Cooperatives Principal Secretary (PS) Patrick Kilemi has warned Savings and Credit Cooperative Organizations (SACCOs) against venturing into unregulated investments, urging stronger governance structures and tighter internal controls to protect member funds.
Speaking at the 1st Regulatory Policy and Legal Roundtables for NWDT SACCOs, PS Kilemi said the growing appetite for investments outside the regulatory framework poses a serious threat to the sector’s stability.
“The biggest problem we have is that nowadays SACCOs want to invest outside the regulatory framework,” Kilemi said
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He cautioned that even excess liquidity must be deployed strictly in line with SASRA guidelines. “If you want to invest in things like land, you have to notify the regulator, since land is not regulated,” he stressed.
Kilemi urged SACCO boards to avoid rushing into decisions on surplus funds and warned against pressuring chief executives who object to risky proposals. He said such pressure often leads to costly mistakes that undermine member confidence.
On governance, Kilemi called for wider adoption of the delegate system, particularly in cooperatives with more than 5,000 members. He explained that while annual general meetings remain useful for member engagement, the delegate system provides a structured decision‑making organ capable of handling complex matters such as investment approvals.
Turning to technology, Kilemi encouraged SACCOs to embrace modern e‑systems to improve efficiency. However, he emphasized that digital platforms cannot replace proper reconciliation of member accounts. “As much as we trust in the e‑system, there is no replacement for reconciliation,” he said.
Kilemi also raised concerns about the role of auditors in SACCOs, noting that many have become too flexible with leadership instead of pointing out critical issues. He warned that compromised auditing practices expose loan books and e‑systems to manipulation. He urged SACCOs to vet the calibre of auditors carefully they hire to ensure they match the scale and complexity of the institutions they review.
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PS Kilemi reminded SACCOs of their obligation to safeguard member funds, given the large asset base they hold under SASRA’s oversight. He further stressed the need for clear demarcation of roles between boards and chief executives, drawing lessons from countries with mature cooperative sectors. “SACCOs must re‑imagine how they perceive the roles of CEOs and boards to ensure competence and professionalism at the executive level,” he said.
Kilemi concluded by challenging cooperative leaders to be accountable in their use of member funds, particularly when travelling abroad. He urged them to explain the purpose of international meetings and demonstrate the value such engagements bring to their institutions.
By Masaki Enock
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