The government has launched a crackdown on rogue entities masquerading as Savings and Credit Cooperative Societies (Saccos), warning that the era of operating outside the law is coming to an end.
Speaking during the 11th Annual Sacco Leaders Convention in Mombasa, Patrick Kilemi, the Principal Secretary for the State Department of Cooperatives, revealed that several organizations are illegally using the “Sacco” name to lure unsuspecting members of the public.
To combat this, the PS announced that the government is compiling a comprehensive, publicly accessible database of all legally registered cooperatives. This database will serve as a primary reference for the public to verify the legitimacy of any institution before committing their money.
However, progress remains slow. According to Kilemi, fewer than 3,000 cooperatives have integrated into the new system so far.
“Not a Valentine’s Card”
The Principal Secretary also took aim at large Saccos that have failed to implement a government circular regarding the “delegate system”—a structural requirement for managing large-scale memberships. He issued a stern six-month ultimatum to non-compliant institutions, starting with the industry’s largest players.
“Why can’t we engage through the established industry mechanisms?” Kilemi questioned. “That circular is not a Valentine’s card. Those who have not complied should show cause why they should not be de-registered and barred from operating as cooperatives. We are giving them six months, and we are starting with the big ones.”
Suspiciously High Dividends
In a move to ensure financial stability and transparency, the PS signaled a shift in how the government evaluates success within the sector. He revealed that during this year’s International Day of Cooperatives (Ushirika Day) in October, Saccos boasting the highest interest rates and dividends will not necessarily be celebrated.
Instead, the government will scrutinize the “cost of money” to protect ordinary members from predatory lending hidden behind high returns.
“That money comes from somewhere,” Kilemi warned. “When you see you’re being paid a 20% dividend or 13% interest rebate, you must ask: where is that money coming from? If you are giving out loans at 12%, but paying out 20% in dividends, the math doesn’t add up.”
He suggested that some Saccos might be masking exorbitant interest rates on emergency and small-scale loans to fund these high dividend payouts—a practice he characterized as unfair to the general membership.
“Saccos often talk about ‘weighted average cost’ to justify these dividends, but that cost is often driven by emergency loans where members are charged exorbitant interest. Are we being fair to our members? At what point do we prioritize fairness over optics?”
The PS reiterated that all cooperatives must operate strictly within the stipulated rules and regulations to ensure the long-term health of Kenya’s multi-billion-shilling cooperative sector.
