Kenya Union of Savings and Credit Co-operatives (KUSCCO) Limited top officials and directors have been under investigation by the Sacco Societies Regulatory Authority (SASRA) on suspicion of running some Sacco businesses without a license since mid-October.
- Among the operations on the regulator’s radar is an inter-lending facility, a Central Finance Fund (CFF), platform used by all deposit-taking SACCOs affiliated to KUSCCO that operates on the same principles as the inter-bank lending facility used by banks.
- Financial capital for KUSCCO’s CFF is sourced from regular deposits by deposit-taking SACCOs with the lobby paying interest on the deposits, which is then disbursed quarterly to its member societies.
“It is true that KUSCCO has a portfolio of unique financial products, including those that deal with advocacy, risk management, and a mutual fund that is partly supervised by the Insurance Regulatory Authority. KUSCCO also has a Central Finance Fund (CFF) which has been in operation for the past 34 years even before the recently enacted…regulations,” said an official at the lobby who requested anonymity.
According to the regulator’s 2022 supervision report, total deposits in SACCOs grew by 9.84% to Kshs 620.45 Billion in 2022 while total assets portfolio registered a growth rate of 10.31% to Kshs 890.30 Billion in 2022 from Kshs 807.30 Billion in 2021.
- Gross loans increased by 11.76% to Kshs 680.35 Billion in 2022.
- SACCO membership grew from 5.99 Million members in 2021 to 6.42 Million members in 2022, an increase of 7.02%.
- SACCOs are tightly linked to banks and telcos; 209 out of 361 regulated SACCOs have USSD Code mobile connectivity; 103 have internet or app-based connectivity; 34.09% offer ATM access; and 13.64% have Pesalink integration.
In a letter addressed to SASRA in mid-October, Simon Chelugui, Cabinet Secretary for Co-operatives and Micro, Small, and Medium-Sized Enterprises Development expressed his suspicions that KUSCCO appears to be carrying out unregulated SACCO business.
- Lobby officials now claim that KUSCCO has thwarted past attempts by the ministry to take over the CFF.
- The officials, who all spoke on condition of anonymity, say the lobby is reluctant to relinquish control of the platform, which is its most lucrative product, for fear that it could cripple its financial operations.
- Despite its importance, experts say that the facility lacks the necessary muscle to serve the cash needs of the entire Sacco sub-sector.
Industry sources also question the timing of the probe, amidst reports that the Ministry of Co-operatives and Micro, Small, and Medium-Sized Enterprises Development and the National Treasury are putting in place a better-funded inter-lending facility for all deposit-taking Saccos.