The government has rolled out a series of stringent policies aimed at reining in Savings and Credit Cooperative Societies (SACCOs). These actions follow the sensational KUSCCO scandal that rocked the sector and brought urgent attention to potential misuse of members’ funds.
On Monday, March 3, Commissioner of Cooperatives David K. K. Obonyo announced new rules that will force SACCOs to stick to their core purpose of collecting deposits and issuing loans. His office, in conjunction with the Ministry of Co-operatives and KUSCCO’s Interim Board, recently concluded a comprehensive inspection that unearthed alarming financial irregularities.
“One of the issues has been falsification of records,” Obonyo said. “Kussco was trying to declare surplus dividends from losses, which was wrong.”
The probe revealed that inflated dividends were a major challenge, prompting tighter control of how SACCOs declare returns. “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,” Obonyo added.
Under the new guidelines, SACCOs will also face restrictions on certain investments. If they wish to venture into areas like housing or land, they must register a separate entity to protect members’ deposits. “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.
The crackdown comes just weeks after detectives from the Directorate of Criminal Investigations (DCI) apprehended four suspects in connection with the multi-billion shilling KUSCCO debacle. The suspects face charges ranging from conspiracy to defraud to making false documents, with the DCI now reviewing a forensic report for possible further action.
In parallel, the Cooperatives Bill 2024 is under debate in the Senate. If passed, it could introduce a Central Liquidity and Shared Services Framework, giving SACCOs additional tools to weather financial turbulence.
