Crushed dreams: How rogue Saccos and bogus saving schemes fleeced public, got away with it

SASRA CEO John Mwaka (right) and other delegates during the 6th Annual Sacco Leaders Convention at Pride Inn Shanzu, Mombasa County. [Kelvin Karani, Standard]

Thousands of Kenyans have lost their money to dubious entities, which lured them in the name of the cooperative movement.

Cunning individuals, marketing their outfits as Saccos, have in the past walked away with billions of shillings from Kenyans who had been saving with them and have in many instances gotten away with it.

Two licensing regimes have in the past been blamed for the rise in the number of rogue Saccos.

On the one hand, the Commissioner of Cooperative Development licences the thousands of smaller cooperatives found across the country. On the other hand, Sacco Societies Regulatory Authority (Sasra) has, since the Saccos Societies Act of 2008 came into place, been regulating deposit-taking Saccos.

Its mandate has, however, been expanded to include non-deposit-taking Saccos with assets of upwards of Sh100 million. The move is partly expected to help protect savers by increasing oversight on the new Saccos that now fall under its fold as well as root out fraudulent entities.

Sasra’s expanded mandate is courtesy of the Sacco Societies Regulations of 2020 that require the regulator to have oversight on Saccos with deposits of over Sh100 million – previously under the purview of Commissioner of Cooperatives – as well as diaspora and virtual Saccos. Sasra had been regulating 175 deposit-taking Saccos.

Peter Munya, Cabinet Secretary Agriculture and Cooperatives, says the non-deposit-taking Saccos had operated without proper regulatory oversight, giving room to unscrupulous people that took advantage to swindle Kenyans their hard-earned cash. 

“As we all know, this legal lacuna created room for mischief in the public arena – by many Sacco-like styled entities collecting savings from members of the public, promising good returns, only to disappear with such savings. The unfortunate incident relating to an entity that called itself Ekeza Sacco and which caused a lot of misery to members of the public is still very fresh in our minds,” he said.

The CS directed the Saccos’ Fraud Investigation Unit to speed investigations on cooperatives that have in the past embezzled funds from Kenyans. At the same time, he said Kenyans should stick to Saccos that are regulated.

“The government is going to take very firm actions against persons or Saccos, which for selfish personal gain, choose such treacherous paths to operate outside the law. I am calling upon the Saccos Fraud Investigation Unit to fast-track criminal investigations relating to fraud, embezzlement and other criminal conducts within the Sacco sub-sector and where criminal culpability is proved, to recommend criminal prosecutions to the Director of Public Prosecutions,” said Munya.

“If you are a member of a Sacco, and your Sacco is not regulated by Sasra, you must ask why. If the answer is not satisfactory, just do not put your money there,” he added.

Peter Munya, Cabinet Secretary Agriculture and Cooperatives. [Wilberforce Okwiri, Standard]

Daniel Marube, the chief executive Cooperative Alliance of Kenya, said a clean-up of the movement was necessary to rid the industry of con artists who use entities modeled like Saccos to rip off Kenyans.

As noted by the CS, Ekeza Sacco was a major scandal in the cooperative movement where businessman David Kariuki Ngari also referred to as Gakuyo is said to have irregularly transferred over Sh1 billion from the Sacco to his personal account.

According to a report of an auditor appointed by the Commissioner for Cooperatives, Ngari transferred the money between 2015 and 2017.

Ngari and the members of Ekeza Sacco have since reached an out of court agreement in which the members were to receive refunds overseen by a government-appointed acting chief executive officer Jimmy Kagoni.

As of June, the Sacco said it refunded Sh750 million to members and expected to clear the balance soon. The audit report showed that Sacco had mobilised Sh2.5 billion by 2018.

Urithi Sacco is also alleged to have taken its members for a ride, taking their money with a promise to deliver houses but years later, thousands of the members are still waiting for their houses.

The Urithi brand might be fading after it rebranded to Anchor Premier Sacco but many savers still ache from the years of torture of waiting for houses that never appear to materialise.

At a function to rebrand in late 2019, the Sacco explained that it had been experiencing a rough patch owing to the general state of the economy, adding that this had resulted in some of its savers quitting the Sacco. It had hoped that the new brand identity would increase confidence among its members as well as attract more to enable it deliver some of the projects that had stalled.

Many of the members who have quit the Sacco have, however, not received their funds.

As of 2020, more than 30 000 members of the Sacco were still waiting for the delivery of their houses. Some of them have recorded statements with the Directorate of Criminal Investigations, hoping the authorities will help them recover their money.

Africans Pooling Resources Together (APRT) is among the Saccos that may have emerged in the recent past taking on a digital approach to its recruitment of members and even taking deposits.

Sacco Society Regulatory Authority CEO John Mwaka. [Kelvin Karani, Standard]

While it had physical offices in Nairobi’s Central Business District and Westlands, it adopted a digital approach to mobilising savings but would soon wind up and leave, pulling down its website while its social media handles have remained dormant since 2019.

Before the officials left with members’ savings, the savers had to endure promises of loans triple what they had saved but in the end, they lost their savings. In the few instances that the Saccos paid members who had withdrawn or gave loans to others, it was through cheques that would bounce.

Again, a number of the members had lodged complaints with the authorities even before the officials left the physical offices but nothing happened. The instances, reported in recent years, are just a few in what is a long history of Kenyans being ripped off by Saccos, or entities modeled as Saccos.

In 2009, the then Cooperatives Minister Joseph Nyagah tabled a report in Parliament that showed a total of 148,784 investors lost Sh8.2 billion to dubious Saccos and pyramid schemes between 2008 and 2009.

The Commissioner of Cooperatives noted that while there has been fraud perpetrated by entities fashioned as Saccos, the instances are few and not a norm in the cooperative movement.

Geoffrey Jang’ombe, the outgoing Commissioner of Cooperatives, noted that due to the magnitude of some of the suspected crimes that the few rogue Saccos had committed as well as the number of people affected and the involvement of authorities, the issue tends to stay within the new cycle. This has had the impact of making the sector as though it is always in a crisis mode.

“There are not many organisations out there posing as Saccos. What happens is that when one fraudulent Sacco emerges, the story never dies.

There was a time when there were many pyramid schemes but these were dealt with by the authorities,” he said, adding that the Saccos regulations of 2020 are aimed at enabling Saccos to manage their growth.

“You cannot say there is a proliferation of rogue Saccos. There is no crisis whatsoever in the cooperative sector. The need to regulate them is to safeguard the members’ money because of the rapid growth and the risk becomes higher as the deposits grow… just to ensure they are sound and assist them to have better capacity.”

Sasra has been regulating 175 deposit-taking Saccos and in compliance with the new regulations, 157 Saccos with deposits of over Sh100 million had lodged documents with Sasra, ready to operate under the Sacco’s regulatory authority. Of these, 25 have been issued with certificates of compliance, while the rest are being reviewed.