Member Savings and Credit Cooperatives (SACCOs) exercise their ownership and control in SACCOL through representatives in a democratic structure, adhering to recognised international cooperative principles.

We aim to empower communities to take control of their financial well being, offering financial advice, encouraging savings and loans, and promoting and advocating the importance of SACCOs.

We respond to members through the provision of a range of professional, technical, financial training and developmental services.

SACCOL is an advocate of members’ interests and represents members nationally, continentally and internationally towards the creation of a favourable policy, legislative and institutional environment for the development and prosperity of SACCOs in South Africa.

SACCOs (or Credit Unions as the Bill refers to them with its North American bias as the whole of Africa refers to them as SACCOs) have an important role to play in "banking the un-banked" and toward implementing mass based economic empowerment through democratically owned and controlled enterprises.

Some of the key features that distinguish SACCOs from both other cooperatives and commercial banks are:

Unlike banks, SACCOs serve only their members and each member is entitled to one vote in the democratic election of volunteer officials, regardless of the amount of the member’s individual share holdings. Much of the SACCO’s success depends on the voluntary efforts of its members and leaders.

Unlike non-financial cooperatives, SACCOs mobilise members’ savings in the form of withdrawable shares and/or deposits. To assure the members that these deposited funds are safe, SACCOs require a specialised system of examination and regulation that is not needed by non-financial cooperatives.

Unlike Commercial bank shares, SACCO members’ shares are withdrawable at par (plus earnings, if any). Bank shares are convertible to cash only upon liquidation of the bank or by sale of the shares to third parties.

Unlike non-financial cooperatives whose "risk" capital is principally members’ paid-in shares, SACCO institutional or "risk" capital is made up principally of reserves and retained earnings accumulated from operations.

Unlike non-financial cooperatives that often limit dividends on members’ shares to below market yields, SACCOs generally pay competitive dividend and interest rates on members’ share and deposit savings accounts.

SACCOs optimise economic benefits to members and their communities by granting a diversified portfolio of relatively small loans to as many worthy SACCO members as possible, unlike commercial banks, which, in order to maximize their shareholders’ profit, typically concentrate their funds in a few large loans to a small number of customers.

SACCOs make loans to members with the major considerations being the character of the borrowers and their ability to repay, unlike commercial banks that generally require tangible and other security.

Members are involved in the drafting of the loan policy and agree amongst themselves as to the terms with which a member is entitled to apply for a loan. SACCOs nominate credit committee members (from amongst themselves) who administer loan applications on their behalf. Aggrieved members have access to various structures within the SACCO including a supervisory committee (elected by members) and board of directors (elected by members) should they feel aggrieved. Furthermore, as a member owner of the cooperative, they can raise any concern at an AGM, including on the loan policy, procedures, application process, approval process or any other issue they believe needs attention. Members collectively decide on the merits of such proposals.

As discussed in the introduction to SACCOL and its role, SACCOs are structured in a unique manner, for which this Bill takes no account.

1. All SACCOs when starting up their operations, use a SACCOL prepared "template" statutes, model savings policies, model lending policies and reporting requirement forms. As SACCOs are required to mobilise subscriptions as the basis for their capital to on lend, SACCOs only begin to generate income at the point they decide to begin giving out loans to their members. Thus most SACCOs for the first 6 – 12 months of their operations do not generate any substantial income (other than joining fees).

2. All SACCOs are independent and autonomous. In South Africa they are compelled to belong to a self regulatory organisation, of which our members have affiliated to SACCOL, which in turn is owned and controlled by its members, who jointly decided the rules for all other members of SACCOL.

3. At SACCOL’s AGM decisions around prudential standards and minimum operating requirements are discussed, debated, resolved and adopted by all members, binding all members.

This keeps the system "closed" to self regulation, relying on credibility capital to ensure one bad apple does not afflict the entire savings and credit movement.

To ensure SACCOs are operating according to their own rules, SACCOL has a regulatory team, which does inspections of SACCOs, and to which all SACCOs report their financial and lending information on a quarterly basis.

Chapter 1, Interpretation, purpose and application of the Act, Part A Interpretation, Definitions

1. In this Act -

page 13, Stokvels means a formal or informal rotating financial scheme with entertainment, social or economic functions, which –

Page 9, "SACCO" means a cooperative whose predominant purpose is to offer services to its members comparable to those customarily offered by a bank

We note that in the

BANKS ACT, 1990

DESIGNATION OF AN ACTIVITY NOT FALLING WIHIN THE MEANING OF "THE BUSINESS OF A BANK" (A GROUP OF PERSONS BETWEEN THE MEMBERS OF WHICH EXISTS A COMMON BOND)

Defines the activities of a SACCO or SACCO as

(d) members of a specific group that chooses to identify itself by use of the name SACCO or Savings and Credit Cooperative-

1. which group consists of persons of similar occupation or profession or who are employed by a common employer or who are employed within the same business district; or
2. which group has common membership in an association or organisation including religious, social, co-operative, labour or educational groups; or
3. which group has resides within the same defined community, rural or urban district,

and continues to specifically exempt SACCOs, SACCOs and Stokvels from being defined as NOT FALLING WITHIN THE BUSINESS OF A BANK

Note: The National Credit Bill specifically refers to SACCOs or Cooperatives, of which there is only one registered SACCO (with SACCOL) and it is non-functioning. All other 47 members refer to themselves as Savings and Credit Cooperatives (SACCOs) as per a resolution of the African Confederation of Savings and Credit Associations (ACCOSCA).

Note: That in the definition of SACCO it is comparing them with banks, when in fact there is no comparison, as

1. Banks (and 90% of the other lenders in this bill) are for profit maximisation; SACCOs formed by members to provide financial services to themselves due to their inability to be serviced by the banks in a not-for-profit form of organisation called a cooperative.

2. Banks offer a great variety of products and services to members, whereas SACCOs are restricted in their activities to that of savings and loans to their members ONLY. Even in the tabled Cooperative Banks Act, SACCOs are restricted in their activities.

3. That the activities and structure of a SACCO are exactly the same as those allowed by a Stokvel, the primary difference being they have opted to register in the form of a Cooperative (and not remain an association).

4. The most fundamental difference between banks and SACCOs lies in two aspects of ownership – common bond and mutuality. The common bond restrictions promote members’ knowledge of credit worthiness of other members and allow exercise of moral suasion on lenders.

Having noted that SACCOs closely resemble in form, nature and activities those of a stokvel rather than a bank, we would propose that,

"SACCO" means, any Savings and Credit Cooperative (SACCO), Financial Services Cooperative (FSC) and SACCO, in which exists "a common bond" between members of a specific group that chooses to identify itself by use of the name SACCO or Savings and Credit Cooperative or Financial Services Cooperative-

and which group receives funds from members against the issue of stock or by means of the subscriptions of members; (as per SOUTH AFRICAN RESERVE BANK, Government Gazette No. 2173 - 14 December 1994, Banks Act 1990)

8. (d) read: a transaction between a SACCO and a member of that SACCO accordance with the rules of that SACCO as adopted by members.

Should the above not be accepted by the committee, our members would propose the following consideration be taken into account:

1. That the Bill makes some special allowances for "developmental" lenders, it does not take into account the unique structure of the SACCO Movement in South Africa as described above in the introduction

2. The National Credit Bill requires each individual SACCO to have to apply for registration as a lender with the Bill as well as for the "developmental lender" status.

3. That the Bill makes no consideration for the cooperative tiered structure of primary cooperatives, secondary or apex cooperatives (services organisations whose membership is made up of primary cooperatives as recognised in the Cooperatives Bill 2005).

4. The structure and rules applied to SACCOs are uniform throughout the movement due to their self regulatory requirement to operate.

Chapter 3, Consumer Credit Industry Regulations, Part A, Registration requirements, criteria and procedures,

Registration of credit providers

10. (7) A SACCO, SACCO or Financial Services Cooperative, affiliated to a self regulatory organisation as recognised by the South African Reserve Bank or National Credit Regulator, may apply on and report on behalf of its members.

Chapter 3, Consumer Credit Industry regulations, Part A, Registration requirements, criteria and procedures

Supplementary registration to provide development credit

41. (1) (a) is a closed corporation, company, SACCO or registered representative body on behalf of SACCOs, cooperatives ………….

National register of credit agreements 69.

We note 1: The Minister may require the National Credit Regulator ……a single national register of outstanding credit agreements

Note 2: That there is no discussion as to the implications for Developmental lenders and their ability to provide this information on a sustainable manner

Note 3: That of SACCOL’s 40 members, only 18 have a computerised SACCO information system and that all the others use manual book keeping and record keeping tracking member’s accounts and loans

Note 4: That this could turn out to be an administrative burden for start up or developing SACCOs.

Propose 1:

The requirement to register with the National Credit Register, should it be constituted, include a section

a) Exempting lenders of a predetermined threshold as determined by the Registrar having to register loan agreements on the register

b) provide that the National Credit Register, be obligated to provide the necessary technology, information systems and support to enable and develop this sector as is a primary aim of this Bill.

Noting 1: That the definition of a common bond of SACCOs are specifically made up of which group consists of persons or similar occupation or profession or who are employed by a common employer or who are employed within the same business district

Noting 2: That many of our SACCOs are work-based and have offices based in such a workplace, or are a combination of work based and community within a particular district

Noting 3: That 74 (5) states Subsection (2) does not apply in respect of developmental credit

That a point 6 be added that states that

(6) Subsection 3 does not apply in respect of those organisations falling within the definition of SACCOs.

SACCOL and its member SACCOs wholeheartedly support the sentiment of this section of the Bill. Most of our SACCOs are formed by members who cannot and do not qualify for credit from formal financial institutions as they either do not have access to formal financial intermediation, earn too little, do not have formal employment, or are blacklisted.

Too many of our members are over indebted and our SACCOs help to re-habilitate their members through a number of methodologies including

a) SACCOs are a savings first model, and members through their subscription records, enhance their character which entitles them to the privilege of applying for credit from other members savings.

b) Assisting in consolidating all their debts into one loan to be paid to the SACCO at fair interest rates.

c) Through financial counselling

Using the above methodology of "character" based lending, our SACCOs are concerned that should they not be recognised in this section as developmental lenders, they too would have to apply the same criteria formal financial institutions do before giving out credit, disqualifying many of their currently good borrowers.

In this section, character and history of savings plays no role in the evaluation of members.

We note 1: In the prevention of reckless credit (81) a credit provider must assess (ii) the re-payment history as a consumer under credit agreements. This particular requirement is problematic in the lending methodology of SACCOs/SACCOs in that

a) Our members have over-ruled our SACCOs’ boards and management at members meetings in using credit bureau’s as a means of evaluation of credit

b) Most of our SACCOs are not registered with such bureau from where this information would have to be accessed

c) The SACCO is many members last resort to receiving credit, and as a member based organisation, members prove their credit worthiness through becoming good savers and showing a track record of ability to make monthly instalments.

Not withstanding the above 81(ii) would place all SACCOs at risk of their loans being declared "reckless" when this methodology has been proven over the years.

Note 2: That provision is made under 82. (2) (a) for the National Credit Regulator to pre-approve models

Note 3: Are not sure if their methodology would be acceptable to the National Credit Regulator.

That 81 (2)(a)(ii) not apply to SACCOs as re-defined in this bill.

Chapter 7: DISPUTE SETTLEMENT OTHER THAN DEBT ENFORCEMENT

Part A, Alternative dispute resolution

Alternative dispute resolution

Noting that: SACCOs, and through their second tier member based organisation, are self regulatory organisations.

There is huge concern amongst our member SACCOs that notwithstanding the fact that this is a member based organisation, whereby members are the owners and controllers of their SACCO, members may undermine all democratic policies and procedures of the SACCO and use the court mechanisms to undermine their mutuality.

Note: 134 (1) does not recognise the self regulatory structure of our movement, and does not put forward the need to firstly, attempt to resolve disputes through the member agreed upon mechanisms

Propose: (c) . In the case of a SACCO (as re-defined in the Bill) a member, in filing a complaint with the National Credit Regulator, will be required to demonstrate that they have exhausted all resolution dispute mechanisms as agreed to within its rules to no avail.