Savings and Credit Cooperative Societies (Saccos) have been warned against taking loans to pay dividends, with Cooperatives Cabinet Secretary Wycliffe Oparanya cautioning that such actions could result in legal penalties starting next year.
He stressed that loss-making Saccos must stop this practice, which compromises the stability of the sector.
Speaking at the Kenya Union of Savings and Credit Co-operative Societyâs (Kuscco) Annual Leadersâ Summit in Mombasa, Oparanya highlighted that Saccos are not charitable entities and must prioritize sound financial management.
He noted that with over Ksh. 1 trillion in member deposits, the sector plays a significant role in Kenya’s financial ecosystem, and mismanagement erodes trust.
Oparanya also drew attention to instances of financial mismanagement within Kuscco, including a case where members lost Ksh. 11 million due to poor oversight. The government, he stated, has initiated investigations to recover these funds and improve governance within the sector.
In the coming weeks, Kusccoâs interim board plans to convene a meeting to review findings from a forensic audit conducted by PriceWaterhouseCoopers (PwC). This session will address governance challenges and chart a path forward, ensuring transparency and accountability.
The CS urged Saccos to hire reputable audit firms with the expertise to handle their large financial portfolios. He emphasized that audits are critical tools for protecting members’ savings and not just regulatory formalities.
Additionally, the proposed Cooperatives Bill 2024 aims to introduce reforms to enhance governance and safeguard member deposits. Oparanya encouraged Saccos to adopt modern technologies and robust cybersecurity measures to prevent fraud and data breaches.
He further emphasized that all Saccos, regardless of size, must be subject to thorough oversight. While the Sacco Societies Regulatory Authority (Sasra) plays a key role, other entities must also contribute to ensuring compliance and accountability.
Kuscco Chairman David Mategwa outlined the progress made by an interim board appointed earlier this year to oversee recovery efforts. This includes registering a new Secondary Co-operative Society to manage central financial operations under Sasra’s regulation.
The sectorâs contributions to Kenyaâs economy are notable, with Saccos holding over Ksh. 700 billion in deposits and assets. Kusccoâs Managing Director Arnold Munene reported that Saccos disbursed Ksh. 460 billion in loans across key sectors in 2023, including agriculture, housing, education, and MSMEs. Total membership has also grown, reflecting increased confidence in the cooperative model.
By Nairobi