The Commissioner for Cooperatives Development, David Obonyo, has sounded a stern warning to cooperatives and savings and credit societies (Saccos) that resort to borrowing money to declare dividends and rebates.
Speaking during the launch of a four‑year strategic plan for Mhasibu Sacco, Obonyo said such practices amount to deception and will attract punishment under tightened regulations.
Obonyo cautioned leaders against bowing to pressure from members or investors by announcing profits that do not exist. He stressed that cooperatives must remain truthful about their financial position.
“There is no need for a Sacco to pay dividends when they are unable to refund members who have expressed interest in withdrawing. There is no need to declare dividends at 12 percent when you are struggling with a loan backlog,” Obonyo said.
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Obonyo explained that borrowing to pay dividends is equivalent to cheating, since borrowed funds come at a cost and only worsen the financial strain.
He urged Sacco leaders to be transparent with members and communicate frankly when losses are recorded instead of masking financial challenges. According to him, several cooperatives that collapsed in recent years did so because they blatantly disregarded the law and attempted to compete with commercial banks instead of focusing on their core mandate.
Echoing the commissioner’s sentiments, George Mutiso, Chief Officer for Cooperatives in Nairobi City, reminded members that dividends are not the primary business of Saccos. He argued that members should receive modest dividends while enjoying reliable credit access, rather than chasing high returns that compromise stability.
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Obonyo reiterated that insider borrowing and reckless spending will no longer be tolerated. He said the government is tightening oversight to protect members’ funds and ensure cooperatives remain compliant with regulations.
By Masaki Enock
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