Graft in Co-ops tamed by tough rules

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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