According to the Sacco Societies Regulatory Authority (SASRA), legal and policy lacunas are to blame for the billions in losses at the Kenya Union of Savings and Credit Cooperatives (KUSCCO).
According to the Sacco regulator, its members have lost Ksh14 billion, which could have been stopped nearly three years ago. The body says that disparities in policy and the slow pace of developing new policies created a loophole for KUSCCO to continue operating, a factor that has resulted in the loss of 10 per cent of core capital in 201 Saccos in the country.
An attempt to change the laws initiated in 2022 could have saved billions of shillings, according to the regulator.
A forensic audit conducted by PwC revealed significant financial misconduct at KUSCCO where high-ranking executives illicitly forged the signature of a deceased auditor to authorise manipulated financial statements. This fraudulent activity jeopardised Ksh13.3 billion in Sacco deposits.
The audit uncovered a range of unethical practices including extensive embezzlement, bribery, and deliberate financial misreporting, culminating in a staggering insolvency of Ksh12.5 billion.
In an interview with NTV’s Julians Amboko, SASRA CEO Peter Njuguna revealed that KUSCCO, which was created as an advocacy union for Saccos, had begun wading into the financial services, which prompted the regulator to ask questions.
That was in 2022. After exchanges between SASRA and KUSCCO, the authorities realized their discussion was about policy—specifically, whether SASRA had the mandate to regulate KUSCCO, a secondary Sacco whose membership is other SACCOs or cooperative societies rather than individuals.
SASRA maintained that KUSCCO should not enter into financial services and should remain in its advisory role. But, since no actual policy or law was forcing SASRA to mandate KUSCCO, it wrote to then Cooperatives and MSMEs Cabinet Secretary Simon Chelugui, seeking help to establish policy reforms.
“We are looking at a situation where if these policy reforms were concluded, I think we would be having a different story. KUSCCO would have separated (advocacy and financial) maybe for the last three years,” Njuguna told NTV.
Njuguna explained that as investments in government stocks began to decline, SASRA started asking its members to revisit their investment choices. This prompted several Saccos to reconsider their investment levels in KUSCCO, helping some of them mitigate losses.
“We started winding down in KUSCCO; that was evident. And it was assumed it is us (SASRA) who are discouraging Saccos from investing there (KUSCCO),” he said.
Adding, “We were asking questions. Asking our members, where are you putting your money? And out of that, some made the decision that in the boardroom, we would only invest in regulated entities. If it is a non-regulated entity, we put this little.”
However, according to Njuguna, Kenyans who have money in the Saccos should not be worried since the financial hit will not affect deposits in the Saccos. According to the SASRA boss, the loss, although significant, will only affect dividends and interests and not actual savings in Saccos.
“Their deposits are safe. There is no cause for alarm. Don’t make panic withdrawals because panic will actually cause a crisis,” he asserted. Adding, “Most Saccos have enough liquidity to cushion against any risks.”
Source: kENYANS.CO.KE