Saccos in the country are now bearing the brunt of negligence at the Kenya Union of Saccos and Credit Cooperative (Kuscco) that has so far seen a Sh 13.3 billion worth of losses leaving the union insolvent by Sh 12.5 billion. 

Illegal withdrawal of the cash from the umbrella body  has been as result of poor management that now puts the hard-earned monies by depositors into the saccos depending on their exposure to the union at risk. 

Kuscco is mandated to be providing financial cover to saccos in the country, however, due to failing on this mandate, saccos are now facing longer periods for the recovery of the lost millions, with some up to 10 years to be able to regain their financial balance. 

Tower Sacco, a deposit taking Sacco, is set to lose Sh 112. 4 million that it had placed as a Fixed Deposit Receipt (FDR) at Kuscco.

Balozi Sacco on the other hand has written off approximately Sh 437.5 million out of which 299.2 million had been placed as special deposits, making the biggest chunk.  At the same time, Qona Sacco expects to see a Sh137 .4 million it had invested at the umbrella body sink. Sh 104 million was channeled as interest earning deposits while 30.7 as shares. 

As indicated in their financial results, members of the law society of Kenya are also set to lose Sh 19 million which was a balance from Sh 61.9 deposits after they received Sh42.18 million. Mhasibu and Kimisitu saccos on their part are expecting to lose Sh480 million and Sh353 million respectively. 

This just highlights the losses that the about 247 saccos are poised to experience, sending a negative signal to investors. The body had collecte deposits amounting to 24.8 billion from the saccos.  Meanwhile, in November last year, an internal audit report revealed that approximately Sh12.5 billion had been lost as a result of “illegal” withdrawals and poor management structures.  

The top Union’s officials during the same year had been found to have squandered Sh 6.56 billion in the past decade, an occurrence that prompted Kuscco board to be disbanded by the then Micro Small and Medium Enterprises (MSMEs) Cabinet Secretary Simon Chelugui.

Affiliate cooperatives

“Effective immediately, i the CS for cooperatives and MSMEs Development hereby announce the dismissal of the current board of directors. Furthermore, the commissioner for cooperatives development is directed to appoint an interim board of 15 members drawn from esteemed leaders of affiliate cooperatives,” Chelugui said.  

As a result of the inconveniences, Arnold Munene, the Acting managing director of Kuscco now wants the government to help salvage the situation saying, “it will be irresponsible for Kuscco which plays a central role in the survival of the Sacco industry, to collapse. It is not too late to salvage it.”    = According to the Sacco Societies Regulatory Authority (SASRA) annua) supervision report 2023, if the union, surviving on a thread, collapses the industry will have dealt a huge blow which might take decades to rise again.  

As one of the strategies to help cushion saccos from facing liquidation challenges, David. K. Obonyo in an interview advised saccos to limit dividend payout to its members even as the annual reports continue to be published. 

Instead of giving all the profits to the members, get a portion of it and set aside as a provision. It is a good practice especially now that they are declaring dividends so that they don’t declare a lot of dividends anticipating there is money from Kuscco, and this provision comes from the surplus they are releasing,” he advised. 

Despite the ongoing interventions, the development still puts the saccos in a precarious position as their members might have been triggered, wanting to withdraw their monies from them. 

Members over the recent past have been enjoying great dividends from their investment, but this may not be the case at least for now.   “We have asked SASRA to look at the requirements of the IFRS 9 which guide on provisions and we have said that the circumstances, we localise a solution so that we protect the movement.