Government announces new SACCO rules after KUSCCO scandal
The government has announced several strict measures to regulate the SACCO industry after the sensational scandal involving the Kenya Union of Savings and Credit Co-operatives (KUSCCO)
The government has announced several strict measures to regulate the SACCO industry after the sensational scandal involving the Kenya Union of Savings and Credit Co-operatives (KUSCCO).
Commissioner of Cooperatives David K. K. Obonyo issued an update on Monday, March 3, detailing new measures set to be put in place to regulate SACCOs, who will now be forced to tow the line in a bid to curb the daunting issue of mismanagement of members’ funds.
Obonyo revealed the Ministry of Co-operatives had conducted a thorough inspection through Ministry auditors and the KUSCCO’s Interim Board, which brought forth startling revelations.
One of the key discoveries was that the exaggeration of dividends was one of the major financial irregularities the institution was grappling with.
To curb this problem, the commissioner revealed several directives the Ministry has issued to regulate how Saccos declare and distribute dividends and interest on deposits, preventing unrealistic or unsustainable returns.
“One of the issues has been falsification of records,” Obonyo said. “Kussco was trying to declare surplus dividends from losses, which was wrong.”
While addressing what he termed as ‘arranged misappropriation of funds’, Obonyo added, “We have identified the root cause of the problem. We have issued a circular to regulate the issuance or declaration of dividends on the interests on deposits. That alone will cap exaggerated dividends.”
Further, the government also announced plans to regulate SACCO investments to ensure they focus on their core functions, which is mobilizing deposits and lending. With this, SACCOs that wish to venture in projects such as housing and land will be forced to register a separate entity.
“We have issued a circular on investments. SACCOs will remain to their core mandate. We don’t want them to divert their members’ funds which will make members lose their funds,” the commissioner asserted.
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The new measures comes just weeks after the DCI arrested four suspects believed to be part of the multi-billion scandal at KUSSCO.
Besides conspiracy to defraud, the suspects faced charges including theft allegedly committed by the directors and officers of companies, which is contrary to Section 282 of the Penal Code, and making false documents.
A forensic report on KUSCCO has since been handed to the Directorate of Criminal Investigations (DCI) for further scrutiny before further action and punishment for any wrongdoing.
Meanwhile, the Cooperatives Bill 2024 is under review in the Senate and if it is passed, it will radicalize how SACCOs operate. Amendments to the Sacco Societies Act could also see the introduction of a Central Liquidity and Shared Services Framework, which would provide more mechanisms to stabilise SACCOs during times of financial adversity.
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