While there is still a lack of clarity on what led to the exit of former Kenya Union of Savings and Credit Co-operative Society Chief Executive George Ototo and Board Chairman George Magutu, details are slowly emerging that these two officials might have resisted attempts by unnamed state officers to take over the running of its lucrative Central Finance Facility (CFF).
Although KUSCCO shareholders had notified Sacco Societies Regulatory Authority (SASRA) some two years ago that it was running an unlicensed inter-Sacco lending platform, SASRA is said to have ignored this alert, prompting these KUSCCO officials to approach the Central Bank of Kenya (CBK).
On the other side of this confusing debate are allegations leveled against KUSCCO officials that when SASRA attempted to audit its operations, the Union rushed to court to stop the process through an injunction.
Trouble for the former management and Board at KUSCCO began on November 15, 2023, when the Union obtained a court order stopping SASRA from auditing its operations, insisting that KUSCCO was a lobby group that was only answerable to the Commissioner for Co-operatives.
It was also during this period that it had become apparent that the Ministry of Co-operatives and MSMEs Development was shopping for an inter-Sacco platform, a development that has led KUSCCO to tighten its grip on its underfunded and unregulated, but the only inter-Sacco lending platform in Kenya.
According to C0-operative CS Chelugui, his directive to SASRA to probe KUSCCO was within Section 49 of the Sacco’s Act, which gives SASRA the authority to inspect any Sacco as ordered by the minister and also the authority to assist any investigative authority regarding matters of suspected fraud or malpractices in Sacco societies either by identification of such matters for referral or at the request of such by the authority.
“This directive was issued under section 49 of the Sacco Societies Act. SASRA commenced the inspection and provided constant updates on the progress. However, on November 15, 2023, the inspection was stopped through a court order,” said CS Simon Chelugui.
The motives behind the KUSCCO probe by SASRA remain scanty, with some linking it to political maneuvers. However, KUSCCO made a hasty retreat to invite supervision upon realizing that its CFF was facing a threat of either competition or a hostile takeover.
While the Ministry of Co-operatives and Medium, Small, and Microenterprises Development recently directed SASRA to probe the unregulated deposit-taking business of KUSCCO, it is now apparent that the Sacco lobby had written to the Central Bank of Kenya(CBK) more than two years ago, claiming that SASRA had left it out of its regulatory oversight lenses.
This is even though KUSCCO is one of the largest players in the Sacco sub-sector, holding over Ksh 20 billion in member funds and deposits.
KUSCCO members claim in this letter to CBK, dated February 25, 2022, that the reason for the omission stems from the fact that their origin is an umbrella advocacy body.
In a communique to SASRA Chief Executive Officer Peter Njuguna, dated March 17, 2022, CBK said KUSCCO had, in the intervening period, engaged in commercial activities that include deposit-taking and lending activities. Members of KUSCCO also admit that they have gone ahead and engaged in other additional activities that did not have a nod from the Sacco sector regulatory body.
It is unclear why SASRA failed to work on this alert and the concerns from CBK and KUSCCO shareholders, only to turn around and term these Union financial activities as unlicensed. This is after pushing the matter to the backburners for more than a year.
The letter from CBK’s then-governor, Dr Patrick Njoroge, said SASRA has a role to play in ensuring the sustainability and financial stability of deposit-taking Saccos. While urging SASRA to take a seizure of matters raised by KUSCCO members, SASRA appears to have ignored these concerns, leaving KUSCCO to operate in a legal vacuum.
In a strange twist of events, KUSCCO’s long-serving Managing Director, George Ototo, and National Chairman, George Magutu, suddenly resigned without a word on January 15, 2024. The Board of KUSCCO has since replaced them without offering any concrete reasons for the drastic action.
The KUSCCO Board went ahead and appointed David Langat from Imarisha Sacco as its new chairman, while Arnold Munene was picked as acting managing director with effect from January 15, 2024. It also appointed David Moyia from Invest & Grow Sacco as the new Vice Chairman.
KUSCCO was registered on September 19, 1973, under the co-operative societies act as an umbrella body for Saccos. Its main mandate is the promotion of Saccos through Advocacy, provision of Financial Services and Training, Research and Consultancy, and Central Finance Facility, among other offerings. The giant Union has a membership of over 4,000 Saccos across Kenya.
Clarity concerning the fate of the KUSCCO Central Finance Facility, which is said to be unlicensed, as well as its other lending activities, could become clearer when the Union holds its 9th Annual Sacco Leaders Convention in Mombasa between 19th and 23rd February 2024.
This annual event targets Sacco board members and top management staff, Government policy makers, country government officials, and corporations.
The Chief guest will be Co-op Cabinet Secretary- Simon Chelugui, while keynote speakers will include Patrick Kiburi Kilemi, PS at the State Department for Co-operatives, and David K Obonyo, Commissioner for Co-operatives.
The theme of this convention is Diversity, Equity, and Inclusion New Landscape for Saccos.
This convention will address important issues, including the future of financial inclusion, climate-smart financing, the inclusive growth agenda, financial turbulence, diversity, equity, and other issues that Saccos are currently facing.
While KUSCCO is the largest lobby group for the Sacco sector in Kenya, it has had to deal with sibling rivalry from such organizations as the Co-operative Alliance of Kenya (CAK), among others.
While introducing the new KUSCCO Board and Management recently, CS Chelugui insisted that the move to clean up the Union is to instill good corporate governance practices and to ensure stability in the sector.
