Stakeholders in the cooperative movement have now called for urgent measures to ensure that the country’s Sacco umbrella body, the Kenya Union of Credit Co-operatives (KUSCCO), is regulated for safety of funds and restore the image of the union.
This comes after the Cabinet Secretary (CS) for Cooperatives and MSMEs Development Simon Chelugui dissolved the KUSCCO board after preliminary findings indicated systemic deficiencies in the management of resources.
Chelugui went ahead to appoint an interim board headed by the police Sacco chairman David Mategwa.
The findings showed that there was irregular withdrawals of Ksh5.46 billion over 11 years between February 2013 and April 2024. Broken down, the amount cumulated from suspicious cash transfers of Ksh318,160,172 to company secretary, and loans to Group Managing Director (Ksh50 million), Company Secretary KUSCCO Housing Society (Ksh4.5 million), and Head KUSCCO Housing Cooperative (Ksh7 million).
Further, there was a double purchase of the same land priced at Ksh80,546,000, suspicious cash transfer of funds to insurance agencies amounting to Ksh434,160,379, cash transfers from KUSCCO accounts to staff accounts with the Group Managing Director receiving Ksh67,035,452.35, while two other members of staff received Ksh118,046,999.90 and Ksh15,986,289.
Other preliminary findings of the audit were inter-subsidiary cash transfers, KUSCCO operating unregulated FOSA (Front Office Service Activity) – KUSASA – which is neither a registered FOSA nor a microfinance, an irregular account opened for KUSASA under KUSCCO CIF, customers’ cheques received at KUSASA endorsed and deposited at KUSCCO account for clearing, and the bank not indemnified on third party cheques.
And now stakeholders, especially from the Sacco sub-sector who recently spoke to Sacco Review, have called for regulation of the Sacco’s umbrella body, notably by the Sacco Society Regulatory Authority (SASRA).
Too much at stake
Ufanisi DT Sacco Chairman CPA Tom Okeyo Akeno noted that KUSCCO, being one of the lead institutions in the country, should not have been allowed to go down the drain.
“There’re some Saccos which have deposits with KUSCCO and those deposits are now in jeopardy because the money which is being alleged to have been misappropriated is for Saccos, which is the danger it poses to the sub-sector; I believe people will be following very keenly on how this matter is going to be resolved,” said Akeno.
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“But before it is resolved I am sure it is also going to have a negative effect on the sector. I am really praying that the matter is handled to a logical conclusion to allay fears, but I will tell you that Saccos which may have funds tied there will find themselves in problems,” he added.
According to Akeno, when KUSCCO refused to be regulated by SASRA, it was left to the oversight of the cooperatives ministry. However, considering how the union has evolved over the years, it was hard for the ministry to watch over such a complex institution.
“Any outfit that is having some form of deposits from the public should actually come under the ambit of SASRA, weather it is a cooperative or a Sacco. For the record, SASRA started with Saccos with more than Ksh100 million; now they have incorporated non-deposit taking Saccos. That is the direction to go and nobody should be left out,” reiterated Akeno, suggesting that SASRA’s capacity should be built to the level of Central Bank of Kenya (CBK) that controls all banks and non-banking financial institutions.
Whose fault?
Jamii Sacco Chief Executive Officer (CEO) CPA Daniel Achieng’ wonders why such an institution would have operated for all those years without being regulated.
“How can an institution operate for those years without any regulation especially that it deals with public funds? We are now being reactive to something that has happened. As much as we are blaming the top leadership of KUSCCO, we are also blaming the government,” observed Achieng’. “I think the measures that have been taken in respect to the financial problems or management issues at KUSCCO will be able to put the matter to rest and also secure investors’ funds in the long run.”
Achieng’ urged Saccos not to pull out of the union en-masse as it needs their support across board.
“It’s very important now that we support them and not pull out en-masse. You know it is the only advocacy body in Kenya for Saccos. So it is of paramount (importance) that KUSCCO be supported both at the stakeholder and government levels so that it is able to do its business, but that must be done in accordance with the law,” he said.
In January this year, the union made changes to its top leadership, parting ways with National Chairman George Magutu and the Group Managing Director George Ototo, with David Lang’at of Imarisha Sacco taking over from Magutu, David Moyia of IG Sacco becoming the Vice National Chairman, and Arnold Munene replacing Ototo.
By Roy Hezron
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