Key recommendations to restore trust in KUSCCO

The Committee of Experts reviewing Kenya’s SACCO legal and regulatory framework has called for immediate reforms at the Kenya Union of Savings and Credit Co-operatives Ltd (KUSCCO) to restore public confidence following a massive fraud scandal.

The scandal, which saw over Ksh13.3 billion misappropriated from member SACCOs, involved illegal withdrawals, unauthorized transfers, and unsupported executive loans.

Transactions were reportedly authorized using the signature of a deceased official, exposing significant internal control weaknesses. At least 23 senior staff were implicated, and legal action has been taken against four suspects. Deposits from more than 247 SACCOs were put at risk, with Ksh 12.5 billion still unaccounted for.

In November and December 2025, KUSCCO refunded SACCOs a total of Ksh360 million on a bilateral basis and continues to make repayments to member SACCOs.

The committee, chaired by Marlene Shiels, Chief Executive Officer of Capital Credit Union, warned that the scandal had severely shaken public trust in SACCO governance. It emphasized that all entities holding SACCO funds must be properly regulated.

The report recommends that the new KUSCCO Board rethink its strategic direction as the organization transitions into a federation.

Key measures include revisiting KUSCCO’s core purpose, strengthening governance structures, and rebranding to distance the institution from its tarnished reputation. Lessons from the scandal must be translated into systemic safeguards, enforced through the regulatory framework, to prevent future fraud.

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The report highlights the need to realign SACCO structures and support mechanisms to enhance efficiency and reduce duplication of services.

It proposes forming a National Steering Committee for SACCO Development, composed of key stakeholders empowered to drive sector transformation. KUSCCO’s credibility must be restored as it assumes a central role in the sector, with rebranding seen as essential to signal accountability, professionalism, and alignment with the broader move toward a National Cooperative Federation.

A major recommendation focuses on the establishment of a Stabilisation Protection Scheme Kenya (SPS-K), designed to support SACCOs facing financial challenges, guide mergers, or oversee liquidation where necessary.

The scheme aims to protect member deposits, prevent sector-wide confidence crises, and facilitate the recovery of struggling SACCOs. KUSCCO, with its nationwide reach, institutional experience, and trusted presence, is deemed best placed to convene and manage the scheme.

Its federated structure allows for multi-stakeholder engagement, including donor partners, government agencies, and SACCO unions, ensuring transparency, accountability, and broad sector representation.

The committee recommends that KUSCCO be formally mandated, under the oversight of the National Steering Committee for SACCO Development, to operationalize SPS-K with clear governance protocols, ring-fenced funding, and independent audits.

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Experts say this will stabilize distressed SACCOs, rebuild public trust, and reinforce KUSCCO’s transformation into a modern, values-driven cooperative federation. They also stressed that the scheme should be enshrined in law to allow the collection of funds from SACCOs, ensuring long-term sustainability and sector resilience.

Released on February 16, 2026, and commissioned by Cabinet Secretary Wycliffe Oparanya, the report which has now been presented to President William Ruto signals a critical turning point for KUSCCO and Kenya’s SACCO sector, urging decisive action to restore trust and strengthen the cooperative financial system.

The national government and regulators have already introduced reforms, including restructuring KUSCCO’s leadership with a new interim board, recovering lost funds through the sale of non-core assets and loans, and strengthening regulation of SACCOs through proposed amendments to the Sacco Societies Act.

Further reforms include the creation of a Central Liquidity and Shared Services Framework to provide emergency liquidity and support inter-SACCO transactions, as well as a Deposit Protection Fund to safeguard member deposits in case of cooperative collapse.

These measures are aimed at rebuilding confidence in SACCOs, improving governance, enhancing regulatory oversight, recovering lost funds, and introducing financial safety nets to protect members’ savings.

This comprehensive reform agenda represents a decisive step toward restoring credibility, strengthening financial stability, and safeguarding the interests of SACCO members across the country.

By Obegi Malack

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