms and with such security as the
(xii) Act – means the Cooperatives Societies managing committee may from time
Act of 1997 as amended in Cooperative to time determine or guarantee loans
Societies Act 2004. and advances to members for similar
(xiii)Rules – means Cooperative Societies purposes
Rules, 2004. iii) Undertake building operations by such
means either directly or indirectly as
4. OBJECTIVES OF THE SOCIETY the committee may decide
The objects for which the society is
iv) Acquire supplies of building and
established are:
similar materials and machinery of all
a) To provide for its members living kinds including household furniture
accommodation within the area of its and equipment for use in building or
operation at a fair and reasonable price for sale or hire to members
together with such ancillary services as
v) Acquire and relinquish land, buildings
roads, drainage, water and light and together
and rights over land and buildings by
with facilities for physical and cultural
purchase, lease or any other means as
recreation and all such other matters as are
may be necessary of the attachment of
usual, customary and desirous for building
these objects
estates, blocks of flats or single dwellings.
The society may own Land and Buildings vi) Employ architects, builders, and
on behalf of its members. contractors. Issue plans, negotiate and
contract services for light and power,
b) To acquire land and or construct houses
water drainage, roads and generally
for the purpose of selling them to members
do all such things as are necessary
and non-members.
and customary for the acquisition of
c) To achieve the objects set forth in By-laws land and its development of housing
4 (a), and (b) the society may perform purpose
and carry on all the usual functions of a
vii) Enter into contracts with members for
cooperative society as governed by the Co-
the sale or lease of land and building
operate Society Act and Rules and may in
acquired by society in pursuance of its
addition
objects on such terms and conditions as
i) Raise funds by accepting deposits and may from time to time be determined
by contracting for loans from members
viii) Do all such things, as are incidental to
or non-members by issuing debentures
or necessary for the attainment of any
or mortgaging its property or by any
or all foregoing objects for the society
other means up to a maximum amount
to be decided by General meeting
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
5. COOPERATIVE PRINCIPLES AND VALUES • common bond can retain his membership
if he so wishes)
In order to achieve the above objects for
which it is established, the society shall act in • Has not applied to be adjudicated as
accordance with the internationally accepted insolvent or is not declared bankrupt by a
Cooperative Principles and values stated competent Court of Law.
below:-
• Has not been convicted for any criminal
a) Cooperative Principles offence involving dishonesty or fraud and
jailed for a period of three months or more
• Voluntary and open membership during the last five years
• Democratic member control • Accept to abide by and observe the
• Economic participation by members provisions of these By-laws and other
regulations and resolutions made by the
• Autonomy and independence members regarding the operations of the
• Education,Training and Information society.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
• To put forth qualified candidates for office • Acts in any way detrimental or prejudicial
to the Society’s interest or other just cause
• To support issues put forth that improves
the sustainability of the society and 17. EXPULSION PROCEDURE
promotes the good will of all members
Upon formal and written announcement (by
• To attend and actively participate in a member or management) that a member
meetings of the society has committed a violation punishable by
expulsion, the Management Committee shall
14. CESSATION OF MEMBERSHIP provide written notice to the member stating
Membership of the society shall cease with the reason(s) or the Proposed suspension and
effect from the date of a member: subsequent expulsion by the General Meeting
and grant a member 30 days to prepare his
• Dying defence.
• Ceasing to hold the qualification for After this period, taking into consideration
membership as specified in these By-laws, the member’s defence, the Management
the Rules or the Act Committee shall initiate an administrative
• Being expelled from the society inquiry and take a decision on its findings
within 15 days. The said member shall have
• Voluntarily withdrawing from the society 10 days to file an appeal against the proposed
in accordance with these By-laws expulsion with Supervisory Committee, which
• Becoming of unsound mind will take this appeal to a General Meeting.
• Being declared bankrupt by a competent
court 18. PAYMENT RESULTING FROM CESSATION
OF MEMBERSHIP
15. VOLUNTARY WITHDRAWAL A member who withdraws or is expelled by a
A member may withdraw from the society General Meeting shall be repaid the following
by giving days’ notice in writing of his amounts after deduction on any debts owed
intention to withdraw from the society. The by him to the society as a borrower, endorser,
Management Committee must approve such and guarantor or otherwise:
withdrawal and take all the necessary action
78
appendix
• The nominal or book value of his deposits • Shares of other Cooperative societies
whichever is less
• Unit Trusts.
• Any bonus, dividend or interest if any,
• Treasury Bills or Bonds
due to him at the date which membership
ceases
22. SHARES
19. FUNDS OF THE SOCIETY The shareholding of a member who fails to
complete the payment of the minimum
The funds of the society shall consist of:
qualifying shares shall be refunded after
• An entrance fee or any other fee as may
giving such member one month’s notice unless
be approved by the committee payable on
the member reactivates his shareholding.
admission
• An undetermined number of shares No member shall hold more that twenty
percent of the total shares at any given time.
• Members’ deposits
• A 20% Statutory Reserve fund and any 23. TRANSFER OF SHARES
other fund established by the General
Within the approval of the Management
Meetings (see by-law 27).
Committee, a member may at any time
• Surplus funds resulting from the transfer his shares to another member or next
operations of the society of kin but not to a non-member. Such transfer
• Funds obtained from any lawful sources must be in writing and shall be at nominal
like grants from Non-Governmental value.
Organizations and other donors or loans All transfers of shares, either from a member
from financial institutions, members or to another member or from a deceased member
non-members. to his nominee must be registered with the
• 10% cash reserve on deposits Secretary and no transfer shall be valid unless
so registered. The society shall charge a certain
• (a), (b) and (c) are subject to changes as fee to cover such transactions.
management may decide from time to
time with approval of General Meeting
24. MEMBER’S LIABILITY
20. APPLICATION OF FUNDS The liability of a member shall be limited to
The funds of the society shall be applied the nominal value of the Shares held by him
for the promotion of the stated objects and in the society.
purposes of the society set forth in these By- In the event of a liquidation, where available
laws and in the applicable law. funds are insufficient to pay the full nominal
value of the Shares/deposits held by the
21. INVESTMENTS OF SOCIETY FUNDS member, the funds shall be distributed par
passu and pro rata among the share holders
The society may invest or deposit its funds
according to the Shares/deposit held by each
not in immediate need in:
member.
• Post Office Saving Bank
• Investments and Securities Quoted in
Nairobi Stock Exchange
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25. POWER TO BORROW shall be made good from net available surplus
resulting from operations of the society during
The loan shall be obtained from the members
subsequent financial years.
and non-members subject to the terms and
the maximum endorsed and approved by the The reserve fund shall be indivisible and no
General Meeting. member shall claim a specific share of it.
The maximum liability fixed shall be subject The reserve fund shall be kept in a separate
to the approval of the Commissioner who may account to be known as reserve fund account.
at any time reduce it or impose such conditions
as he may deem necessary. The society shall cause an annual audit for
the reserve fund.
For better securing of any loan accepted by
the society under paragraph (25a) of this By-
29. GENERAL MEETINGS
law, the society may grant a charge over its
assets and over the Shares held in financial The Supreme Authority shall be vested in
institutions or building owned by the society the General Meeting of the members. Such
on behalf of the members in accordance with meetings shall be held as follows:
these by-laws. Granting of such charge shall
be subject to a special resolution by a general The Annual General Meeting shall be held
meeting. within four months of the close of society’s
year and within four weeks of receiving
the registered final accounts from the
26. RATE OF INTEREST Commissioner.
The rate of interest on deposits or loans
shall be determined by the Management Special General Meeting shall be held
Committee subject to approval by the Annual i) When convened by management
General Meeting. committee or the commissioner in
accordance with the provisions of the Act
27. RECEIPTING FOR MONEY and Rules.
Members shall be provided with a receipt by ii) Within 15 days of receipt of a written
the society, which shall serve as a confirmation demand from at least 50% of the
of each and every transaction processed active members stating the objects and
between the member and the society. reasons of calling the meetings.
iii) If the committee fails to convened a
28. STATUTORY RESERVE FUND meeting within 15 days of receiving
The society shall maintain a statutory reserve the notice under sub-section (b)(ii) above,
fund in pursuance of the provisions of the the members demanding the meeting may
applicable law. The Reserve shall be credited themselves convene the meeting by giving
with at least 20% of the net surplus of each notice to other members of the society,
financial year. Such a fund shall be invested or stating the objects and reasons for the
deposited in a manner as prescribed in section meeting and the fact that the committee
45 of the Act. has failed to convene the meeting.
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• Ratify action taken by the committee The members shall, by resolution in the
and give direction to the new committee subsequent meeting, authorize the chairman
where necessary to sign and date the final record.
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44. AUTHORIZATION OF EXPENDITURE • Observe in all its activities the Act, the
Rules and these By-Laws and undertake
For each financial year, the committee shall prudent business practices in the
cause to be prepared estimates of society’s management of the society
income and expenditure including recurrent
and capital estimates for approval by the • Authorize borrowing and lending
General Meeting at least three months before operations of the society in accordance
the end of the preceding year. The management with the Act and the Rules
committee shall authorize no expenditure • Act upon all applications for membership
unless provided for in the estimates (Budget).
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• Ensure that true and accurate records and • With the consent of the General meeting
accounts are kept of the society’s money, make, revoke and alter from time to time
properties, capital, reserves, liabilities and and at all times enforce such regulation,
income expenditure terms and conditions relating to tenants of
the society
• Lay before the Annual General Meeting a
balance sheet and final accounts, together • To collect rents, repayments, instalments
with proposals for the disposal of the and interests on loans from tenants,
surplus if any members and other purchasers
• Recommend to the Annual General • To represent or cause to represent the
Meeting the rate of dividend, interest on society in all legal matters
deposits or Honorarium to be paid to the
• Perform such other duties as the members
members the Committee and the staff
may from time to time direct
• Fill the vacancies occurring in the
Management Committee and other sub- 48. EXECUTIVE OFFICERS
committees between Annual General
The Chairman, Vice-Chairman, Treasurer
Meetings
and Secretary shall be termed “Executive
• Designate a depository for the funds of the Officers”. The executive officers shall be elected
society either on the day of the General Meeting or at
• Impose fines under these By-laws a Management Committee held within seven
days after the General Meeting in accordance
• Issue new Shares and approve transfer of with these By-laws.
Shares between members
• Determine the interest rates that shall be 49. CHAIRMAN/VICE-CHAIRMAN
paid on deposits and borrowed money
The power and duty of the chairperson shall
• Appoint, suspend or dismiss any employee be to:
of the society and supervise their work
subject to the requirements and provisions • Convene all the meetings of the society
of the Act • Prepare or cause to be prepared the agenda
• Regulate matters regarding investment of the meetings
• Apply on the instruction of the General • Chair the meetings and control the business
Meeting for affiliation to a Cooperative to be transacted at such meetings
Union or National Cooperative • Direct the affairs of the society in
Organization and take necessary action to conjunction with other elected officials
become affiliated
• Enforce all rules made by the committee
• Consider application for loans, suggestions and the General meetings
for investment and act in accordance with
the By-laws • In the absence of the chairman, the vice-
chairman shall perform the duties of the
• Elect delegate(s) to represent the society in chairman
cooperative Union, National Cooperative
Organization or in other apex societies, to • In absence of both the chairman and his
which the society is a member vice, the meeting shall appoint one of the
members to chair that day’s meeting
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The duties of the Secretary shall be: • The Investments sub-committee shall carry
out market research on the most lucrative
• To record Minutes of the Management plots to purchase or the most profitable
Committee and the General Meetings securities to invest in with a view of
• To ensure that the society’s correspondence advising the management committee.
is promptly and correctly attended to • The investments sub-committee must
• To prepare and send notices of meetings in prepare Minutes of its meetings indicating
consultation with the chairman clearly their recommendations, relations or
any Action taken by them for ratification
• Generally to manage and cause to be by the Management committee.
managed the affairs of the society as may
be necessary in consultation with the
executive officers
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• maintain and provide safe custody • The term of office of the committee shall
of society’s books, accounts, registers be three years with one members retiring
certificates, society seal, chequebooks and annually but eligible for re-election.
other accountable documents.
• counter sign the society’s cheques, contracts 62. SUPERVISORY COMMITTEE POWERS
AND DUTIES
and other documents.
The following are the powers and duties of
b) The committee may appoint one or more
the Supervisory Committee:-
deputy managers. If appointed, the deputy
manager shall, in the absence of the manger or • To ensure that the Management of the
in case of vacancy in the office of the manager, society complies with the Act, Rule and
perform the duties of the manager and such the General Meeting resolutions
other duties as from time to time be prescribed
by the Management Committee. • To make, or cause to be made at least once
every three months, an investigation into
The committee may hire and discharge the the affairs of the society, including an audit
employees of the society in accordance with of its books
terms and conditions of service approved by
• To present their Annual report to the
the commissioner.
Management Committee before final
presentation to the members at the
60. SUPERVISORY COMMITTEE Annual General Meeting for adoption
Without interfering in the administrative and give a quarterly report and make
functions subjects to its control and recommendations at each regularly
supervision, the Supervisory Committee scheduled management committee
is responsible for society’s compliance and meeting detailing the activities undertaken
internal control oversight. It is responsible for by the Committee since the last meeting
the truth and accuracy of the society financial • To perform the various internal audits, to
conditions and should ensure procedures are evaluate internal operation and controls
adequate to safeguard the members and the (policies and procedures) at least once
institutions rights and interest. every three months, and make procedural
recommendations regarding the internal
This committee shall consist of three
controls. These recommendations will be
members who are not employed by the society
submitted in writing to the Management
or serve on management committee or any
Committee on a quarterly basis
other committee of the society.
• At the annual General Meeting, give
61. ELECTION OF SUPERVISORY its opinion on the financial statements
COMMITTEE presented by Managements Committee
• The exercise shall be undertaken as per By- • To receive and investigate any complaint
law 39 or appeal by members concerning the
operations of the society
• In addition to all qualifications of
management committee (See By-law 34) • To ensure trial balances and financial
the supervisory committee members statements, which the Treasurer and the
shall be expected to have at least basic Manager are required to prepare by the
accounting knowledge. end of the month, are ready and presented
to the Committee members as required
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• The supervisory Committee shall from time • A minute file giving details of proceedings
to time and not less frequently than once at General Meetings
every year cause the statements of accounts
• A cashbook showing the details of all
of all members to be compared with the
monies received and all monies expended
records of the Treasure and confirmed
or paid out by the society
to the members. The Committee shall
maintain a record of all such verifications • Ledger containing such accounts as is
necessary to properly record the business
• The Secretary of the Supervisory
of the society
Committee shall prepare and have custody
of the records of all actions taken, including • A personal ledger for each member showing
evidence of any audits performed by the his transactions with the society
Committee • Assets (property) register
• If need be, the committee shall submit its • A register of loans to members showing
reports to the Commissioner in respect of each loan advanced, the loan
number, name of borrower, the amount
63. LIABILITY OF SUPERVISORY borrowed the purpose of the loan, the due
COMMITTEE date of repayments and the date repayments
In spite of its total independence from the were made
society’s administrations, the supervisory • A guarantor’s control register showing
committee members are jointly liable with the the guarantor’s name, members account
administration for non-performance of duties, number borrower’s name, amount of loan
whether resulting from lack of supervision or guaranteed, date granted loan interest rate
negligence in noticing illegal and fraudulent and collateral required, date repayments
acts. commence and end
• A ledger shoeing deposits and withdrawals
64. BOOKS OF ACCOUNTS
by members
The society shall keep up to date and in a
• Such other books/records as the committee
proper business like manner such accounts and
may decide or the Commissioner may
such books and records as the commissioner
prescribe
may prescribe from time to time. The
following books and records shall be kept by
65. ANNUAL ACCOUNTS
the society:
• It shall be the duty of the management
• A register of members showing in respect committee to cause society’s accounts to
of each member be audited at least once every financial
• The name, age, date of joining the society year. The audited accounts shall be, after
as member address and occupation submission to the commissioner for
registration, be presented for adoption at
• The date on which he ceased to be a
a General Meeting
member
• The person to audit shall be appointed at
• The name of his nominee(s)
a General Meeting from a list of auditors
• Minute file giving details of proceedings of approved by the Commissioner
the Management Committee, Supervisory
• In case of failure by the management to
Committee and sub-Committees
cause society’s accounts to be audited within
meetings
3 months after the end of the financial year
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they shall automatically lose their positions 68. AUTHORIZATION TO SIGN DOCUMENTS
at the next General Meeting and shall not
Any two holders of the following officers
be eligible for re-election for three years
shall sign all documents contracts and cheques
unless the Commissioner is satisfied the
on behalf of the society (one of whom shall
failure was due to circumstance beyond
either be the chairman or the treasurer).
their control
• Where an auditor is not appointed at an • Chairman
annual General Meeting the Commissioner • Vice-chairman
may appoint a person to fill the vacancy and
• Treasurer
the remuneration of the person appointed
shall be borne by the society • Secretary
• The society shall cause its audited accounts The manager shall counter sign all
to be displayed in a conspicuous place at documents, contracts and cheques. In case the
its registered office and branches at least society has no manager then any other three of
two weeks before the presentation of the the above shall suffice.
accounts to its members at the General
Meeting. 69. FINANCIAL YEAR
• Alternatively, the accounts shall be sent The financial year of the society shall be
to all members through their last known from 1st January to 31st December subject to
address. the applicable law.
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• The committee may refuse to accept as At every regular meeting of the Management
a guarantor a person who himself is in Committee, the item “Loans” shall appear on
receipt of a loan or does not qualify as the agenda. At the meeting, the Treasure shall
guarantor according to the society’s policy. present a list of delinquent loans showing:
The society reserves the right to refuse to
• Name of borrower
grant a loan to a member while he remains
liable as a guarantor • Account Number
• A borrower or guarantor may apply to the • Date of loan granting
Management Committee for a change of
• Date of last payment
guarantor(s)
• Unpaid balance of loan and loan accrued
73. DIVIDENDS thereto.
The management Committee shall establish • Number of month’s delinquent
the dividend period, the rate and mode of • Borrower’s share balance
payment in accordance with applicable law.
The Management Committee may classify • Security, guarantors
share and deposit accounts, and may declare The Management Committee shall take
Dividends at variable rates for each type of Action to collect the overdue accounts.
account. Dividends due to a member shall
be credited to the member’ account in paid
75. FINES
in cash, at the option of the Committee and
subject to approval by the General Meeting. For each breach of these By-laws or of
instructions issued by the committee, in
All honorariums payable to the members of pursuance of General Meeting resolutions the
the Management Committee will be approved defaulting member may be defined an amount
by the AGM. The rates of honorarium shall not exceeding Kshs 20,000 for each offence
be reviewed from time to time by the General or Kshs 10,000 for every day the offence
Meeting to adequately reflect the operation continues.
rate.
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ii. Every other savings and credit ii. Affiliation fee of Kshs. 1,000.00 (or
cooperative society subsequently such other sum as may be notified by
admitted to membership in accordance the Union from time to time), paid by
with the provisions of these by-laws. each society on admission to Union
membership
b) A registered Savings and Credit
Cooperative Society desiring to become iii. Annual subscription by members as
a member of the union shall make an may be determined by the Board of
application for membership by submitting Directors.
to the directors:-. iv. Loans from Banks or any other
financial institutions
i. A certified copy of the resolution
passed at a General Meeting of the v. Income derived from services rendered
society authorizing the application for to or on behalf of members
the Union membership.
vi. Income from investments of the
ii. Payment for at least one hundred Union Union
shares, payment of affiliation fees and
vii. Grants from the Kenya Government
payment of the annual subscription
or any other organization
for the current year. Provided that a
payment for thirty shares, may be paid viii. Any other sources consistent with
in the first instance and the balance these by-laws
within one year of membership.
11. Financial Year
iii. A certified copy of the Registration
Certificate. The financial year of the Union shall
commence on 1st January and shall end on
c) All applications for Union membership
31st December of each year.
shall be approved by the Union’s General
Meeting.
12. Financial Plan
9. Annual Subscription The Board of Directors shall submit to
the Annual General Meeting of the Union
Each member shall pay to the Union, within
proposed financial plan of income and
the first three months of each year, annual
expenditure for the ensuing financial year and
subscription in accordance with the rate or
the Capital Expenditure Budget.
formula set by members at the last Annual
General meeting of the Union. The Board
of Directors may from time to time set out 13. Application of Funds
penalties for defaulting SACCO Societies, The funds accruing to or obtained by the
provided that such penalties shall be within Union in the course of its business shall be
the limits approved by the Annual General applied or devoted only to the promotion of
Meeting. the stated objects of the Union, the running
of the Union and such other purposes as are
10. Raising of Funds set in the Cooperative Societies Act and Rules
made thereunder and these by-laws.
The funds of the Union shall consist of:
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14. Disposal of Accumulated Funds and f ) The directors may deduct from any
Surplus dividend payable to any member all sums
a) The Union in General Meeting shall of money (if any) presently payable by it to
decide the manner in which the Union’s the Union on account of calls or otherwise
accumulated funds or part thereof shall be in relation to the shares of the Union.
disposed of. g) Any dividend, interest or any other moneys
b) Where the Union derives a surplus from its payable in cash in respect of shares may be
transactions during a financial year, it shall paid by cheque or warrant sent through the
open and maintain an account to be called post directed to the registered address of
the reserve fund account, to which shall the holder. Every such cheque or warrant
be carried such portion of the net surplus shall be made payable to the order of the
in each year as may be prescribed under society to which it is sent.
the Cooperative Societies Rules or by the h) No dividend shall bear interest against the
Union in a General Meeting. Union.
c) The net balance of each year’s surplus or i) The Union in a general meeting may
any portion thereof may be set aside by the declare all bonuses due to members to be
directors to be employed in the business of paid out of the net balance of each year’s
the Union or be invested in such investment surplus, either in lieu of or in addition to
(other than shares of the Union) as the any dividends payable or to be paid by the
directors may from time to time deem fit. Union.
The directors may also without investing
the same carry forward the said net balance j) Any General Meeting declaring a dividend
if they deem it prudent not to divide the or bonus may direct payment of such
same. dividend or bonus wholly or partly by
the distribution of specific assets and in
d) The Union in General Meeting may declare particular of paid-up shares, debentures or
dividends to be paid out of the net balance debenture stock or in any one or more of
of each year’s surplus, but no dividend such ways and the directors shall give effect
shall exceed the amount recommended by to such resolutions.
the directors.
k) The Union in a General Meeting may
e) All dividends shall be declared and paid decide to approve the payment of gratuity
according to the amounts paid, but no or honorarium to retiring employees with
amount paid or credited as paid on a share a good performance record or Directors of
in advance of calls shall be treated for the the Union.
purposes of these by-laws as paid on the
share. All dividends shall be apportioned l) The Union in a General Meeting may
and paid proportionally to the amounts direct that an amount not exceeding ten
paid or credited as paid on shares during per cent of the net balance of each year’s
any portion or portions of the period in surplus shall be applied to any charitable
respect of which the dividend is paid, but or harambee purposes.
if any share is issued on terms providing
that it shall rank for dividends as from a
particular date such share shall rank for
dividend accordingly.
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15. Withdrawal and Expulsion of Members the Union in respect of any sums owing to
the Union on that date as if it were still a
a) A member intending to withdraw from
member.
the Union shall give six months written
notice of such intention to the Union f ) Entrance fees and Annual dues are not
Directors. The notice shall be signed by the refundable upon cessation of membership.
Executive Committee of the withdrawing
member and shall be accompanied by a
16. Rights, Liabilities and Obligations of
copy of a resolution passed at a General
Members
Meeting, certified by members present at
the meeting of such a member sanctioning a) Members of the Union shall enjoy such
the proposed withdrawal provided that the rights as they may from time to time be
withdrawal shall not be sanctioned until entitled to under these by-laws.
the full indebtedness of such a member has
been cleared. b) The liability of each member shall be
limited to the amount, if any, unpaid on
b) The Directors shall refer the notice to the the shares held by it in the Union.
Union General Meeting which may, if
the member is not indebted to the Union c) Every member shall hold at least one
accept the notice. hundred shares each of the values of Ksh.
100/- or of such other values as may be
c) A member whose notice of withdrawal determined by the Union in General
has been accepted by the Union’s General Meeting.
Meeting shall cease to be a member of the
Union at the end of the Financial Year d) Members of the Union shall be under an
of the Union during which the notice is obligation to abide by the provisions of
given, and shall be repaid the nominal the Union by-laws as provided for in the
value of its shares held in the Union within Cooperative Societies Act and Rules.
two years from the date of withdrawal
from membership. 17. Transfer of Shares or Other Interest
d) A member may be expelled by the Union a) The shares or other interest of any member
in a General Meeting from the Union for in the Uni’s shall be moveable property
persistent breaches of the Union By-laws shall be transferable by any instrument in
in respect of which imposition of a fine writing in any usual or common form or
under the Cooperative Societies Act would any other form which the directors may
not be an adequate remedy. Provided that approve.
no member shall be expelled until the b) The instrument of transfer or any share
reasons for the purposes of expulsion have shall be executed on behalf of the transferor
been fully set out in writing and given to by its authorized officers, and shall be
the member, and the member has been delivered to the Union for registration, and
given an opportunity of defending itself. the transferee shall be deemed to remain a
e) Any member which alters its by-laws in member until the transfer has been entered
such a way that they no longer include in the register of members in respect
the promotion of Cooperative Savings and thereof.
Credit business shall cease to be a member
of the Union from the date the alteration
comes into effect, but shall remain liable to
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c) Subject to the Act, the Rules and these by- to be a member of the Management
laws, any member may transfer all or any Committee or elected representative of his
of its shares to any SACCO upon approval primary society to the Provincial Council,
by the directors. the relevant KUSCCO member shall elect
another representative to replace him.
d) The directors may also decline to register
the transfer of a share on which the Union e) The names of the representatives to the
has a lien. Provincial Council Meeting shall be
submitted to the Regional Manager 7 days
e) The directors may also decline to recognize before the date of the meeting.
any instrument of transfer unless:-
i. Such fee as the directors may from time 19. Functions of the Provincial Council
to time require for registration is paid a) The Provincial Council shall consist of
to the Union is respect thereof. the Chairman, the Vice-Chairman elected
ii. The instrument of transfer is delegates and representatives elected by the
accompanied by the certificate of shares primary societies in accordance with by-
which the Board of directors may law 18.
require to show the authority of the
persons who executed the instrument b) The Provincial Council shall be the forum
of transfer and, for all members of the Union within the
province to meet and receive reports, make
iii. The instrument of transfer is in respect recommendations and take action as agreed
of only one class of shares. upon by the Union.
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f ) The elected Provincial Delegates shall work iv. The Provincial Chairman shall inform
as a team to foster growth and development the National Chairman and the
of the Union in the province under the Managing Director his programme
guidance of the Board of Directors. while carrying out his duties.
b). Vice – Chairman
20. Duties of Provincial Delegates
The Vice-Chairman shall be elected by the
It shall be the responsibility of a delegate to:- Provincial Council and shall act on behalf of
a) Attend general meetings when convened, the Chairman whenever he is absent.
in order to exercise democratic rights of c). Secretary
the member societies he represents.
i. The Secretary to the Provincial Council
b) Attend delegates education seminars shall be the Union’s Regional Manager
organized by the Union covering that province.
c) Participate in Cooperative activities in ii. Besides his promotional and inspectorate
the delegate’s area of jurisdiction in duties, the Regional Manager shall
consultation with the Regional Manager be in charge of KUSCCO’s Regional
Office and shall ensure:-
d) Market the Union’s activities and enhance
the corporate image of the Union 1) That all office work including
maintenance of records and books
e) Perform such other duties and functions as of accounts of all affiliate societies
may be directed by the Board of Directors is done to the satisfaction of the
from time to time societies, KUSCCO Board of
Directors and the Ministry for the
21. Duties of the Provincial Office Bearers time being in charge of Cooperative
affairs.
a). Chairman
2) That all monthly, quarterly and
i. The Chairman of the Provincial Council annual reports to the Managing
shall be a member of the Union’s Board Director of KUSCCO, the
of Directors subject to minimum shares Government and the Primary
subscription by the Province to be societies are written and dispatched
determined by the Board of Directors on time.
from time to time.
3) That all KUSCCO’s assets, such
ii. The Chairman shall convene and as office furniture and fittings,
preside over all meetings of the machinery and other items are
Provincial Council and shall perform properly recorded in stores registers
such other duties as he may from time and safeguarded against loss or
to time be directed to perform by the damage.
Board of Directors of KUSCCO or the
Provincial Council. 4) That all branch employees are on
duty and engaged during working
iii. He shall be responsible to the Board hours.
of Directors for the exposition of
KUSCCO’s objectives, ideas and
aspirations as contained in the Union’s
by-laws.
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5) That all activities that require iii. In the case of either annual or special
publicity are accorded such general meeting convened by the Board
publicity. of Directors, the Board of Directors
shall determine the date and venue of
6) That all provincial council meeting
the meeting.
minutes are submitted to the
Managing Director. The Secretary iv. At least 15 clear days written notice shall
shall liaise with the Provincial be given of a special general meeting
Cooperative Office while carrying by the Union Managing Director.
out his duties. The notice of a general meeting shall
include a statement of the business to
22. General Meetings be brought before the meeting.
a) The supreme authority of the Union v. Except when convened by the Registrar
shall be vested in the General Meeting of Cooperative Societies, the presence
of the Union which shall be constituted of three-fifth of the delegates shall be
by delegates elected at the Provincial necessary for the disposal of business at
Council Meeting in each province based the general meeting.
on the prescribed minimum shares of When a quorum is not present, the
Kshs. 100.00 per member of their primary Chairman shall adjourn the meeting, and
societies. with the approval of those present, fix a date
The number of elected delegates will be within one month for an adjourned meeting
determined by the number of shares in that of which notice shall be given to all delegates.
province in relation to the total share holding If at such adjourned meeting a quorum is
in the Union. again not present, the Chairman shall declare
the meeting open.
b) The Union shall have a maximum of 120
delegates who shall serve for a period of vi. The National Chairman or in his
three years subject to By-law 18 (d) and 19 absence, the National Vice-Chairman
(e). shall preside at the meeting. In the
absence of both, upon a majority vote
c) General meetings shall be held as follows:- those present at the meeting shall elect
any duly authorized delegate present to
i. The Annual General Meeting of the preside.
Union shall be held not later than six
months after the financial year. vii. Each delegate present at the meeting
including the National Chairman shall
ii. A special general meeting shall be be entitled to one vote only.
held:-
1) When convened by the Board 23. Agenda of the Annual General Meeting
of Directors or the Registrar of
Except when otherwise decided by a
Cooperative Societies.
majority vote of those present at the Annual
2) Within 14 days of receipt of a General Meeting, the order of business shall
written request from at least one be as follows:-
half of the delegates entitled to
attend the Union general meeting. a) Reading the notice convening the meeting
b) Adoption of the Agenda
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104
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x. The Directors shall always keep 32. Duties of the Executive Board Members
available for inspection under the
The Executive Board members comprising
Cooperative Societies Act:-
six Board members shall be responsible for
1. The certificate of registration of the:-
the Union
a) Administration and integration of
2. A copy of the Cooperative personnel policies, procedures, salary
Societies Act, Rules and these By- review and other staff emoluments.
laws
b) Handling of staff matters in consultation
3. A list of Union members and with the Managing Director and in line
4. A list of the officers of the with the Union Policy Manual.
Union. c) Initial study, development and
recommendation of new and revised
29. Legal Standard of Care policies to the Directors.
In the conduct of the affairs of the Union, d) Ensuring of appropriate tendering
the Board of Directors shall exercise prudence of the Union products and services
and diligence of ordinary men and women of requirements.
business and shall be held, jointly and severally
liable for any losses sustained through any of e) Discussion and review of monthly cash
their acts which is contrary to the Act, Rules flow statements including review of
and the By-laws of the Union or the directions financial reports and budgetary control of
of any general meeting. the Union’s expenditure.
f ) Execution of urgent matters requiring
30. Delegation to Sub-Committees immediate policy guidelines or decisions.
The Board of Directors may delegate to g) Planning and execution of the Board
the Sub-committees such of its powers and meetings, Provincial Council meetings and
duties under these by-laws as it deems fit and the General Meetings.
proper. h) Advice on formulation of Union policies
and procedures relating to Primary Societies,
31. Vacation of Office by Directors National and International Cooperative
and Non-Cooperative Organizations
i. A member of the Board of Directors, or any
in liaison with the Commissioner for
Sub-committee shall cease to hold office if
Cooperative Development.
his society ceases to be a member of the
Union or by resignation or removal from i) Performing such other duties as may be
membership of the Board of Directors or assigned by the Board of Directors from
Sub-committee by the Board as provided time to time.
for by these by-laws.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
33. Duties of the Business Sub-Committee a) Ensure that the affairs of the Union are
managed in a competent manner
The Business Sub-Committee shall comprise
of seven Board Members and its duties shall b) Maintain correct and current account of
include:- all receipts, disbursements, assets and
liabilities of the Union.
a) Formulation of sound policies on
appropriate business practices for the c) Be custodian of all funds and property
various Union products and services. belonging to the Union and ensure their
safe keeping.
b) Evaluating the performance of the various
departments of the Union and suggesting d) Ensure compliance with all directives of
remedial measures. the Board of Directors and Registrar’s
guidelines.
c) Vetting the admissions of new members
into the Union and the various services. e) Recommend to the Board of Directors
appointment of such field staff as the
d) Approving new business opportunities
budget permits. He shall be responsible
and recommending closure of non-viable
for training assignment and supervision of
activities.
other Union staff, subject to instructions
e) Approval, rejection or deferring of of the Board of Directors.
Housing Loan applications, Central
f ) With the approval of the Board of Directors
Finance Programme Loan applications and
and subject to budgetary limitations,
such other loan disbursements to Primary
employ and fix the compensation of such
Societies and their members.
clerical employees as are needed for proper
f ) Performing such other duties as may be operations of the Union.
assigned by the Board of Directors from
g) Under the supervision of the Board
time to time.
of Directors, he shall make payments
from funds of the Union for authorized
34. Appointment of the Managing Director purposes.
There shall be a Managing Director
h) Convene general and board meetings when
appointed by the Board of Directors in
instructed to do so by the Directors and
accordance with these by-laws. The Managing
prepare agenda for the said meeting.
Director shall attend all general meetings of
the Union and the Board of Directors meeting i) Keep minutes of all general meetings and
and shall act as secretary to the said meetings. meetings of the Board of Directors.
The Managing Director shall have no voting
powers interest. j) Prepare and sign official correspondence of
the Union.
35. Duties of the Managing Director k) Submit to the Board of Directors a
The Managing Director shall be the Chief quarterly statement showing the financial
Executive of the Union and shall be responsible condition of the Union.
for the day to day operations. In addition to
l) Make a financial report at the Annual
duties customarily performed by a Manager,
General Meeting of the Union
he shall;-
m) Cause books of accounts to be audited.
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n) Represent the Union locally and abroad on of disqualification of any such Board member,
all aspects pertaining to the Management he shall withdraw from such deliberation or
of the Union determination, and the remaining qualified
Board members present at the meeting, if
o) Perform such other duties as he may be constituting a quorum with the disqualified
directed to perform by the Board of person, may exercise with respect to the matter,
Directors from time to time. all the powers of the Board.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
44. Dissolution
The Union shall be dissolved only in
accordance with the procedures prescribed in
the Cooperative Societies Act.
45. Acceptance
Certified that the foregoing by-laws
of “Kenya Union of Savings and Credit
Cooperatives Limited” has been approved and
duly registered.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
• Does the membership consist of at least −− The manner of raising funds, including
ten persons, all of whom have met the the maximum rate of interest on
above named requirements? deposits
• Have the members pledged to adhere −− I ts general meetings, the procedure and
to the cooperative’s values of self-help, quorum of such meetings, power of
self-responsibility, democracy, equality, such meetings and representation and
equity, solidarity and also believe in the voting at such meetings
ethical values of honesty, openness, social
−− Th
e appointment, suspension and
responsibility and caring for others?
removal of members of the committee
and officers and the powers and duties
1.5 Cooperative By-laws of the committee and officers
• Were the Government cooperatives by- −− The period of its financial year
laws used to form theirs?
−− Th
e authorization of officers to sign
• Who prepared them? documents on its behalf
• To what level were the potential members −− The settlement of disputes
involved?
−− S uch other matters as may be expedient
−− Do these by-laws include the for the better carrying out the provisions
following: of these Rules.
−− Its name
1.6 Cooperative Principles
−− I ts registered office, postal address and
location • Do the Housing cooperative’s by-laws
incorporate the following cooperative
−− Its area of operation and membership
principles:
common bond
−− Voluntary and open membership
−− The objects of the cooperative
−− Democratic member control
−− The purposes to which its funds may
be applied −− Economic participation by members
−− The disposal of its accumulated funds −− Autonomy and independence
−− The qualification for membership, the −− Education, training and information
terms of and the mode of enrolment
−− Co-operation among cooperative
−− The withdrawal and expulsion of members and among other cooperatives
members and the payment, if any, to if any
be made to such members and the time
−− Concern for the community in general
within which such payment shall be
made
1.7 Challenges
−− The rights, liabilities and obligations
• What are the expected challenges in the
of members, including the minimum
formation process for instance, identifying
share holding and produce delivery
potential members, members of interim
−− The transfer of the shares or interest of committee, member apathy, lack of funds,
the members managing the cooperative’s records?
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• What are the strategies the interim 2.3 Pre-registration Meeting of Members
committee has designed to deal with and Commissioner from the Ministry
emerging challenges in the formation of Cooperatives
stage? • Have the members planned for this pre-
registration meeting?
REGISTRATION PROCESS • Invitation to the Commissioner?
• Location?
2.0 Introduction
• Time schedule?
Based upon the monitoring tool on the
formation of housing cooperatives, the • The agenda of the meeting?
following is an evaluation tool which will • Attendance and participation by the
determine whether the housing cooperative members?
society is eligible for registration with the
Ministry of Cooperative Societies in Kenya. • Other activities that will inform the
Commissioner more on the intent of the
cooperative?
2.1 Presentation of a Letter of Introduction
to the Ministry of Cooperative
2.4 Submission of the Cooperative’s By-
Societies
laws
• Who has prepared the letter?
• Have the members developed the by-laws
• Does the letter state the cooperative in line with the indicators cited in the
society’s concept and intent? monitoring tool?
• Does it briefly describe the plan of the • What was their level of involvement in the
cooperative society? preparation of the by-laws?
• Does it offer in general the objectives of • Are the by-laws stated in a clear and precise
the members? format?
• Who has presented it to the ministry? • Do the laws encompass all the transactions
and regulations of the cooperative’s
2.2 Presentation of a List of Potential members?
Members
2.5 Submission of the Registration Form
• How were the potential members
identified? • Are the members able to fill in the
registration form satisfactorily by noting
• Does the proposed list of names meet the
down the following?
required limit (more than ten persons)?
−− Details on the formation of the
• Does the proposed list of potential members
cooperative?
include the following: their names, date of
birth, date of application for membership, −− The type and intent of the
postal address, occupation and date cooperative?
admitted to membership?
−− Supplement information about the
cooperative society?
−− The cooperative’s economic viability?
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
4. (1) In the absence of the Minister from any 5. (1) The Authority shall keep such capital,
meeting of the Authority, a person shall revenue and other accounts as the Minister
be chosen by the members present at the for the time being responsible for finance
meeting, from their number, to preside at may from time to time require. and such
that meeting. accounts together with a balance sheet shall
be submitted for audit to the Controller
(2) At all meetings of the Authority, three
and Auditor-General within four months
members, of whom not less than two are
after the end of each financial year or
persons other than persons appointed
within such further period as the Minister
under section 3 (2) (e), shall form a
may in any particular case direct.
quorum.
(2) The Authority shall, as soon as
(3) The Minister, or other person acting as
practicable after the report of the Controller
chairman of any meeting of the Authority,
and Auditor-General on the accounts
shall have. a deliberative vote and, in the
for the preceding financial year has been
case of an equality of votes, shall also have
received in every year, submit to the
a casting vote; a decision of the majority
Minister a report upon the administration
of the members present and voting at a
of the affairs of the Authority and the
meeting of the Authority shall be deemed
working of the Fund during the preceding
to be the decision of the Authority.
year, together with the accounts and
(4) The Authority shall have power to balance sheet duly audited in accordance
act notwithstanding a vacancy among with subsection (1).
the members thereof, and all acts done
(3) Every such report and all such accounts
at any meeting of the Authority shall,
and balance sheets as are furnished to the
notwithstanding that it was afterwards
Minister under this section shall be laid by
discovered that there was some defect in
the Minister before the National Assembly
the appointment of a person purporting to
as soon as may be after they are submitted
be a member of the Authority, be as valid
to him.
as if that defect had not existed.
6. (I) There is hereby established a Local
(5) Subject to the provisions of this section,
Government Loans Fund under the
the Authority shall have power to regulate
control of the Authority, consisting of
its own procedure.
such securities and moneys and applicable
(6) The seal of the Authority shall be to such purposes as are provided for by this
authenticated by the signatures of the Act.
Minister and the Permanent Secretary of
(2) There shall, by virtue of this Act and
the Ministry, and the seal shall be officially
without further assurance, become vested in
and judicially noticed.
the Authority the right of the Government
(7) All documents, other than those required to demand, sue for and recover, and give
by law to be under seal, made by, and all receipts for, and the benefit of all securities
decisions of, the Authority may be signified for such loans made to local authorities by
under the hand of the Permanent Secretary the Government out of the public revenues
of the Ministry. of Kenya as may be approved from time to
(8) It shall be the duty of the Permanent time by Parliament to the extent to which
Secretary of the Ministry to carry into those loans, at the commencement of this
effect the decisions of the Authority. Act, remain outstanding; and all moneys
received by the Authority on account
of every such loan shall be carried to the
Fund.
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(3) There shall also be paid to the Authority bear interest at such rate and shall be
and carried to the Fund- repaid at such time and in such manner as
the Authority may determine.
(a) moneys which may from time to time
be voted or appropriated by Parliament 8. Moneys borrowed by a local authority
for the purpose of providing loans to from the Authority and loans referred to in
local authorities; section 6 (2) shall be charged indifferently
on all the rates and revenues of the local
(b) repayments of principal or interest
authority.
made by a local authority on account
of a loan referred to in subsection (2); 9. (1) If a local authority ha.ving power to
levy rates or taxes or impose and collect
(c) repayments of principal or interest
dues or cesses neglects to pay moneys
made by a local authority on account
due to the Authority in respect of a loan
of a loan made by the Authority under
granted under this Act, the Minister may,
this Act;
after the expiry of sixty days from the date
(d) moneys which may from time to on which the moneys become due and
time be borrowed by the Authority in payable, forthwith impose and levy a rate
exercise of the powers conferred by this or tax of sufficient amount which may be
Act; imposed and levied by the local authority,
(e) moneys which may from time to time and impose and recover any dues or cesses
become due upon an investment made which may be imposed and recovered by
by the Authority in exercise of the the local authority.
powers conferred by this Act. (2) For the purpose of this section the
(4) Every loan referred to in subsection Minister shall have all the powers vested
(2) shall be deemed for the purposes of in the local authority for imposing, levying
sections 9, 10 and I I to be a loan made by and recovering rates upon all rateable
the Authority under this Act. property and improvements thereon within
its jurisdiction and for imposing, levying
(5) The Authority may from time to time incur and recovering taxes and for imposing and
and meet out of 'the Fund administrative recovering the dues and cesses.
and other expenses which may be necessary
or desirable for the efficient discharge of its (3) The Minister, in making an estimate of
functions under this Act. the rate or tax to be levied or of the dues
or cesses to be imposed for the purpose
7. (1) The Authority may from time to time, of paying any sum due to the Authority,
as provided by this Act, make loans to may add such sum as he thinks sufficient
local authorities for purposes which local for defraying, and may defray there out,
authorities may be authorized by law to all costs, charges and expenses, including
borrow money. remuneration to any officer or other person
(2) The Authority may from time to time employed, incurred in the execution of
make to a local authority advances of the powers conferred by this section or
moneys required for the proper discharge otherwise by reason of the default in
of the functions of the local authority. payment of the sum due to the Authority.
(3) (Deleted by LN. 365/1964) (4) If, after payment out of the proceeds
of any such rate or tax or dues or cesses
(4) Every loan made by the Authority of the sum due to the Authority and of
under this Act to a local authority shalI the expenses of and incidental to the
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
imposition, levy and recovery of the rate 13. (1) The Authority may from time to then,
or tax or dues or cesses, there remains any and shall whenever so directed by the
balance, the balance shall be paid over to Minister for the time being responsible
the local authority whose default led to for finance, establish and maintain sinking
the exercise by the Minister of his powers funds as may be necessary or desirable
under this section. for the efficient discharge of its functions
under this Act.
10. Upon all money due from a local authority
to the Authority being fully paid, the (2) The Authority shall apply moneys for
Authority shall, when required, give to the time being comprised in a sinking
the local authority a receipt in writing for fund maintained under subsection (I)
it, and any further sufficient discharge as in redemption of the borrowing by
may seem to the Authority to be necessary, the Authority in respect of which the
and upon receipt being given the rates and sinking fund is maintained, and, pending
revenues of the local authority shall be application, the moneys may 00-
released from the charge created by section
(a) invested as provided by section 14; or
8.
(b) subject to the approval of the Minister
11. Where a loan is made by the Authority to
for the time 'being responsible for
meet expenditure of a local authority which
finance, applied in the exercise of the
is chargeable to a particular account, there
powers conferred by section 7.
shall be debited to that account all sums
required for repayment of the principal 14.The Authority may from time to time
of the loan, or for payment of interest invest moneys for the time being in the
thereon. Fund which are not immediately required
for the discharge of its functions under
12. (1) The Authority may, with the consent of
this Act in any investment for the time
the Minister for the time being responsible
being authorized by any law in force for
for finance, borrow such sums as may be
the investment of trust moneys, and any
required by the Authority in exercise of the
such investments may from time to time
powers conferred by this Act,
be varied or transposed.
(2) Where the Authority is authorized
15. (1) For the purposes of borrowing by the
to borrow money, it may, subject to the
Authority by means of an issue of stock
provisions of this Act, raise the money
under this Act, stock may be created, issued,
either-
transferred, dealt with and redeemed as
(a) by stock issued under this Act; or may be prescribed by regulations made
with the consent of the Minister for the
(b) by local bonds issued under this Act; time being responsible for finance.
or
(2) Without prejudice to the generality
(c) in such other manner as may be of the above power, the regulations made
approved by the Minister for the time under this section may provide for the
being responsible for finance. discharge of any loan as raised, and may
(3) Moneys borrowed by the Authority provide for the consent of owners under
under this Act shill be charged indifferently disability and for the application or non-
on all the revenues of the Authority. application of the Act relating to stamp
duty (subject to the provisions of sections
16 and 18 of this Act and to cheques, and
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for the disposal of unclaimed dividends. 21. Subject to the provisions of this Act, the
Minister may make regulations prescribing
16. For the purposes of borrowing by the
anything required to be prescribed by this
Authority by means of an issue of local
Act and generally for carrying out the
bonds under this Act. the bonds shall-
provisions of this Act.
(a) be secured upon all the revenues of the
22. Nothing in this Act sha1l-
Authority;
(a) prejudice or affect the rights of the
(b) bear interest at such rate as the
Government, or of any body or bodies
Authority may determine at the time
politics or corporate or other person
of issue of the bonds;
or persons excepting only such as
(c) be issued in denominations of one are mentioned in this Act and those
hundred, two hundred, four hundred, claiming by, from or under them;
one thousand and two thousand
(b) prejudice or affect the priority of any
shillings and multiples of two thousand
security for a loan created by any local
shillings;
authority before the commencement of
(d) be issued for periods of not less than this Act.
three years;
(e) be exempt from all stamp duties.
17. A trustee, as defined in the Trustee Act, may
invest trust funds in his hands, whether at
the time in a state of investment or not, in
stock or local bonds issued by the Authority
under this Act.
18.Transfers of stock or local bonds issued
by the Authority under this Act shall be
exempt from all stamp duties.
19. (Repealed by LN. 365/1964)
20. (1) If at any time an interest due on stock
Appointment of remains unpaid for three
months after demand in writing, receiver.
the person entitled thereto may, without
prejudice to any other remedy, apply to the
High Court for a receiver to be appointed,
and the Court may appoint a receiver on
such terms as it thinks fit.
(2) The Court may confer on the receiver any
of the powers of collecting. receiving and
recovering the revenues of the Authority
which are conferred upon the Authority by
this Act. and any of the powers of imposing
and levying rates and taxes and imposing
and recovering dues and cesses which are
conferred on the Minister by this Act.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
"Housing Fund" means The Fund (4) The Corporation shall have power to
established by section 6; "scheme" means enter into contracts, to hold and dispose
a proposal for the construction of several of property both movable and immovable,
approved dwellings including such other and may sue and be sued in its corporate
proposals as may be necessary or desirable name.
or incidental thereto by way of the 4. (I) In the absence of the chairman from any
provision of roads, drains, open spaces, meeting of the Corporation, a person shall
places of worship, places of recreation, be chosen by the members present at the
facilities for social welfare and trading, and meeting, from their number, to preside at
the acquisition, laying out, subdivision and such meeting.
development of land comprised within the
area of the scheme. (2) The quorum of the Corporation shall
be four members, of whom at least two
118
appendix
shall be public officers and at least two shall (a) a capital account:
be persons who are not public officers.
(b) a balance sheet:
(3) The person acting as chairman of any
(c) a statement of income and expenditure;
meeting of the Corporation shall have
and
a deliberative vote and, in the case of an
equality of votes, shall also have a casting (d) such other accounts as the Minister
vote; and a decision of the majority may require.
members present and voting at a meeting (2) The accounts of the Corporation shall
of the Corporation shall be deemed to be be examined audited and reported upon
the decision of the Corporation. annually by the auditor. .
(4) The Corporation shall have power to (3) The Corporation shall, when required
act notwithstanding a vacancy among by the auditor so to do, produce and lay
the members thereof, and all acts done before the auditor all accounts of the
at any meeting of the Corporation shall, Corporation, with all vouchers in support
not withstanding that it was afterwards thereof, and all books, papers and writings
discovered that there was some defect in in its possession or control relating thereto,
the appointment of a person purporting and the auditor shall be entitled to require
to be a member of the Corporation, be as from all members, officers and servants
valid as if that defect had not existed. of the Corporation such information and
(5) Subject to this section, the Corporation explanations as he may deem necessary for
shall have power to regulate its own the purposes of his duties as auditor.
procedure. (4) The Corporation shall, within a period
(6) The seal of the Corporation shall be of six months (or such a longer period as
authenticated by the signature of lcl1e the Minister may approve) after the end .of
chairman of the Corporation, or any other each financial year, furnish to the Minister
member of the Corporation authorized a report on Its operations during that year,
in that behalf, and, the officer for the the accounts, balance sheet and statement
time being the managing director of referred to in subsection (1), and the
the Corporation, and such seal shall be auditor s report far that year.
officially and judiciary noticed. (5) The reports furnished under subsection
(7) All documents, other than those (4), and the capital account and such
required by law to be under seal, made by, accounts and statements as. The Minister
and all decisions of the Corporation may be deems sufficient, shall be laid by the
signified under the hand of the chairman, Minister before. The National Assembly
or any other member of the Corporation within the next 14 days on which the
authorized in that beha1f. Assembly is sitting after they have been so
furnished, and shall be published in the
5. (1) The Corporation shall cause to be
Gazette by the Corporation.
kept proper books of accounts, records
and vouchers in relation to its funds and (6) For the purposes of this section:
activities, and shall, within four months "auditor" means the Auditor-General
(or such longer period as the Minister may (Corporations):
approve) after the end of each financial "financial year" means any period of
year, cause to be prepared. Signed and 12 months which the Corporation may
transmitted to the auditor: adopt as its financial year for accounting
purposes:
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
Provided that, where at any time the of any loan made by the Corporation
financial year of the Corporation is under this Act;
changed, the period between the end of the
(d) all such sums as may from time to time
old financial year and the beginning of the
be borrowed by the Corporation in
new shall, for the purposes of this section,
exercise of the powers conferred by this
be deemed to constitute a financial year
Act; and
and the word “annually” in subsection (2)
shall be construed accordingly. (e) all such sums as may from time to
time become due upon any investment
6. The Corporation shall keep all moneys
made by the Corporation in exercise of
belonging to it in a bank approved by the
the powers conferred by this Act.
Minister.
8. (1) The Corporation may, from the
7. (I) There is hereby established a Housing
Housing Fund and from time to time, in
Fund under the control of the Corporation,
the manner provided by this Act-
consisting of such securities and money
and applicable to such purposes as are (a) lend or grant money to any local
provided for by this Act. authority, for the purpose of enabling
the authority to exercise any of
(2) There shall, by virtue of this Act and
the powers conferred upon it by this
without further assurance, become
Act; I
vested in the Corporation the right of
the Government to demand, sue for and (b) make loans to any company, society
recover, and give receipts for, and the or individual person for the purpose
benefit of all securities for every loan made of enabling such company, society or
to a local authority by the Government out individual person to acquire land and
of the Housing Fund established under construct thereon approved dwellings
the Housing Ordinance (now repealed) or to carry out approved schemes;
to the extent to which such loans, at (c) make loans to organizations established
the commencement of this Act, remain for promoting the development of
outstanding, and all moneys received by housing;
the Corporation on account of every such
loan shall be carried to the Housing Fund. (d) construct dwellings, carry out approved
schemes and lay out and provide
(3) There shall also be paid to the services for approved schemes;
Corporation and carried to the Housing
Fund- (e) acquire any land or bui1lding, or
estate or interest therein, for any of the
(a) all such moneys as may from time purposes of this Act;
to time be voted or appropriated by
Parliament for payment into the (f ) maintain any land or building, or
Housing Fund; estate or interest therein, for any of the
purposes of this Act;
(b) the repayments of principal or interest
made by any local authority on account (g)appoint and employ on such terms and
of any loan referred to in subsection conditions as the Corporation may
(2); determine such officers and servants as
it may deem necessary; and
(c) all repayments of principal or interest
made by any local authority, company,
society or individual person, on account
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(h) pay such allowance to members of the 10. The Corporation may-
Corporation as the Minister may, in
(a) undertake and encourage research
writing, approve.
and experiment in housing related
(2) Every loan made by the Corporation matters, and undertake and encourage
under this Act shall bear interest at such the collection and dissemination of
rate as the Corporation may from time to information concerning housing and
time prescribe. related matters;
(3) The Corporation, in considering (b) take part in housing exhibitions and
the propriety of making a loan to any other forms of publicity;
company, society or individual person,
(c) undertake and encourage the provision
shall have regard to the financial position
of training in furtherance of the
of the company, society or individual
purposes of this Act and provide
person and the sufficiency of the security
training for members of its staff;
for the repayment thereof.
(d) operate a housing finance institution
9. (l) The Corporation may guarantee the
with powers, to borrow funds from
repayment of the principal money and
the Government, overseas agencies,
interest and other charges in respect of
pension and trust funds and any other
any loan which has been made to a person
institution or persons, as well as to
for the purpose of enabling him to buy or
collect deposits and savings from the
construct an approved dwelling or to carry
public to be applied to the financing of
out an approved scheme, upon-
residential housing development and
(a) that person entering into an agreement related matters;
with the Corporation to reimburse to
(e) establish, promote or aid in establishing
it any money which it is called upon to
or promoting, constitute, form or
pay under the guarantee; and
organize companies syndicates or
(b) security being provided for the due partnerships alone or in conjunction
performance of such agreement. with any other person or institutions for
the carrying on of any such functions as
(2) The security to be provided under
the Corporation is empowered to carry
subsection (1) (b) shall be-
on under this Act; and
(i) a right of pre-emption of the property
(f ) perform such other duties connected
given to the Corporation by the first
with housing as the Minister may
mortgagee; and
direct.
(ii) such other security (if any) as the
11. (1) All loans made to a local authority by
Minister may in any particular case
the Corporation shall be secured against
authorize.
the development financed by the loan
(3) Any moneys which the Corporation is advanced or against or in addition to any
called upon to pay under guarantee given other specific immovable property owned
under subsection (l) shall be provided from by the local authority.
the Housing Fund.
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
(2) The Corporation shall be a party to any (ii) with the approval of the Corporation,
contract or agreement between any person acquire land and construct
and the local authority advanced such approved dwellings or carry out
loans with power to assume all the rights approved schemes outside its area of
and remedies of such local authority in jurisdiction; and
respect of developments financed by funds
(b) sell or let on such conditions as may
advanced by the corporation.
be specified by the Corporation any
12. (1) Where a local authority defaults in dwelling constructed by it:
the repayment of debt charges due to the
Provided that all moneys received by the
Corporation, the Corporation shall take
local authority from the sale of any dwelling
over the management of the property
shall be appropriated to the reduction or
developed by the local authority using
extinction of any existing debt incurred for
funds borrowed from the Corporation and
the construction of such dwelling.
assume collection of any monies payable
to the local authority by the beneficiary or 15. Any local authority may, out of any loan
any other person as provided in section 11 or grant made to it from the Housing
(2) until the outstanding debt is recovered Fund, make a loan to any company, society
substantially or in full. or individual person for the purpose
of enabling such company, society or
(2) Upon taking over the management
individual person-
of the property under subsection (l), the
Corporation shall have the same rights and (a) to acquire land within the area of
obligations as the local authority has in jurisdiction of such local authority and
respect of the developments financed with construct thereon approved dwellings;
funds provided by the Corporation. or
(3) Any shortfall experienced as a result (b) to carry out therein an approved
of the Corporation exercising its powers scheme:
under this section shall be recovered from Provided that no such loan shall exceed
any other securities provided by the local such proportion of the estimated cost
authority or as civil debt recoverable of the land and dwelling or scheme as
summarily. the Corporation may determine either
13. Where a loan is made by the Corporation generally or specially.
to meet any expenditure of a local authority 16. (1) Every loan made under this Act shall
which is chargeable to a particular account, be repayable by such instalments as the
there shall be debited to that account Corporation or the local authority, as the
all sums required for repayment of the case may be, shall specify and within a
principaI of the loan, or for payment of period not exceeding forty years or such
interest thereon. other period as may be prescribed by the
14. Any local authority may Minister.
(a) out of loans or grants made to it from (2) Where a loan has been made repayable
the Housing Fund- within a period less than the full period
allowed by subsection (1), the Corporation
(i) acquire land, construct approved
or the local authority, as the case may be,
dwellings and carry out approved
if the repayment of the loan with interest
schemes within the area of its
is in its opinion sufficiently secured, may
jurisdiction;
extend the period for the repayment
thereof to a period not exeeding the full
122 period from the date of the loan.
appendix
17. (l) Subject to this section, every loan made 19. Upon all money due upon any loan
to a company, society or individual person being fully paid, the Corporation or the
shall be secured by a first mortgage or local authority, as the case may be, shall,
charge over the land on which the dwelling when required, give to the local authority,
is to be constructed or is situate or, as the company, society or individual person as
case may be, over the land acquired for aforesaid a receipt in writing for the same,
the approved scheme, together with all and such further sufficient discharge (if
the buildings and improvements on such any) as may be necessary, and upon such
land, and on such further security or on receipt being given the rates and revenues
any other security, as the Corporation or of the local authority or the land mortgaged
the local authority, as the case may be, may or charged, as the case may be, shall be
require. released from the charge created by section
II, or the first mortgage or charge, as the
(2) The Corporation may prescribe the
case may be.
form of such first mortgage or charge, and
the affixation of the seal of the Corporation 20. The rate of interest payable on a loan made
or the local authority, as the case may be, by a local authority shall not exceed the
to any mortgage or charge purporting to rate of interest which the local authority is
be made under this Act shall be conclusive liable to pay in respect of the money from
evidence that the same is in the prescribed which the loan has been made by more
form. than one-half per centum, and such loans
or instalments thereof shall bear interest
18. (1) Any loan may be made notwithstanding
from the date of issue.
that the land in respect of which the loan
is made has not been surveyed or that such 21. (1) If an individual person to whom, or a
a map or plan of the land as any officer company or society to which, a loan has
concerned with the registration of the title been made-
to or the title deeds of such land is bound
(a) fails to pay any amount due in respect
to accept for the purpose of registering
of the principal or interest of the loan;
any dealing with the land is not, for the
or
time being, registered or available for
registration. (b) has not applied the whole or any part
of the loan to the specific purpose for
(2) Upon making such a loan the
which it was made; or
Corporation, or the local authority, as the
case may be, may require the execution of (c) fails to make such progress with
such documents as will ensure- an approved dwelling or approved
scheme as the Corporation or the local
(a) that the loan will, immediately upon
authority, as the case may be, considers
the issue or completion of such grant,
reasonable; or
lease, purchase or other acquisition
as aforesaid, become secured as a first (d) fails to comply with any condition on
mortgage or charge upon the land in which the loan or any part thereof was
favour of the Corporation or local made; or
authority; (e) becomes bankrupt, or is placed in
(b) that. pending the creation of such liquidation. the Corporation or the
first mortgage or charge, no mortgage local authority, as the case may be,
or charge of the land which would or may either proceed to recover the
might rank in priority thereto shall be amount outstanding on account of
created. the loan together with all interest due
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
124
appendix
or unsuitable, the Minister may, by written such regulations may be expressed to apply
notice, require that local authority, within throughout Kenya or in any specified or
such time as may be stated in the notice, defined portion thereof.
to make such provision for the housing of
(2) The regulations may provide penalties
such persons as the Minister may specify.
for any contravention thereof not exceeding
24. (1) Upon the failure of a local authority a fine of Kshs 10,000s or imprisonment for
within the time fixed in any notice given two years or both.
under section 23 or within any extension
28. (l) Any member of the Corporation, and
of that time granted by the Minister to
any officer or servant of a local authority
comply with any requirement notified
generally or specially authorized by such
under that section, the Minister may, after
local authority, and any person likewise
written notice to the local authority, carry
authorized by the Minister, may, at any hour
out such works and do all such things as
reasonable for the proper performance of
may be necessary to give effect to that
the duty, enter upon any land or building
requirement; and for that purpose the
in respect of which a grant or loan has been
Minister is hereby authorized to exercise
made or undertaken to be made under
all such rights, powers and authorities as
this Act to make any inspection or to
might have been exercised by the local
perform any work or to do anything which
authority in that behalf.
he is required or authorized to do under
(2) Any expenditure reasonably incurred regulations made under this Act.
by the Minister under this section in excess
(2) Any person who fails to give or refuses
of revenue derived from the exercise of the
access to any person mentioned in or
powers vested in him may be recovered in
authorized under subsection (l) or obstructs
the manner provided by section 12.
or hinders him in the execution of his
25. (1) The Corporation may, and shall when duties under the regulations made under
required by the Minister or the local this Act, or who prevents any servant or
authority, inquire into and report to the workman of a local authority from entering
Minister or the local authority on the any such land or dwelling for the purpose
necessity or otherwise of the provision of complying with any requirements under
of dwellings in the area of any local the regulations made under this Act, shall
authority. be guilty of an offence and liable to a fine
not exceeding ten thousand shillings or to
(2) The Corporation shall advise and
imprisonment for a term not exceeding
assist in the preparation of proposals for
two years or to both.
dwellings and schemes.
29. (1) There shall, by virtue of this section and
26. The Corporation may, with the consent of
w1t1hout further assurance, become vested
the Minister, borrow any moneys which it
in the Corporation the right, formerly
requires for the purpose of exercising its
vested in the Local Government Loans
functions under this Act in such amount
Authority under and by virtue of the Local
and upon such conditions as the Minister
Government Loans Act, to demand, sue for
may sanction.
and recover, and give receipts for, and the
27. (l) The Minister may from time to time benefit of all securities for, the scheduled
make regulations for prescribing anything loans, to the extent to which those loans
which may require to be prescribed under were outstanding at the commencement of
this Act, and for the better carrying out of this section,
the objects and purposes of this Act, and
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The Organisation, Management and Finance of Housing Cooperatives in Kenya
126
In the past fifty years, there has been an unprecedented
increase in urban population which directly translates into
a mushrooming of slums worldwide. In 2001, 924 million
people or 31.6% of the world’s urban population lived in
the slums, with the majority being from the developing
regions. Indeed, it has been documented that African cities
have experienced the fastest population growth rates
in the World history. However, they have been unable to
cope with the increasing demand for essential services like
housing, health and education. As a consequence, a rapidly
increasing number of urban dwellers in Africa live in poverty
and reside in overcrowded slums which lack the essentials
to sustain even a modest living.