'1. The Application before the court for determination is the one dated 10.2.25 wherein the applicant seeks: -
1) An Order of Certiorari be issued to bring into this Honorable Court and for purposes of quashing and to quash Respondent’s Guideline Ref. No. SASRA/700/721/VOL.1(67) issued on 14th January, 2025, directed to Regulated Sacco Societies.
2) Any other order(s) or further orders and/or writs and/or directions as the Honorable Court may deem fit to grant.
3) Costs of the Application be provided for.
Applicants Case;
2. The Applicant is a society that receives funds from its members. Amongst other things, it invests the members'' funds in the interested parties inter alia and in April 2024, the Applicant had invested the sum, a colloidal sum of money belonging to its members.
3. In May 2024 the Applicant was expecting to receive its funds for onward transmission to its Members from the interested party. Unfortunately, the funds were not released as expected.
4. Instead and in a surprising twist, the Applicant argues that on 14th January, 2025 the Respondent issued Guideline Ref. No. SASRA/700/721/VOL.1(67), directed to Regulated Sacco Societies which has triggered the filing of this suit.
5. The Applicant is concerned and troubled that it might never recover its money which will leave the people who had deposited money with it counting their losses.
6. The Applicant is also aggrieved since the guidelines were generated without public participation.
7. The Applicant is concerned given that it had issued a notice protesting the regulation. The Applicant wants a more inclusive arrangement which incorporates the stakeholder sentiment, including itself.
The Applicant’s Submissions;
8. The Applicant is among many other Sacco Societies who invested funds in the interested party in form of acquisition of shares, savings and special deposits under Central Finance Fund.
9. It submits that on 14th January, 2025, the Respondent herein unilaterally issued a Guideline directing Regulated Sacco Societies, to start recognizing impairment loss and make provision for future write offs arising from financial investments in the Kenya Union of Savings & Credit Cooperatives Limited (KUSCCO) in their financial statements for the period ending 2024 effective immediately.
10. It is concerned that the Respondent argues in paragraph 13, 14, and 15 of its Replying Affidavit that the impugned guideline is merely advisory. However, that applicant submits that this is not the case as demonstrated by wording of the guideline in question, which stated as follows:
“…the authority expects the Sacco Society to immediately start recognizing impairment loss and make provisions for future write-offs that may arise from the said financial investments in the financial statements. Kindly take note and deal accordingly.”
11. The Applicant submits that the Respondent never invited feedback or participation of the Applicant or other Sacco Societies and key stakeholders in the sector, and neither did it leave room for optional compliance. The Guideline was not optional but couched in mandatory terms.
12. The Applicant herein reiterates that the guideline was made contrary to the public duty imposed on the Respondent to protect the Sacco Societies’ members’ funds.
13. Most significantly, the guideline was made unilaterally and the key stakeholders in the sector were never involved, including the regulated Sacco societies, the Institute of Certified Public Accountants Kenya (ICPAK) among others.
14. There is nothing before the court to indicate that the situation with KUSCCO is so grave so as to warrant the directive by the Respondent and The Respondent overreached in issuing the Guideline irregularly regardless of the purported intent.
15. It submits that the impugned guideline appears ultra vires for the following reasons:
a) While SASRA is empowered to regulate and supervise Sacco societies (under Section 5(b) of the Sacco Societies Act), the directive imposes a specific accounting treatment without clear statutory backing under the Act. Unless the Act explicitly grants SASRA authority to mandate accounting standards for non-deposit related investments (e.g., in KUSCCO), this oversteps its regulatory scope.
b) The directive encroaches on the role of accounting bodies or the Sacco societies’ own governance.
c) The guideline lacks reference to a lawful direction by the Minister (under Section 5(e) of the Sacco Societies Act) or another written law (under Section 5(f) of the Sacco Societies Act) justifying this specific intervention. If such authority exists, it must be explicitly cited.
d) A blanket order effective immediately for 2024 financials, without consultation or phased implementation, must be deemed unreasonable.
16. It submits that The Respondent issued the impugned guideline without legal authority, as the Sacco Societies Act does not empower it to impose the said regulations.
17. It is its case that the guideline imposes new obligations/restrictions not contemplated under the Act, thereby unlawfully expanding the Respondent’s regulatory scope.
18. It relies in the case of Okiya Omtatah Okoiti & 3 others v Anne Waiguru, the Cabinet Secretary, Devolution and Planning & 6 others [2021] eKLR where the court held:
“An act of ultra vires (occurs) when the decision-making authority commits an error of law in the process of taking the decision or making the act, the subject of the complaint. Acting without jurisdiction or ultra vires or contrary to the provisions of law or its principles renders the decision made laced with illegality.”
19. It is further its case that procedural unfairness and lack of consultation strike at the heart of justice and good governance. It is the applicant''s case that when decisions are imposed without transparency, dialogue, or consideration for those affected, trust erodes. It is not merely about flawed outcomes, but the denial of voice—the refusal to listen before acting. Such exclusion breeds resentment, as people rightfully demand fairness in process, not just in result. To ignore this is to undermine legitimacy itself.
20. The Applicant submits that the Respondent acted contrary to its core-object(s) of regulating and supervision of the running of the Sacco societies.
21. The guideline has a dangerous effect of shielding the Interested Party from its financial obligations. It also has issues with the requirement for immediate implementation of the guideline that have given such a short notice, especially in the absence of any credible evidence that the situation at KUSCCO is so dire such as to warrant the dangerous directive.
22. There was no room for objection accorded to the Applicant and all other affected Sacco Societies, hence the reason the Applicant moved this court for recourse.
23. In its opinion, stakeholder participation would have been crucial for ensuring that the Guideline is well aligned with the needs and concerns of Sacco Societies. The Applicant’s perspectives and concerns were ignored. The guideline will definitely have far-reaching ramifications not only to the Applicant but in the entire industry since many Sacco Societies are affected.
24. The Applicant is reasonably apprehensive that should the impugned guideline be implemented, it shall be subjected to huge losses by being compelled to write-off its financial investments with KUSCCO, while the aforesaid investments are still fully recoverable.
25. In the case of Mugo & 14 others v Matiang’i & another; Independent Electoral and Boundary Commission of Kenya & 19 others (Interested Party) (Constitutional Petition 4 of 2019) [2022] KEHC 158 (KLR) (12 January 2022) (Judgment), the court held that:
“Public participation is the centerpiece of every decision made by state agencies and even non state agencies in Kenya. The Constitution requires that every decision whether administrative, regulatory or statutory in so far as it affected the lives of the people, had to have key component of public participation…
Consultations or stakeholder’s engagement tended to give more latitude to key stakeholders in a given field to take part in the process towards making laws or formulations of administrative decisions which to a large extent impacted on them. Such key stakeholders were mostly affected by the law, policy or decisions in a profound way.
Therefore, in appropriate instance a government agency or a public officer undertaking public participation could have to consider incorporating the aspect of consultation or stakeholder’s engagement.”
26. In the above cited case, the court was also of the view that the affected people must be given sufficient notice of the nature of the decision to be made and when the consultations will be held.
27. It argues that the fact that the guideline required immediate compliance was acting in utopia without catering for the concerns, needs and current situations of the Applicant as well as other Sacco Societies.
28. It submits that the Respondent has no record of how many Sacco Societies are affected by its directive, how many had their investments already mature and how many had theirs yet to mature. It submits that the Respondent issued the guideline in haste based on alleged unverified reports.
29. It further submits that IFRS 9 did not contemplate writing off or providing for a likely loss as required by Respondent in the instant matter.
30. The Interested Party presented itself like a financial institution with capability to secure and advance interest of Saccos by getting deposits from them in various forms including fixed deposits with defined interests thereon. The Applicant herein had a fixed account with the Interested Party.
31. The Interested Party has not been declared insolvent and/or placed under receivership. It wonders why the regulator would wish to interfere with such a contractual arrangement. It is trite law that parties are bound by their contractual obligations and no party can be granted an opportunity to rewrite such privity of contract not even a regulator.
32. It submits that impairment of a financial asset which in the instant matter were fixed deposits can only be done if the financial institution in issue (holding the fixed deposits) is under statutory management or has been formally declared insolvent.
33. The Applicant submits that the Respondent failed to conduct mandatory public participation as required under Section 5(1) (a) of the Fair Administrative Action Act, 2015 and Article 47 of the Constitution denying the Applicant a fair opportunity to be heard.
34. On another front, it is its case that the impugned guideline constitutes Wednesbury unreasonableness because it is so irrational that no reasonable authority could have made it, for the following reasons:
a) Lack of Proportionality – The directive mandates immediate recognition of impairment losses and provisions for KUSCCO investments without clear evidence of systemic risk to Saccos or phased consultation. A reasonable regulator would assess financial impacts and allow transitional periods.
b) Absence of Factual Basis – SASRA issued the order without demonstrating that all Saccos face imminent losses from KUSCCO investments, and therefore the blanket requirement is arbitrary. A rational decision must be grounded in objective risk assessment.
c) Disproportionate Burden – Forcing uniform write-offs regardless of individual Saccos’ exposure levels or recovery prospects is excessively punitive, violating the principle that regulatory action must balance public interest with fairness.
d) Procedural Unfairness – Saccos were not given prior notice or opportunity to present financial data before the abrupt 2024 deadline, and hence the impugned decision lacks procedural rationality.
35. The Applicant places reliance on the case of Republic v Public Procurement Administrative Review Board & 2 others Ex-Parte Pelt Security Services Limited [2018] eKLR (para. 84), where the Court stated thus:
“The test of Wednesbury unreasonableness has been stated to be that the impugned decision must be “objectively so devoid of any plausible justification that no reasonable body of persons could have reached it”
The Court went on to further state (para.85): “A decision which fails to give proper weight to a relevant factor may also be challenged as being unreasonable. It is a well-established principle that if an administrative or quasi-judicial body takes into account any reason for its decision which is bad, or irrelevant, then the whole decision, even if there are other good reasons for it, is vitiated.”
36. According to the applicant, the guideline is so unreasonable that no reasonable regulator would have issued it, as it imposes burdensome, impractical, or disproportionate requirements on Sacco societies.
37. The Respondent failed to consider relevant factors, such as the economic impact on Saccos, while issuing the guideline. It is further its case that the principle of legitimate expectation was violated.
38. The Applicant places reliance on the case of Oindi Zaippeline & 39 Others v Karatina University & Another [2015] eKLR where the Court held that;
“Legitimate expectation” is a doctrine well recognized within the realm of administrative law. In re Westminster City Council, [1986] A.C. 668 at 692 (Lord Bridge): “…the courts have developed a relatively novel doctrine in public law that a duty of consultation may arise from a legitimate expectation of consultation aroused either by a promise or by an established practice of consultation. Legitimate expectation applies the principles of fairness and reasonableness, to the situation in which a person has an expectation, or interest in a public body retaining a long-standing practice, or keeping a promise. An instance of legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulfill a promise.”
39. It submits that the impugned SASRA directive violates the principle of legitimate expectation for the following reasons:
a. Saccos historically followed a different accounting treatment for KUSCCO investments (e.g., delayed impairment recognition based on past regulatory tolerance or industry norms), the sudden, retroactive imposition of write-offs for 2024 financials breaches their expectation of consistency.
b. A reasonable expectation exists that material changes in financial reporting standards would involve stakeholder engagement or advance warning. The immediate effective date denies Saccos a fair opportunity to adjust and organize their affairs appropriately.
c. SASRA had previously not enforced such requirements. Saccos therefore legitimately expect that any future changes would be prospective, not retroactive.
d. Applying the directive to already-prepared 2024 financial statements undermines reliance on existing rules, prejudicing Saccos’ financial planning and audits.
40. The Applicant submits that the directive violates the following provisions of the Kenyan Constitution:
a) Article 47 (Fair Administrative Action) – The abrupt, mandatory imposition of impairment losses without prior notice, consultation, or reasonable transition period amounts to unfair administrative action, denying the Applicant procedural fairness.
b) Article 40 (Protection of Property) – Forcing immediate write-downs of investments without due process or justification constitutes an arbitrary deprivation of property (financial assets) unless proven necessary for public interest—which SASRA must demonstrate. SASRA has not demonstrated any public interest informing its impugned decision.
c) Article 46 (Consumer Rights) – The directive leads to sudden financial instability for Saccos (e.g., reduced dividends or liquidity crises), and this has indirectly harmed members’ economic interests without adequate safeguards.
d) Article 10 (National Values – Equity & Public Participation) – The lack of stakeholder engagement before issuing the guideline contradicts constitutional principles of inclusive governance and reasonableness in regulatory actions.
The Respondent''s Case:
41. The Respondent is the Government''s principal agency responsible for the licensing, regulation and supervision of SACCO Societies in Kenya under the Sacco Societies Act (Cap 490 B).
42. It is its case that since it licenses the Applicant, the Applicant is bound to comply with the provisions of the aforesaid Act and Regulations made thereunder.
43. It argues that it exercises the;
a) Powers to license SACCO Societies to undertake Deposit - Taking Business and regulate and supervise such SACCO Societies in accordance with section 5 of the Act as read with the regulations made thereunder.
b) Powers to prescribe prudential standards to be adhered to by SACCO Societies including such incidental powers as maybe necessary or requisite to effectively to carry out its functions as provided in section 48 (2) (a) and (b) of the Act as read with the Regulations made thereunder.
c) Powers to access and inspect SACCO Societies and their books, accounts and records as provided in section 49 of the Act as read with the Regulations made thereunder.
d) Powers to advice and issue directions to SACCO Societies in the manner to conduct of their businesses from time to time and any given time in accordance with section 50 of the Act as read with the Regulations made thereunder.
e) Powers to impose and issue supervisory actions against a SACCO Society or an officer of a SACCO Society in an event of non-compliance as provided in section 51 of the Act as read with the Regulations made thereunder.
44. It argues that the main regulatory and supervisory objectives of the regulatory framework provided under the SACCO Societies Act is to secure the safety of public deposits and funds held in such SACCO Societies including the deposits and funds held by the Applicant SACCO Society, and to meet these objectives the Authority from time to-time exercises any of the statutory powers herein above mentioned.
45. It argues that it got credible information that some SACCO Societies which it regulates and supervises could not access their investments in the interested party.
46. It argues that driven by the complaints lodged by SACCO Societies to the Authority on their inability to access their investments from KUSCCO LTD it had to take the action.
47. Many Saccos were unable to realize or recover their investments in the short term and consequently as a matter of international accounting and auditing standards, such SACCO Societies were expected to make appropriate provisions in their financial statements for the impairments of their investments in the said entity.
48. It is its case that Section 40 (3) of the SACCO-Societies Act requires SACCO Societies to comply with the International Financial Reporting Standards (IFRS).
49. It is further their case that making provisions in the accounts and financial statements of SACCO Societies for the impairments of any assets or investments is one of the requirements of IFRS standards and in particular IFRS 9 which requires institutions to make provisions for any impaired assets or investments immediately upon realization that short-term recoverability is doubtful per IFRS-9.
50. It further argues that Section 33 (3) (b) and (c) of the Act requires SACCO Societies to establish an asset review system-which is capable of identifying risks and assuring the adequacy of provisions for losses associated with any such risks.
51. It is its case that it saw the risks associated with the inability of KUSCCO LTD to meets its obligations owed to SACCO Societies by paying the investments held by it on behalf of such SACCO Societies advised SACCO Societies to recognize the fact the investments held in the KUSCCO LTD had become doubtful and appropriate provisioning for their impairments of the investments ought to be recognized in the SACCO Societies'' accounts and other financial statements as required by IFRS-9 as read with section 40 (3) of the Act.
52. According to the Respondent there was a general advisory issued pursuant to Section 50 of the Act to SACCO Societies which may have had investments in the said KUSCCO LTD to commence the process of recognizing the attendant risks associated with the doubtful realization of the said investments in KUSCCO LTD.
53. It wanted to bring up a system that would facilitate the flagging out cases where recovery was not assured in the short term as per the individual SACCO Societies'' asset review system.
54. The drive behind this move according to the Respondent was so as to curb the violation of Section 40 (3) of the Act as well as the IFRS-9, and also to ensure that the accounts and financial statements of SACCO Societies which do not reflect a true and fair state of their affairs contrary to section 40 (2) of the Act are identified and tamed.
55. The effect of this was to eradicate the risk of loss of members'' deposits and savings held in the SACCO Societies.According to the Respondent this is a prudential accounting standard aimed at ensuring that financial institutions do not over state their assets and income.
56. It argues that in any event some of the SACCO Societies made the provisioning of their impaired assets in KUSCCO Ltd on their own volition and prior to the issuance of the advisory.
57. It is further its case that when the advisory was issued the Applicant did not complain or lodge any objections. It complied.
58. It argues that different SACCO Societies have made different recognitions and provisions for the impairment of their investments in KUSCCO LTD based on their individual asset review systems as provided in Section 33 (3) (b) of the Act.
59. It finally argues that the Authorities communication being challenged dated 14th January 2025 issued in exercise of the Respondent’s supervisory and regulatory powers as provided in the Sacco Societies Act.
60. It is its case that the directive is not ultra vires the Authority''s powers and neither was it irregular or unfair or contrary to the objects or functions of the Authority.
61. It argues that the Applicant had the option to comply with it or raise objections if any to the advisory based on its assets review system established under section 33 (3) (b) of the Act.
62. The Respondent argues that the Applicant SACCO Society did not raise any objection or difficulty with the advisory but instead complied with it.
63. The decisions by SACCO Societies in Kenya to invest their funds in non-regulated entities is an individual board of directors’ decision and the Authority''s supervisory and regulatory interventions in the making of such investments by SACCO Society is only as provided in section 38 of the Act as read with Regulation 48 (4) of the Sacco Societies (Deposits Taking Business) Regulations, 2010 where the prescribed thresholds are breached.
64. In case such investments become doubtful as is the case with the investments in KUSCCO LTD, then appropriate recognition and provisions must be made.
65. In reacting to the allegation by the Applicant that the said KUSCCO has not been declared insolvent by a court of law or that there is no basis for the Authority''s communication of the said KUSCCO LTD facing financial challenges it argues that this is completely without merit because if KUSCCO LTD was not facing any financial challenges then.
66. It argues that the fact that the Applicant has admitted that it has been unable to realize its investments including maturing savings and deposits from KUSCCO LTD is itself a testament that KUSCCO is facing financial challenges and unable to meet its obligations as they arise, and as such, setting in the automatic Application of IFRS 9 as read with section 40 (3) of the Act for immediate provisioning and recognition of the said investments as doubtful assets.
67. If indeed KUSCCO LTD was not facing financial challenges, then nothing would have been easier than KUSCCO LTD releasing the funds held on behalf of SACCO Societies including those of the Applicant according to the Respondent.
The Respondents Submissions:
68. The Respondent relies in the case of Kenya National Examinations Council Vs Republic [1997] KECA 411 (KLR) wherein the Court of Appeal set out the principles which govern the grant of the prerogative remedies of Certiorari, Prohibition and Mandamus. It rendered itself as follows with regard to the order of Certiorari: -
“Only an order of CERTIORARI can quash a decision already made and an order of certiorari will issue if the decision is made without or in excess pf jurisdiction, or where the rules of natural justice are not complied with or for such like reasons.” [Emphasis added]
69. It emphasized that Judicial Review is concerned with the decision-making process, not with the merits of the decision itself.
70. It submits that The Sacco Societies Regulatory Authority is established pursuant to the Sacco Societies Act, with the mandate to undertake the following acts pursuant to Section 5 of the said act: -
a) license Sacco societies to carry out deposit-taking business in accordance with this Act;
b) regulate and supervise Sacco societies;
c) hold, manage and apply the General Fund of the Authority in accordance with the provisions of this Act;
d) levy contributions in accordance with this Act;
e) do all such other things as may be lawfully directed by the Cabinet Secretary; and
f) perform such other functions as are conferred on it by this Act or by any other written law.
71. The respondent submits that it has jurisdiction to issue the guideline of 14th January 2025 under Section 5 (b) of the Sacco Societies Act as amplified at Part V (Regulation and Supervision of Sacco Societies) of the Sacco Societies Act at Section 48 (2) (a) & (b) which grants the Authority power to prescribe prudential standards to be adhered to by Sacco Societies and power to undertake inspections or require a Sacco Society to submit information and reports on its financial affairs of the deposit-taking business to enable the Authority evaluate the society''s financial condition.
72. It submits that the main regulatory and supervisory objective of the regulatory framework laid out by the Sacco Societies Act is to secure the safety of public deposits and funds held by the Applicant Sacco Society and others within the remit of the said framework.
73. It submits that in the course of the exercise of its supervisory and regulatory mandate the Respondent received credible information that some Sacco Societies which it regulates and supervises could not access their investments from the Kenya Union of Savings and Credit Cooperatives Limited (KUSCCO Ltd-an Interested Party herein).
74. It is its submission that upon consideration of both the short-term and long-term effects of investments made by Saccos in the interested Party, the Respondent invoked the provisions of Section 33 (3) (b)& (c) and 40 (3) of the Sacco Societies Act to safeguard public monies which had been invested by Saccos in form of various investment ventures and or platforms operated by the interested party herein.
75. Section 33 (3) (b) & (c) and 40 (3) of the Sacco Societies Act stipulates:
33. Application for loan or credit facility
(3) Every Sacco society shall prescribe in writing— (a)
(b)an asset review system, which shall accurately identify risk and assure the adequacy of the provisions for losses account;
(c)a system of reviewing the entire asset portfolio including contingent accounts or off-balance sheet items and adequate provisioning for losses at periodic monthly intervals."
40. Form of accounts
(3) The accounts and other financial records of a Sacco society shall be denominated in Kenya shillings and shall comply with the international financial reporting standards and such other requirements as the Authority may prescribe."
76. Accordingly, it is submitted that the provisions of the Sacco Societies oust contentions by the applicant. It is submitted that the other objective was to arrest the risk of loss posed to investments made with the interested party herein namely KUSCCO, which has since crystallized, with far-reaching financial consequences across many sectors within the Republic of Kenya.
77. The respondent urges the Court to take judicial notice of the dissolution of KUSCCO''s Board and the appearance of a cross-section of Directors in a competent Court of Law to answer to charges of embezzling colossal sums of money belonging to various Saccos across the Country.
78. The Respondent submits that it had such a situation in active contemplation at the time it issued the Guideline in question.
79. On another front it is submitted that the rationale for the Guideline was to make a provision for any impaired assets or investments immediately upon realization that short-term recoverability was doubtful. It further submits that the guideline is an advisory issued to Saccos pursuant to Section 50 of the Sacco Societies Act.
80. It submits that the Guideline in question is a prudential accounting standard aimed at ensuring that financial institutions do not overstate their assets and income. It seeks to preserve the value of existing deposits or savings.
81. The Guideline in question was geared towards ensuring business continuity on the part of the Applicant and other Saccos lending credence to earlier submission that the Respondent was alive to its statutory mandate as it issued the Guideline in question.
82. It submits that it is disingenuous for the Applicant to be challenging the Guideline in question in one breath; and implementing the same fully in the next breath.
83. Majority of Saccos have since made a provision for impairment of doubtful investments and or assets for periods convenient to their membership and suitable to their income levels in keeping with the Guideline issued by the Respondent. In respo
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1) An Order of Certiorari be issued to bring into this Honorable Court and for purposes of quashing and to quash Respondent’s Guideline Ref. No. SASRA/700/721/VOL.1(67) issued on 14th January, 2025, directed to Regulated Sacco Societies.
2) Any other order(s) or further orders and/or writs and/or directions as the Honorable Court may deem fit to grant.
3) Costs of the Application be provided for.
Applicants Case;
2. The Applicant is a society that receives funds from its members. Amongst other things, it invests the members'' funds in the interested parties inter alia and in April 2024, the Applicant had invested the sum, a colloidal sum of money belonging to its members.
3. In May 2024 the Applicant was expecting to receive its funds for onward transmission to its Members from the interested party. Unfortunately, the funds were not released as expected.
4. Instead and in a surprising twist, the Applicant argues that on 14th January, 2025 the Respondent issued Guideline Ref. No. SASRA/700/721/VOL.1(67), directed to Regulated Sacco Societies which has triggered the filing of this suit.
5. The Applicant is concerned and troubled that it might never recover its money which will leave the people who had deposited money with it counting their losses.
6. The Applicant is also aggrieved since the guidelines were generated without public participation.
7. The Applicant is concerned given that it had issued a notice protesting the regulation. The Applicant wants a more inclusive arrangement which incorporates the stakeholder sentiment, including itself.
The Applicant’s Submissions;
8. The Applicant is among many other Sacco Societies who invested funds in the interested party in form of acquisition of shares, savings and special deposits under Central Finance Fund.
9. It submits that on 14th January, 2025, the Respondent herein unilaterally issued a Guideline directing Regulated Sacco Societies, to start recognizing impairment loss and make provision for future write offs arising from financial investments in the Kenya Union of Savings & Credit Cooperatives Limited (KUSCCO) in their financial statements for the period ending 2024 effective immediately.
10. It is concerned that the Respondent argues in paragraph 13, 14, and 15 of its Replying Affidavit that the impugned guideline is merely advisory. However, that applicant submits that this is not the case as demonstrated by wording of the guideline in question, which stated as follows:
“…the authority expects the Sacco Society to immediately start recognizing impairment loss and make provisions for future write-offs that may arise from the said financial investments in the financial statements. Kindly take note and deal accordingly.”
11. The Applicant submits that the Respondent never invited feedback or participation of the Applicant or other Sacco Societies and key stakeholders in the sector, and neither did it leave room for optional compliance. The Guideline was not optional but couched in mandatory terms.
12. The Applicant herein reiterates that the guideline was made contrary to the public duty imposed on the Respondent to protect the Sacco Societies’ members’ funds.
13. Most significantly, the guideline was made unilaterally and the key stakeholders in the sector were never involved, including the regulated Sacco societies, the Institute of Certified Public Accountants Kenya (ICPAK) among others.
14. There is nothing before the court to indicate that the situation with KUSCCO is so grave so as to warrant the directive by the Respondent and The Respondent overreached in issuing the Guideline irregularly regardless of the purported intent.
15. It submits that the impugned guideline appears ultra vires for the following reasons:
a) While SASRA is empowered to regulate and supervise Sacco societies (under Section 5(b) of the Sacco Societies Act), the directive imposes a specific accounting treatment without clear statutory backing under the Act. Unless the Act explicitly grants SASRA authority to mandate accounting standards for non-deposit related investments (e.g., in KUSCCO), this oversteps its regulatory scope.
b) The directive encroaches on the role of accounting bodies or the Sacco societies’ own governance.
c) The guideline lacks reference to a lawful direction by the Minister (under Section 5(e) of the Sacco Societies Act) or another written law (under Section 5(f) of the Sacco Societies Act) justifying this specific intervention. If such authority exists, it must be explicitly cited.
d) A blanket order effective immediately for 2024 financials, without consultation or phased implementation, must be deemed unreasonable.
16. It submits that The Respondent issued the impugned guideline without legal authority, as the Sacco Societies Act does not empower it to impose the said regulations.
17. It is its case that the guideline imposes new obligations/restrictions not contemplated under the Act, thereby unlawfully expanding the Respondent’s regulatory scope.
18. It relies in the case of Okiya Omtatah Okoiti & 3 others v Anne Waiguru, the Cabinet Secretary, Devolution and Planning & 6 others [2021] eKLR where the court held:
“An act of ultra vires (occurs) when the decision-making authority commits an error of law in the process of taking the decision or making the act, the subject of the complaint. Acting without jurisdiction or ultra vires or contrary to the provisions of law or its principles renders the decision made laced with illegality.”
19. It is further its case that procedural unfairness and lack of consultation strike at the heart of justice and good governance. It is the applicant''s case that when decisions are imposed without transparency, dialogue, or consideration for those affected, trust erodes. It is not merely about flawed outcomes, but the denial of voice—the refusal to listen before acting. Such exclusion breeds resentment, as people rightfully demand fairness in process, not just in result. To ignore this is to undermine legitimacy itself.
20. The Applicant submits that the Respondent acted contrary to its core-object(s) of regulating and supervision of the running of the Sacco societies.
21. The guideline has a dangerous effect of shielding the Interested Party from its financial obligations. It also has issues with the requirement for immediate implementation of the guideline that have given such a short notice, especially in the absence of any credible evidence that the situation at KUSCCO is so dire such as to warrant the dangerous directive.
22. There was no room for objection accorded to the Applicant and all other affected Sacco Societies, hence the reason the Applicant moved this court for recourse.
23. In its opinion, stakeholder participation would have been crucial for ensuring that the Guideline is well aligned with the needs and concerns of Sacco Societies. The Applicant’s perspectives and concerns were ignored. The guideline will definitely have far-reaching ramifications not only to the Applicant but in the entire industry since many Sacco Societies are affected.
24. The Applicant is reasonably apprehensive that should the impugned guideline be implemented, it shall be subjected to huge losses by being compelled to write-off its financial investments with KUSCCO, while the aforesaid investments are still fully recoverable.
25. In the case of Mugo & 14 others v Matiang’i & another; Independent Electoral and Boundary Commission of Kenya & 19 others (Interested Party) (Constitutional Petition 4 of 2019) [2022] KEHC 158 (KLR) (12 January 2022) (Judgment), the court held that:
“Public participation is the centerpiece of every decision made by state agencies and even non state agencies in Kenya. The Constitution requires that every decision whether administrative, regulatory or statutory in so far as it affected the lives of the people, had to have key component of public participation…
Consultations or stakeholder’s engagement tended to give more latitude to key stakeholders in a given field to take part in the process towards making laws or formulations of administrative decisions which to a large extent impacted on them. Such key stakeholders were mostly affected by the law, policy or decisions in a profound way.
Therefore, in appropriate instance a government agency or a public officer undertaking public participation could have to consider incorporating the aspect of consultation or stakeholder’s engagement.”
26. In the above cited case, the court was also of the view that the affected people must be given sufficient notice of the nature of the decision to be made and when the consultations will be held.
27. It argues that the fact that the guideline required immediate compliance was acting in utopia without catering for the concerns, needs and current situations of the Applicant as well as other Sacco Societies.
28. It submits that the Respondent has no record of how many Sacco Societies are affected by its directive, how many had their investments already mature and how many had theirs yet to mature. It submits that the Respondent issued the guideline in haste based on alleged unverified reports.
29. It further submits that IFRS 9 did not contemplate writing off or providing for a likely loss as required by Respondent in the instant matter.
30. The Interested Party presented itself like a financial institution with capability to secure and advance interest of Saccos by getting deposits from them in various forms including fixed deposits with defined interests thereon. The Applicant herein had a fixed account with the Interested Party.
31. The Interested Party has not been declared insolvent and/or placed under receivership. It wonders why the regulator would wish to interfere with such a contractual arrangement. It is trite law that parties are bound by their contractual obligations and no party can be granted an opportunity to rewrite such privity of contract not even a regulator.
32. It submits that impairment of a financial asset which in the instant matter were fixed deposits can only be done if the financial institution in issue (holding the fixed deposits) is under statutory management or has been formally declared insolvent.
33. The Applicant submits that the Respondent failed to conduct mandatory public participation as required under Section 5(1) (a) of the Fair Administrative Action Act, 2015 and Article 47 of the Constitution denying the Applicant a fair opportunity to be heard.
34. On another front, it is its case that the impugned guideline constitutes Wednesbury unreasonableness because it is so irrational that no reasonable authority could have made it, for the following reasons:
a) Lack of Proportionality – The directive mandates immediate recognition of impairment losses and provisions for KUSCCO investments without clear evidence of systemic risk to Saccos or phased consultation. A reasonable regulator would assess financial impacts and allow transitional periods.
b) Absence of Factual Basis – SASRA issued the order without demonstrating that all Saccos face imminent losses from KUSCCO investments, and therefore the blanket requirement is arbitrary. A rational decision must be grounded in objective risk assessment.
c) Disproportionate Burden – Forcing uniform write-offs regardless of individual Saccos’ exposure levels or recovery prospects is excessively punitive, violating the principle that regulatory action must balance public interest with fairness.
d) Procedural Unfairness – Saccos were not given prior notice or opportunity to present financial data before the abrupt 2024 deadline, and hence the impugned decision lacks procedural rationality.
35. The Applicant places reliance on the case of Republic v Public Procurement Administrative Review Board & 2 others Ex-Parte Pelt Security Services Limited [2018] eKLR (para. 84), where the Court stated thus:
“The test of Wednesbury unreasonableness has been stated to be that the impugned decision must be “objectively so devoid of any plausible justification that no reasonable body of persons could have reached it”
The Court went on to further state (para.85): “A decision which fails to give proper weight to a relevant factor may also be challenged as being unreasonable. It is a well-established principle that if an administrative or quasi-judicial body takes into account any reason for its decision which is bad, or irrelevant, then the whole decision, even if there are other good reasons for it, is vitiated.”
36. According to the applicant, the guideline is so unreasonable that no reasonable regulator would have issued it, as it imposes burdensome, impractical, or disproportionate requirements on Sacco societies.
37. The Respondent failed to consider relevant factors, such as the economic impact on Saccos, while issuing the guideline. It is further its case that the principle of legitimate expectation was violated.
38. The Applicant places reliance on the case of Oindi Zaippeline & 39 Others v Karatina University & Another [2015] eKLR where the Court held that;
“Legitimate expectation” is a doctrine well recognized within the realm of administrative law. In re Westminster City Council, [1986] A.C. 668 at 692 (Lord Bridge): “…the courts have developed a relatively novel doctrine in public law that a duty of consultation may arise from a legitimate expectation of consultation aroused either by a promise or by an established practice of consultation. Legitimate expectation applies the principles of fairness and reasonableness, to the situation in which a person has an expectation, or interest in a public body retaining a long-standing practice, or keeping a promise. An instance of legitimate expectation would arise when a body, by representation or by past practice, has aroused an expectation that is within its power to fulfill a promise.”
39. It submits that the impugned SASRA directive violates the principle of legitimate expectation for the following reasons:
a. Saccos historically followed a different accounting treatment for KUSCCO investments (e.g., delayed impairment recognition based on past regulatory tolerance or industry norms), the sudden, retroactive imposition of write-offs for 2024 financials breaches their expectation of consistency.
b. A reasonable expectation exists that material changes in financial reporting standards would involve stakeholder engagement or advance warning. The immediate effective date denies Saccos a fair opportunity to adjust and organize their affairs appropriately.
c. SASRA had previously not enforced such requirements. Saccos therefore legitimately expect that any future changes would be prospective, not retroactive.
d. Applying the directive to already-prepared 2024 financial statements undermines reliance on existing rules, prejudicing Saccos’ financial planning and audits.
40. The Applicant submits that the directive violates the following provisions of the Kenyan Constitution:
a) Article 47 (Fair Administrative Action) – The abrupt, mandatory imposition of impairment losses without prior notice, consultation, or reasonable transition period amounts to unfair administrative action, denying the Applicant procedural fairness.
b) Article 40 (Protection of Property) – Forcing immediate write-downs of investments without due process or justification constitutes an arbitrary deprivation of property (financial assets) unless proven necessary for public interest—which SASRA must demonstrate. SASRA has not demonstrated any public interest informing its impugned decision.
c) Article 46 (Consumer Rights) – The directive leads to sudden financial instability for Saccos (e.g., reduced dividends or liquidity crises), and this has indirectly harmed members’ economic interests without adequate safeguards.
d) Article 10 (National Values – Equity & Public Participation) – The lack of stakeholder engagement before issuing the guideline contradicts constitutional principles of inclusive governance and reasonableness in regulatory actions.
The Respondent''s Case:
41. The Respondent is the Government''s principal agency responsible for the licensing, regulation and supervision of SACCO Societies in Kenya under the Sacco Societies Act (Cap 490 B).
42. It is its case that since it licenses the Applicant, the Applicant is bound to comply with the provisions of the aforesaid Act and Regulations made thereunder.
43. It argues that it exercises the;
a) Powers to license SACCO Societies to undertake Deposit - Taking Business and regulate and supervise such SACCO Societies in accordance with section 5 of the Act as read with the regulations made thereunder.
b) Powers to prescribe prudential standards to be adhered to by SACCO Societies including such incidental powers as maybe necessary or requisite to effectively to carry out its functions as provided in section 48 (2) (a) and (b) of the Act as read with the Regulations made thereunder.
c) Powers to access and inspect SACCO Societies and their books, accounts and records as provided in section 49 of the Act as read with the Regulations made thereunder.
d) Powers to advice and issue directions to SACCO Societies in the manner to conduct of their businesses from time to time and any given time in accordance with section 50 of the Act as read with the Regulations made thereunder.
e) Powers to impose and issue supervisory actions against a SACCO Society or an officer of a SACCO Society in an event of non-compliance as provided in section 51 of the Act as read with the Regulations made thereunder.
44. It argues that the main regulatory and supervisory objectives of the regulatory framework provided under the SACCO Societies Act is to secure the safety of public deposits and funds held in such SACCO Societies including the deposits and funds held by the Applicant SACCO Society, and to meet these objectives the Authority from time to-time exercises any of the statutory powers herein above mentioned.
45. It argues that it got credible information that some SACCO Societies which it regulates and supervises could not access their investments in the interested party.
46. It argues that driven by the complaints lodged by SACCO Societies to the Authority on their inability to access their investments from KUSCCO LTD it had to take the action.
47. Many Saccos were unable to realize or recover their investments in the short term and consequently as a matter of international accounting and auditing standards, such SACCO Societies were expected to make appropriate provisions in their financial statements for the impairments of their investments in the said entity.
48. It is its case that Section 40 (3) of the SACCO-Societies Act requires SACCO Societies to comply with the International Financial Reporting Standards (IFRS).
49. It is further their case that making provisions in the accounts and financial statements of SACCO Societies for the impairments of any assets or investments is one of the requirements of IFRS standards and in particular IFRS 9 which requires institutions to make provisions for any impaired assets or investments immediately upon realization that short-term recoverability is doubtful per IFRS-9.
50. It further argues that Section 33 (3) (b) and (c) of the Act requires SACCO Societies to establish an asset review system-which is capable of identifying risks and assuring the adequacy of provisions for losses associated with any such risks.
51. It is its case that it saw the risks associated with the inability of KUSCCO LTD to meets its obligations owed to SACCO Societies by paying the investments held by it on behalf of such SACCO Societies advised SACCO Societies to recognize the fact the investments held in the KUSCCO LTD had become doubtful and appropriate provisioning for their impairments of the investments ought to be recognized in the SACCO Societies'' accounts and other financial statements as required by IFRS-9 as read with section 40 (3) of the Act.
52. According to the Respondent there was a general advisory issued pursuant to Section 50 of the Act to SACCO Societies which may have had investments in the said KUSCCO LTD to commence the process of recognizing the attendant risks associated with the doubtful realization of the said investments in KUSCCO LTD.
53. It wanted to bring up a system that would facilitate the flagging out cases where recovery was not assured in the short term as per the individual SACCO Societies'' asset review system.
54. The drive behind this move according to the Respondent was so as to curb the violation of Section 40 (3) of the Act as well as the IFRS-9, and also to ensure that the accounts and financial statements of SACCO Societies which do not reflect a true and fair state of their affairs contrary to section 40 (2) of the Act are identified and tamed.
55. The effect of this was to eradicate the risk of loss of members'' deposits and savings held in the SACCO Societies.According to the Respondent this is a prudential accounting standard aimed at ensuring that financial institutions do not over state their assets and income.
56. It argues that in any event some of the SACCO Societies made the provisioning of their impaired assets in KUSCCO Ltd on their own volition and prior to the issuance of the advisory.
57. It is further its case that when the advisory was issued the Applicant did not complain or lodge any objections. It complied.
58. It argues that different SACCO Societies have made different recognitions and provisions for the impairment of their investments in KUSCCO LTD based on their individual asset review systems as provided in Section 33 (3) (b) of the Act.
59. It finally argues that the Authorities communication being challenged dated 14th January 2025 issued in exercise of the Respondent’s supervisory and regulatory powers as provided in the Sacco Societies Act.
60. It is its case that the directive is not ultra vires the Authority''s powers and neither was it irregular or unfair or contrary to the objects or functions of the Authority.
61. It argues that the Applicant had the option to comply with it or raise objections if any to the advisory based on its assets review system established under section 33 (3) (b) of the Act.
62. The Respondent argues that the Applicant SACCO Society did not raise any objection or difficulty with the advisory but instead complied with it.
63. The decisions by SACCO Societies in Kenya to invest their funds in non-regulated entities is an individual board of directors’ decision and the Authority''s supervisory and regulatory interventions in the making of such investments by SACCO Society is only as provided in section 38 of the Act as read with Regulation 48 (4) of the Sacco Societies (Deposits Taking Business) Regulations, 2010 where the prescribed thresholds are breached.
64. In case such investments become doubtful as is the case with the investments in KUSCCO LTD, then appropriate recognition and provisions must be made.
65. In reacting to the allegation by the Applicant that the said KUSCCO has not been declared insolvent by a court of law or that there is no basis for the Authority''s communication of the said KUSCCO LTD facing financial challenges it argues that this is completely without merit because if KUSCCO LTD was not facing any financial challenges then.
66. It argues that the fact that the Applicant has admitted that it has been unable to realize its investments including maturing savings and deposits from KUSCCO LTD is itself a testament that KUSCCO is facing financial challenges and unable to meet its obligations as they arise, and as such, setting in the automatic Application of IFRS 9 as read with section 40 (3) of the Act for immediate provisioning and recognition of the said investments as doubtful assets.
67. If indeed KUSCCO LTD was not facing financial challenges, then nothing would have been easier than KUSCCO LTD releasing the funds held on behalf of SACCO Societies including those of the Applicant according to the Respondent.
The Respondents Submissions:
68. The Respondent relies in the case of Kenya National Examinations Council Vs Republic [1997] KECA 411 (KLR) wherein the Court of Appeal set out the principles which govern the grant of the prerogative remedies of Certiorari, Prohibition and Mandamus. It rendered itself as follows with regard to the order of Certiorari: -
“Only an order of CERTIORARI can quash a decision already made and an order of certiorari will issue if the decision is made without or in excess pf jurisdiction, or where the rules of natural justice are not complied with or for such like reasons.” [Emphasis added]
69. It emphasized that Judicial Review is concerned with the decision-making process, not with the merits of the decision itself.
70. It submits that The Sacco Societies Regulatory Authority is established pursuant to the Sacco Societies Act, with the mandate to undertake the following acts pursuant to Section 5 of the said act: -
a) license Sacco societies to carry out deposit-taking business in accordance with this Act;
b) regulate and supervise Sacco societies;
c) hold, manage and apply the General Fund of the Authority in accordance with the provisions of this Act;
d) levy contributions in accordance with this Act;
e) do all such other things as may be lawfully directed by the Cabinet Secretary; and
f) perform such other functions as are conferred on it by this Act or by any other written law.
71. The respondent submits that it has jurisdiction to issue the guideline of 14th January 2025 under Section 5 (b) of the Sacco Societies Act as amplified at Part V (Regulation and Supervision of Sacco Societies) of the Sacco Societies Act at Section 48 (2) (a) & (b) which grants the Authority power to prescribe prudential standards to be adhered to by Sacco Societies and power to undertake inspections or require a Sacco Society to submit information and reports on its financial affairs of the deposit-taking business to enable the Authority evaluate the society''s financial condition.
72. It submits that the main regulatory and supervisory objective of the regulatory framework laid out by the Sacco Societies Act is to secure the safety of public deposits and funds held by the Applicant Sacco Society and others within the remit of the said framework.
73. It submits that in the course of the exercise of its supervisory and regulatory mandate the Respondent received credible information that some Sacco Societies which it regulates and supervises could not access their investments from the Kenya Union of Savings and Credit Cooperatives Limited (KUSCCO Ltd-an Interested Party herein).
74. It is its submission that upon consideration of both the short-term and long-term effects of investments made by Saccos in the interested Party, the Respondent invoked the provisions of Section 33 (3) (b)& (c) and 40 (3) of the Sacco Societies Act to safeguard public monies which had been invested by Saccos in form of various investment ventures and or platforms operated by the interested party herein.
75. Section 33 (3) (b) & (c) and 40 (3) of the Sacco Societies Act stipulates:
33. Application for loan or credit facility
(3) Every Sacco society shall prescribe in writing— (a)
(b)an asset review system, which shall accurately identify risk and assure the adequacy of the provisions for losses account;
(c)a system of reviewing the entire asset portfolio including contingent accounts or off-balance sheet items and adequate provisioning for losses at periodic monthly intervals."
40. Form of accounts
(3) The accounts and other financial records of a Sacco society shall be denominated in Kenya shillings and shall comply with the international financial reporting standards and such other requirements as the Authority may prescribe."
76. Accordingly, it is submitted that the provisions of the Sacco Societies oust contentions by the applicant. It is submitted that the other objective was to arrest the risk of loss posed to investments made with the interested party herein namely KUSCCO, which has since crystallized, with far-reaching financial consequences across many sectors within the Republic of Kenya.
77. The respondent urges the Court to take judicial notice of the dissolution of KUSCCO''s Board and the appearance of a cross-section of Directors in a competent Court of Law to answer to charges of embezzling colossal sums of money belonging to various Saccos across the Country.
78. The Respondent submits that it had such a situation in active contemplation at the time it issued the Guideline in question.
79. On another front it is submitted that the rationale for the Guideline was to make a provision for any impaired assets or investments immediately upon realization that short-term recoverability was doubtful. It further submits that the guideline is an advisory issued to Saccos pursuant to Section 50 of the Sacco Societies Act.
80. It submits that the Guideline in question is a prudential accounting standard aimed at ensuring that financial institutions do not overstate their assets and income. It seeks to preserve the value of existing deposits or savings.
81. The Guideline in question was geared towards ensuring business continuity on the part of the Applicant and other Saccos lending credence to earlier submission that the Respondent was alive to its statutory mandate as it issued the Guideline in question.
82. It submits that it is disingenuous for the Applicant to be challenging the Guideline in question in one breath; and implementing the same fully in the next breath.
83. Majority of Saccos have since made a provision for impairment of doubtful investments and or assets for periods convenient to their membership and suitable to their income levels in keeping with the Guideline issued by the Respondent. In respo
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