Graft in Co-ops tamed by tough rules

By Staff Writer
The Co-operative sector has shed
off its dark past characterized by
corruption, nepotism and poor representatation
owing to strong prudential
guidelines and supervision by Government
agencies.
This is according to the Sacco Society
Regulatory Authority (SASRA) CEO,
John Mwaka.
“While corporate governance issues
are still common in the financial sector,
we have noted marked improvements over
the last five years. This is due to governance
training for board and senior management
staff of Saccos, an initiative of
Co-operatives University and SASRA,”
said Mwaka.
Already, an increasing number of Sacco
Executives have undertaken examinations
that allow them to join the Certified
Institute of Directors of Kenya.
“We require that Sacco directors must
operate within the set prudential guidelines,
improve on their capital, cash reserves
and avoid paying out huge dividends
just to please their members while depleting
their reserves,” disclosed Mwaka in an
exclusive interview.
While Corporate Governance issues
still persist in the Co-operatives Sector,
there are a few Saccos that have made significant
strides to improve their structures.
“We always ensure that policies that are
in place are constantly reviewed to ensure
that they are aligned to the present situation,
environment and circumstances. The
Society has also been sponsoring directors
and its other policy makers to undergo corporate
governance training at the Centre for
Corporate Governance,” said David Sohelo
Mategwa ICUDE, ADE, National Chairman,
Kenya Police Sacco Society Limited.
He told Sacco Review that as a board
chair, he has no dealings with suppliers of
Kenya Police Sacco, has no idea who they
are and has left this task to the procurement
committee, which does its work after the
supply firms have been pre-qualified.
“Kenya Police Sacco is also keen to
ensure it has qualified board members.
Delegates are also not left behind and are
enlightened on the Society’s vision and
strategic plan. The quality of our delegates
can be seen in their interactions during the
Annual Delegates Meetings and the kind
of resolutions members adopt,” said Mategwa.
Boresha Sacco, formerly Baringo
Teachers Sacco Limited, is another example
of Saccos that are keen to have proper
corporate governance structures. Boresha
Sacco delegates recently amended the Society’s
by-laws to put a limit on the length
of time a director can sit on the Board. At
a special sitting, Boresha Sacco Delegates
voted to ratify the minimum terms a director
can serve on the board.
They also resolved that a director will
be voted out immediately he/she joins Public
Service. One will only be eligible to
become a board member after meeting all
the qualifications under Chapter Six of the
Constitution on Leadership and Integrity
among other requirements.
Boresha has also come up with an affirmative
action policy which reserves a specific
number of slots for elected delegates
to women, a move that has put the vibrant
society on a good stead within the public
arena.
While there are Societies such as Kenya
Police Sacco that have won numerous
accolades as having one of the best
corporate governance structures, the entire
co-operatives sector is still not out of the
woods yet.
For instance, there are Saccos that
have male-dominated Board of Directors,
in total disregard of the one third gender
rule. Other Societies have been infiltrated
by powerful political figures, who decide
who sits on the Board.
Cases abound of CEOs held hostage
by rogue and powerful Directors or Delegates,
a clique that fixes their own sitting
allowances, number of meetings to attend
or make fictitious claims which all end up
emptying the Society’s coffers.
“At the Board level, elected members
are frequently non-professional volunteers
yet they assume highly technical responsibilities
such as loan analysis and disbursement,
budgeting and financial expenditure
control,” said Edward Mudibo, lead consultant
at Enterprise Skills Development
Africa (ESDA).
There are Societies that lack clear
guidelines on where, for example the
Credit Committees’ authority ends and
where the Executive Committee begins
and where the onus of staff members begin
hence delayed decision making.
“We have seen cases where board
members succumb to political pressure
from external forces to implement activities
that counter the management ethics
and standards. Some elected officials also
abuse the trust of members by engaging
in corruption, gross mismanagement and
misappropriation of funds,” said Mudibo,
who is a former Managing Director of
KUSCCO.
“While we have over 14 million people
subscribing to the Sacco model, we still
have a few isolated cases of theft of funds
by some Society officials. This is because
there is no market anywhere that does not
have a few mad people,” said Philip Gichuki,
Acting Commissioner for Co-operative
Development.
Speaking while officiating at this year’s
38th Annual Delegates Meeting (ADM) for
Ukulima Savings and Credit Co-operatives
Limited, held at the Kenya Bankers Hall
along Ngong Road, Nairobi, Gichuki however
pointed out that the Ministry with the
support of other stakeholders had tightened
the noose on those bent on stealing from
their members through strong policies and
supervision.
He hinted that the proposed Co-operative
Bill and other planned legislations
in future would help reduce incidences of
corruption and address other governance
issues plaguing the industry.
The list of Co-operative Societies embroiled
in crippling severe Boardroom
wrangles as well as exit of top management
staff keeps on growing longer by the day.
Some of the latest episodes include that
of Bandari Sacco where delegates have
kicked out the Society’s entire Board of
Directors and members of the Senior Management
Team, including the CEO. An interim
select committee of five persons has
now been picked by the Society’s delegates
to oversee operations at the beleagured
Sacco.
In May this year, financially crippled
Sot Tea Growers Sacco announced it was
offering to sell shares worth Sh170 million
to stop itself from sinking. This is after the
directors of the society pumped cash into
a tea factory that became an unviable venture.
Besides financial woes, Sot Tea Sacco
is also said to be embroiled in leadership
wars pitting founders against interim directors,
picked by members to deal with its
cash flow problems.
A battle of wits has also erupted at the
giant Stima Sacco Co-operative Society
Limited, leading to the resignation of six
senior officers. Those who have resigned
from the Sacco included Paul Wambua,
who was the Stima Sacco CEO.
He has been replaced by Chris Oseki,
who has been Manager, Nairobi Branch
and Acting Chief Manager, Finance. Oseki
will now be the Chief Manager-Finance
and Acting CEO.

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