Cooperative sector practitioners have expressed concerns over the manner in which Saccos and cooperatives are declaring dividends and interest on deposits, as well as honoraria payments.
Through Kenya Society of Professional Co-operators (KSPC), the practitioners observed that there are a lot of malpractices among cooperatives in the way dividends, interest on deposits and honoraria are paid.
The practitioners suggested that the three are different and should be treated as such.
“The professionals noted that there are a lot of malpractices, unethical behaviour and unprofessionalism in the way dividends, interest on deposits and honoraria are declared,” reads the resolution of the members contained in a dispatch seen by Sacco Review.
According to the practitioners, dividends and bonuses should be declared from surpluses after operations; and that as provided for by the Cooperative Societies Act, general meetings must be involved in the appropriation of dividends and bonuses after consideration of audited reports.
They observed that many cooperatives are apportioning dividends through the chairperson reports even before adopting the audit report.
On honoraria, they aver that the expense is meant to appreciate the contribution of the board of directors to the performance of cooperatives, and should be appropriated from realised surpluses.
They also see that many cooperatives hide these expenses under the provision of interest on deposits, making it unaccountable, unprofessional and dishonest.
The cooperators further stated that interest on deposits in cooperatives, as it is in other financial institutions, is provided as an expense (cost of finance).
“This is not an appropriation element from operating surpluses as is the case of dividends, and cooperatives must charge interest on loans at a higher rate to cover this cost and permit a margin to cover other administrative costs and leave a margin for a surplus,” the cooperators argue.
They noted with concern that many cooperatives do not have any clear criteria when apportioning this expense and have no regard to the continuing escalation of the cost of their products and the continuity of the organization.
The practitioners’ comments come at a time Saccos have been cautioned against issuing ‘abnormal’ dividends in a bid to retain members, with Kenya Union of Savings and Credit Cooperatives (KUSCCO) Managing Director George Ototo warning that it is unsustainable to pay out huge returns to members while struggling to meet overhead costs.
The professionals have also called for the establishment of a regulatory authority for non-financial cooperatives to ensure only serious organizations are allowed to operate, thereby maintaining public confidence in the sector.
They further called for realignment of cooperatives to conform with their registered objectives, noting that some are publicly known to target a certain objective but in reality, they are involved in other services.
This has encouraged multiplicity of operations and promotion of pyramid scheme-like tendencies.
Regarding cooperatives leadership, the professionals called for the appointment of independent directors who should be members of the same cooperative, since the greatest drawback to promotion of professionalism in cooperatives is the electoral process of identifying popular leaders who may not be acquainted with leadership and managerial qualities.
The KSPC members resolved to promote professionalism within the cooperative sector through continuous acquisition of knowledge on the cooperative business model, adoption and practice of cooperatives ethical beliefs and practices, cultivation of positive attitude for accountability and service delivery, championing the cooperative philosophy and practice, and promoting youth and gender inclusion by adopting strategies like road caravans and invitation of members’ children to general meetings, among others.
By Roy Hezron
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