By Malachi Motano
The employer based Saccos must now adopt alternative methods to generate income and remain afloat even during difficult economic times like the current Covid – 19 pandemic, rather than relying on the unreliable employers who might remit their employees deduction at their own volition, leaving the societies at the verge of collapse when they cannot support their operations.
“Non -remittance of the dues is crippling operations, making it almost impossible for the Saccos to transact optimally as their financial bases were running out due to low liquidity levels. The impasse’ disrupts the financial base of the credit unions and the delay contributes to high non-performing loans,” said Ukulima Sacco Chairman Philip Cherono
The deductions are in the form of either loan recovery or non-withdrawable deposit accounts, popularly known as back office service activities.
He said some of the notable defaulters are institutions of higher learning which have since the onset of Covid- 19 pandemic failed to remit employee’s deductions, a trend that has led to non-performance and servicing of running loan packages.
According to the Cooperatives Commissioner Geoffrey Njang’ombe, issues of non-remittance of statutory deductions at the universities is historical and was aggravated by stoppage of parallel programs, where there was a lot of monies going to the universities.
“To ensure their Saccos continue to operate, we are advising them that all their members should patronize their front office activities (Fosa) products. These are all deposit taking (DT) Saccos with Fosa. Through patronization, all their dues, salaries will be channeled directly to the Fosas,” he said.
His sentiment was echoed by Kenversity Sacco Chief Executive Officer: (CEO) Alfred Korir.
“University owes us (the Sacco) about Sh300 monthly million deductions. We therefore asked our members to channel their salaries through the Sacco so that they receive their payments from us after we deduct our share. That is what has worked well for us for the last two years,” he said.
Kenya Union of Savings and Credit Co-operatives (Kuscco) Managing Directors George Ototo said remittance of statutory, loan and members’ deductions to Saccos and banks is a mandatory employer obligation.
However, University Academic Staff Union (UASU) Secretary General Dr. Constance Wasonga said failure by the institutions’ managements to remit the deductions is a criminal offence which should be dealt with by the law.
The government had warned that employers who default remitting their employees deductions to their respective co-operative societies within the stipulated period risk facing hefty fines.
“For committing such an offence, the employer shall be liable to pay the sum deducted together with compound interest at the rate of not less than five per cent per month,” says Nathan Mukhweso, former Kakamega County Cooperative Commissioner.
He said the law gives powers to the Commissioner of Co-operative Development to direct any bank to transfer to the respective Sacco funds that have been deducted from employees’ salaries and not remitted.
“The government reserves the right to order for transfer of any money if it is proven that the employer deducted from the employees’ salaries and failed to remit the same to their respective Saccos within the prescribed seven days after the date upon which the deductions were made,” said Mukhweso.
According Sacco Societies Regulatory Authority (Sasra) reports, the highest proportion of total non-remitted deductions is owed by public universities and colleges.
“The highest proportion of the total non-remitted deductions amounting to Sh2.86 billion, representing 74.03 per cent of the total non-remitted deductions was owed by the public universities and tertiary colleges,” Sasra says in its latest report.
The total amount which was not remitted to the deposit-taking Saccos increased to Sh3.86 billion last year.
With five deposit-taking Sacco societies whose membership are directly drawn from the public universities and other tertiary institutions, the non-remittance is likely to impair the ability of the Saccos to meet their financial obligations to members, and affect their financial stability.
While three public universities released Sh587.2 million in statutory deductions to Savings and Credit Co-operatives (Saccos) which they had failed to remit by December last year owing to liquidity challenges, Kuscco maintains that the amount remitted by Egerton University, University of Nairobi and Kisii University is just part of the total Sh4.3 billion that was owed by universities, county governments, water and fresh produce companies as at the close of 2020.
“We appealed for remittance of outstanding check-offs owed to Saccos and so far we have seen positive results with Chuna Sacco payment of Sh275.9 million owed by the University of Nairobi. Egerton Sacco was also paid Sh5.3 million by Kisii University and Shs.306 million by Egerton University by December, 2020, excluding interest and penalties,” Ototo said.