How loopholes can be sealed to save Saccos from theft of funds

The recent media reports highlighting how one Sacco had lost billions of shillings through its leaders should serve as a wakeup call to all industry players.

This may as well be a tip of the iceberg as cases of discontent abound in a number of Saccos across the country.

But exactly what could be the root cause of financial impropriety in Saccos? Could there be systemic weaknesses that require fixing?

Part of the reason the sub-sector is experiencing governance challenges is the rebranding mania that swept through the industry some years ago.

The rebranding process entailed, among other things, opening of common bonds and expanding areas of operation; yet some lacked the capacity to effectively serve the expanded membership.

A number of them rented expensive office spaces in towns that required furnishings and recruitment of additional staff in anticipation of increased membership.

This trend also saw some Saccos employing crude methods of winning new members from existing Saccos, including recklessly declaring high dividends/interest on deposits to attract them.

That was part of the genesis of the current state of affairs.

In the meantime, the country will shortly be treated to gruelling legal battles as the surchargees in the case under review engage lawyers to defend them in the Cooperative Tribunal.

Going forward, the government needs to initiate some radical reforms in the sub-sector in order to restore the confidence of cooperators and the public at large.

Some proposed interventions may appear painful at face value but in the fullness of time, they could offer the much-needed panacea that the sector is in dire need of at this point in time.

The proposed reform measures may include, but not limited to, the following;

1. The State Department of Cooperatives to commission a reputable consultancy firm to carry out a random rapid assessment of Saccos with a view to establishing systemic weaknesses therein, if any, and prescribe remedies,

2. Amend the law to provide for appointment of independent directors to mentor and keep elected leaders in check,

3. A framework be put in place where all Saccos share a common platform so as to facilitate centralized monitoring of their operations, which can be domiciled at KUSCCO offices as the umbrella federation,

4. The law be amended accordingly to cap the tenure of office for elected officials,

5. The law be amended accordingly to obligate those seeking elective positions in all types of cooperatives to surrender land title deeds to be held as security during their tenure as cooperative leaders, and,

6. Saccos should be capacitated to adopt “self-regulation”.

If that happened, the government agencies would be blameless in the event that some illegalities are perpetrated by Sacco managements.

The fact of the matter is that the sector has come of age and the evolving dynamics may not be adequately handled within the current static policy, legal and regulatory frameworks. 

Let the cooperatives be held accountable for their actions of commission or omission. The government also needs to align its progressive policies to ensure that the cooperative identity is not only observed but deepened.

By Fred Sitati

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