A rural savings and credit society has been stopped from selling shares to the public.
The Capital Markets Authority (CMA) is unhappy with the manner in which Muramati Sacco Society Ltd is selling its shares and has warned both the sacco officials and the public that the share sale has not been sanctioned.
"The public is hereby notified that the sale of the shares has not been approved by the Authority to be made to the general public and is, therefore, being made contrary to the provisions of Section 30A of the Capital Markets Act, Chapter 485A of the laws of Kenya," CMA chief executive Stella Kilonzo said in a press advertisement on Tuesday.
The sacco was subsequently ordered to stop advertising and selling shares to the public until it fulfilled the requirements of the law on offers of securities to the public or section of the public.
The requirements include publication of information memorandum, which must meet standards set out by CMA on public offers, listing and disclosures.
According to the sacco website, everybody was eligible for membership upon payment for the shares.
"Muramati is offering investment shares to existing and new members at rate of Sh10 per share. A member can buy a minimum of 100 shares units for Sh1,000 and a maximum of 100,000 shares for Sh1 million," the website says.
The share sale is running alongside a promotion and is scheduled to end on Friday.
Ms Kilonzo did not say what would happen to the shares already bought by non-members.
Mr Calirus Ademba, the managing director of Sacco Societies Regulatory Authority (Sasra), which regulates deposit-taking saccos, said they had not been notified about the sale of Muramati shares.
CMA has to approve
"Sasra has to approve every line of investment that a sacco makes to protect the members' contribution. If they are to sell shares to the public, the CMA has to approve. But if they are increasing shares within their membership then they can not take that route," said Mr Ademba.
The warning comes barely a week after the Central Bank of Kenya (CBK), cautioned the sacco against passing itself as a bank.
According to CBK, only licensed institutions can use the term "bank" under the Banking Act.
"Muramati is a sacco and is not licensed under the Banking Act," said a recent CBK statement.
According to a sacco official familiar with the issue, Muramati is facing stiff competition for membership. It is among the largest in membership and contribution in Murang'a.
Beat off competition
"Muramati is trying to beat off the competition by others by expanding their membership reach," said the source who requested not to be named to avoid antagonising the sacco officials.
The officials, according to the source, could also be "excited" about the reforms in the financial institutions that offer opportunities for growth.
On its website, Muramati states that, from humble beginnings of a borrowed office and one employee, it has grown into "a household-known institution with a good branch network, and is still going places."
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Source: Breaking News, Kenya
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