In the wake of the Kenya Union of Savings and Credit Co-operatives (KUSCCO) crisis, the government has announced a number of stringent steps to control the SACCO sector.
On Monday, March 3, Commissioner of Cooperatives David K. K. Obonyo provided an update on the new regulations that would be put in place to control SACCOs. SACCOs will now have to adhere to more stringent rules in an effort to stop the rampant mishandling of members’ money.
Obonyo disclosed that the Ministry of Co-operatives had carried out a comprehensive examination using KUSCCO’s Interim Board and ministry auditors, revealing shocking results. One of the most important findings was that one of the main financial irregularities the institution was dealing with was the exaggeration of profits.
In order to prevent irrational or unsustainable returns, the commissioner listed a number of ministry-issued rules that govern how SACCOs declare and disburse dividends and interest on deposits.
Speaking about what he called the “planned misappropriation of monies,” Obonyo continued, “We have determined the underlying source of the issue. To control the issuance or declaration of dividends on interest on deposits, we have released a circular. Exaggerated dividends will be limited by that alone.
In order to guarantee that SACCO investments concentrate on their primary duties of lending and deposit mobilization, the government has also announced steps to control them. The new rules will force SACCOs to register as a distinct business if they want to engage in projects like real estate and housing.
Only a few weeks have passed since the DCI detained four people in connection with the multibillion-dollar KUSSCO affair.
In addition to conspiracy to defraud, the suspects were charged with producing fraudulent documents and stealing from company directors and officers, which is against Section 282 of the Penal Code.
Since then, the Directorate of Criminal Investigations (DCI) has received a forensic report on KUSCCO for additional review before to any further action or penalty for any misconduct.
In the meantime, the Senate is considering the Cooperatives Bill 2024, which would fundamentally alter the way SACCOs function if it is approved. A Central Liquidity and Shared Services Framework may also be introduced as part of amendments to the Sacco Societies Act, offering additional tools to stabilize SACCOs in difficult financial times.
