Mounting Sacco woes turn spotlight on industry regulator

Members queue at Metropolitan Sacco along Koinange Street, Nairobi on April 19, 2022. [Denish Ochieng, Standard

Kenya's thriving Savings and Credit Cooperative Societies (Saccos) sector, which boasts over Sh1 trillion in savings, is facing a wave of negative reports that threaten its very survival, according to Sacco shareholders and analysts.

Despite the government's efforts to promote the Sacco movement as a key driver in boosting Kenyans' savings culture, recent controversies at the Kenya Police Sacco and National Metropolitan Sacco have raised concerns about the effectiveness of the Sacco Societies Regulatory Authority (Sasra) in overseeing the sector.

A special audit at the National Metropolitan Sacco that began in April 2022 revealed a Sh15 billion scandal involving previous and current managers as well as former board members.

The audit found that the money was siphoned through an intricate web that saw bogus members loaned Sh7 billion to the detriment of genuine ones between 2021 and 2023.

At the Kenya Police Sacco, one of the largest in the country, members have demanded the resignation of its top officials over allegations of financial irregularities and poor governance.

However, Sasra yesterday confirmed to The Standard that it has not received any complaints from the Police Sacco's members regarding governance or other issues.

It, however, acknowledged the technical hitch that recently affected the Sacco's M-TAWI online banking service, noting that the management had committed to finding a long-term solution.

"Sasra is aware of the technical hitch in the mobile platform that is as experienced but has since been sorted. In addition, we are aware of the planned long-term solution," said Sasra CEO Peter Njuguna in an interview.

"On your other questions, Sasra has received about 400 complaints from Sacco members over the last seven months but none from this Sacco whether on governance or other issues. But I hope you have reached out to the Sacco."

These incidents have sparked concerns among industry observers about Sasra's regulatory oversight. While Sasra has a Sacco Fraud Investigations Unit, it has been unable to unearth fraud in some of the 359 regulated Saccos it oversees, allowing corrupt managers and fraudsters to milk them with impunity to the detriment of depositors.

"SASRA's role is to protect the interests of Sacco members, but it seems they are not doing enough to proactively address the concerns being raised," said John Mwangi, a financial analyst.

"The fact that they claim not to have received any complaints from the Police Sacco members is particularly worrying and raises questions about the regulator's vigilance."

Over the past seven months, Sasra has reportedly received around 400 complaints from Sacco members across the country, indicating a growing level of dissatisfaction with the management and governance of these cooperative institutions.