Keep off unlicensed Saccos, cautions Cooperatives CS

Cooperatives Cabinet Secretary Wycliffe Oparanya has warned Kenyans against investing in unlicensed or unregulated Saccos.

The warning comes at a time when several Saccos are under probe over withdrawal of customers' deposits and delayed refunds for exiting members.

Metropolitan Sacco, whose majority of members are teachers, is under investigation after its managers allegedly withdrew Sh15 billion while Kenya Union of Savings and Credit Cooperatives board was dismissed after an audit showed it withdrew over Sh5 billion between 2013 and 2024.

Speaking Wednesday when he launched the Sacco Supervision Annual Report, 2023, by the Sacco Societies Regulatory Authority (Sasra), Oparanya asked the public to confirm the list of approved Saccos from the authority's website.

“Sasra has on a continuous annual basis published the licensed and authorised Saccos in the Kenya Gazette and the national newspapers as required by law. This list is always made available on Sasra’s website throughout the year. The government is therefore calling upon the public to strictly avoid investing their savings in entities which are not licensed,” he said.

“I also call upon the regulated Saccos together with other stakeholders particularly the media, to join hands in educating the public on the financial perils of undertaking Sacco business with unlicensed entities, especially those pyramid-like entities,” he added.

The CS was optimistic that the Cooperatives Bill 2024 once enacted into law will deal with issues of governance.

He said good governance by members includes appointing external auditors with the professional and organisational capacity to protect the interests of members.

“There’s no reason why a Sh10 billion asset Sacco should be audited by one partner firm. This has the risk of affecting independence and objectivity of the auditor,” he said.

Oparanya called upon the sacco industry to quickly align itself to the policy vision of the government as captured in the Cooperative Bill 2024, where a Federation of Saccos is proposed.

“Like other industry associations, I will expect the Federation to be the custodian of good governance as it has both the legal and moral authority given the huge public interest saccos as deposit taking financial institutions carry,” he said.

 “The Sacco industry through a Federation must own, promote and uphold good governance practices through public education and self-regulation with Government left to intervene and enforce compliance for any transgressions,” he added..

Oparanya also challenged Saccos to deal with refunds while counties and universities to deal with non-remittances, which he said is a menace that has continued to affect many Saccos, which rely on employer institutions to deduct and remit member deposits and loan repayments.

In 2023, he said non-remitted amount stood at Sh2.59 billion with 82 Saccos, an improvement from the high of Sh3.4 billion reported in 2021.

"Sadly, the biggest culprits in this challenge remain public sector employers led by County Governments owing Sh865 million or 33 per cent, public universities and tertiary education institutions Sh958 million or 34 per cent,” said Oparanya, who blamed underfunding of these institutions by Exchequer, thus causing liquidity problems.

He said while Sasra and the Office of the Commissioner have acted within their powers, both legally and administratively, the ultimate solution lies with the Saccos changing with the times both at industry and institutional level to have members channel their earnings to the Sacco through even making deposits or paying loans through banks after having a standing order.

"This has largely been achieved in most DT Saccos following an advisory by Sasra in 2019, many more especially the non-deposit taking Saccos continue to depend on the employers as collection agents increasing the risk of non-remittance in case of financial challenges on the part of the employer," he said.

Oparanya said his Ministry is exploring policy options to include expanding jurisdiction of the Cooperative Tribunal to cover disputes between cooperatives and employers so as to expedite the resolution of these non-remittance issues in addition to introducing stricter compliance regulations with robust enforcement and increasing public awareness about remittance obligations.

Sasra chief executive officer Peter Njuguna said the regulator received a total of 411 refund complaints in 2023, which however represented a 2.5 per cent drop, compared to 2.6per cent in 2022.

Njuguna said there are 176 Deposit Taking (DT) saccos across the country and 186 non-DT saccos as at December 2023 out of the 358 that SASRA is regulating with 6.8 million members after growing from 6.42 in 2022.

Total asset grew by 9.17 per cent to Sh971.96 billion, a slight drop by 10.31pc in 2022 that had 890 billion due to Covid-19 pandemic.

"Cumulative total deposits for regulated Saccos grew by 9.95per cent to Sh682.19 billion from Sh620 billion in 2022," said Njuguna.

Regulated saccos had a total asset value of Sh1 trillion as at July 2023 with a loan amount of Sh777 billion and Sh883 billion in savings.

“Land and housing at Sh124 billion or 27per cent is where sacco loans go for use, followed by education(21pc), agriculture(17) and trade 13 per cent, all four sectors accounting for 85pc of loans taken,” he said.

The Report by SASRA showed that 73.34 per cent of the total assets of the Sacco industry is controlled by 53 Saccos, with the remaining 304 sharing the balance of 26.66 per cent.