Savings and credit cooperatives (Saccos) caught in the Kenya Union of Savings and Credit Co-operatives (KUSCCO) scandal will not recover all their lost funds, the Sacco Societies Regulatory Authority (SASRA) has warned.
This development comes months after the Ministry of Cooperatives disbanded KUSCCO’s board following a damning audit that exposed widespread financial mismanagement, including falsified records and irregular withdrawals.
Speaking this week, SASRA CEO Peter Njuguna confirmed that the financial losses were too severe to be fully recovered, even if assets were liquidated.
“They can recover something but not 100 per cent. I don’t think that will be possible because we are talking about billions here. The assets that are being talked about are Sh5 billion, so that tells you,” Njuguna explained.
He cast doubt on whether the available assets could generate enough revenue to offset the losses.
“Those assets… where would they invest to earn enough? I think they will recover something else but not everything,” he added.
How KUSCCO’s Expansion Led to Financial Disaster
Njuguna emphasized that KUSCCO’s downfall was linked to its decision to venture into financial services, straying from its original mandate.
“KUSCCO is very key, and remember it was founded as an advocacy body to do training and lobby for its members. Its venture into financial services is where it failed—it should not have happened,” he noted.
Founded in 1973 as an umbrella body for Saccos, KUSCCO later expanded into deposit-taking operations, a move that ultimately led to its financial crisis.
To investigate the extent of mismanagement, the Ministry of Cooperatives appointed audit firm Grant Thornton to conduct a forensic audit. The findings, released under former Cooperatives Cabinet Secretary Simon Chelugui, revealed irregular withdrawals totaling Ksh5.46 billion between February 2013 and April 2024.
Saccos Among the Biggest Losers
As a result, several Saccos and their depositors are now facing massive financial losses. The hardest hit include:
- Mhasibu Sacco, which risks losing over Ksh480 million
- Kimisitu Sacco, with potential losses exceeding Ksh353 million
- The Law Society of Kenya (LSK) Sacco, which expects to lose at least Ksh19 million, despite efforts to withdraw its investments from KUSCCO
Meanwhile, Nyati Sacco Society Limited has filed a lawsuit against SASRA, challenging its directive that requires KUSCCO-affiliated Saccos to absorb the financial losses caused by the mismanagement at the umbrella body.
