State bans Saccos from borrowing to pay dividends

Co-operatives CS Wycliffe Oparanya. [File, Standard]

As part of a stringent crackdown on poorly managed savings and credit co-operatives (Saccos), the Cabinet Secretary for Co-operatives has declared a moratorium on new registrations and banned the use of loans to pay dividends to members.

The move, the government reckons, will curb "unhealthy financial competition" and protect millions of depositors in a sector that holds over Sh1.08 trillion in assets.

"I have already directed the Commissioner and SASRA to ensure that no Sacco pays dividends or interest, unless they have made sufficient surplus, met the capital adequacy requirements, and made provisions for statutory reserves," CS Wycliffe Oparanya said on Friday in a statement.

"No Sacco shall be allowed to borrow from external sources to pay dividends," he emphasised, speaking as the guest of honour at the 34th Special General Meeting of Unaitas Sacco in Nairobi.

The CS warned that any Sacco intending to procure an external loan must now obtain written approval from the Commissioner.

The crackdown extends to governance, with Oparanya targeting the calibre of elected officials and the integrity of financial audits.

He expressed grave concern that some Saccos are engaged in "cooking of books" while auditors "look the other way."

"I am directing the Commissioner and SASRA to rein in both internal and external auditors who fail to secure correct and accurate financial reporting," he stated, adding that negligent auditors would be referred to the professional body for sanctions.

Furthermore, the Ministry has issued "a temporary moratorium on the registration of new Saccos," to take stock of the sector's health, with inactive entities facing deregistration and liquidation.

The CS hailed Unaitas' growth from humble beginnings.

"Unaitas SACCO stands as a shining example. I am aware that the Society had a humble beginning, having been registered in 1993 by tea farmers in Murang'a under the name - Murang'a Tea Growers SACCO," he said.

"It rebranded to Muramati, before rebranding to the current name. Unaitas is now a Tier 1 SACCO with a national footprint. Currently, its services extend beyond tea farmers to serve small and medium-sized enterprises (SMEs), salaried employees, and individuals."

In his address to delegates, Unaitas Chairman Michael Muriithi reported impressive growth, with total assets climbing to Sh27.01 billion as of June 2025, a 16 per cent increase from the previous year.

Member deposits grew 14 per cent to Sh14.9 billion.

"Honourable delegates, as a Board, our mandate and responsibility for providing strategic leadership to steer performance of the organisation remains our top priority," Muriithi stated, noting Sacco's membership has grown to over 436,000.

In his statement, Chief Executive Officer Martin Muhoho highlighted strategic investments in digital banking, which have been central to the Sacco's expansion.

The Sacco's mobile banking platform, Mo-Cash, processed Sh11.4 billion in transactions in the first seven months of 2025.

"Guided by our vision and mission, our ambition is to be the financial partner of choice for our clients," Muhoho said.

The Sacco is also proceeding with the construction of its own 15-storey headquarters, a project Chairman Muriithi described as a "signature project."

By enforcing stricter governance, the CS said the government aims to ensure that Saccos remain a haven for the savings of millions of Kenyans.