Savings and credit cooperatives (saccos) in Kenya have played a pivotal role in promoting financial inclusion and empowering members with affordable credit and investment opportunities. Despite the shadow of a massive fraud scandal at the Kenya Union of Savings and Credit Co-operatives Ltd (Kuscco), the cooperative sector demonstrated extraordinary resilience in 2024 by distributing a record Sh47 billion in dividends.
The Kuscco Scandal: A Sector Shaken
Kuscco, a central body that supports saccos in Kenya, was embroiled in a financial scandal involving fraudulent activities, poor governance, and embezzlement. Investigations revealed:
- Financial Mismanagement:
Top executives falsified financial records, misappropriated funds, and facilitated questionable transactions. - Conflict of Interest:
Senior managers awarded contracts to their own companies, leading to losses of over Sh13.3 billion. - Impact on Stakeholders:
The fraud rendered Kuscco insolvent by Sh12.5 billion, putting Sh24.8 billion in deposits from 247 saccos at risk.
This scandal shook confidence in the sector and prompted saccos to adopt cautious measures to safeguard their assets and reassure members.
Resilience Amidst Adversity: A Record Payout
Despite these challenges, the top 40 saccos reported a remarkable 13.7% increase in dividend payouts, from Sh41.34 billion in 2023 to Sh46.99 billion in 2024. This achievement highlights the strength and adaptability of Kenya’s cooperative movement.
Leading Saccos and Their Performance
- Mwalimu National Sacco
- Dividend Payout: Sh5.11 billion
- Mwalimu retained its position as the top-performing sacco, underlining its commitment to members.
- Stima Sacco
- Dividend Payout: Sh5.07 billion
- Declared 16% dividend on shares and an 11% interest rebate.
- Deposits grew by 8% to Sh46.69 billion, while the loan book increased by 11% to Sh50.24 billion.
- Kenya National Police Sacco
- Dividend Payout: Sh4.07 billion
- Offered a 17% return on share capital and 11% interest on deposits.
- Harambee Sacco
- Dividend Payout: Increased from 12% to 15% on share capital.
- Total assets grew to Sh38.6 billion, and member deposits rose to Sh26.2 billion.
- Qona Sacco (formerly Safaricom Sacco)
- Dividend Payout: Sh902.6 million
- Adopted a gradual approach to writing off potential losses linked to Kuscco.
Navigating the Scandal: Strategies for Survival
1. Enhanced Governance
Saccos implemented stricter internal controls and embraced transparency to regain member trust. Regular audits and compliance with international financial reporting standards (IFRS 9) became priorities.
2. Focus on Member Value
By prioritizing member benefits, saccos reassured their base and maintained robust savings and investment levels.
3. Diversified Portfolios
Many saccos diversified their investment portfolios, reducing reliance on any single income stream and mitigating risks.
4. Technology Adoption
Digital transformation helped saccos streamline operations, reduce fraud, and improve member access to services.
The Government’s Role
In response to the Kuscco scandal, the government advised saccos to limit dividend payouts and write off Kuscco-related losses. Regulatory bodies also introduced measures to strengthen oversight and restore sector stability.
The Role of Saccos in Kenya’s Economy
Kenya’s cooperative sector is among the most vibrant globally, contributing significantly to financial inclusion. With over 5,000 registered saccos, the sector serves millions, including rural populations underserved by traditional banks. Key contributions include:
- Affordable Credit: Enabling members to access loans at competitive rates.
- Savings Mobilization: Encouraging a culture of saving and investment.
- Community Development: Financing small businesses, education, and housing projects.
Future Outlook
While the Kuscco scandal highlighted vulnerabilities, it also underscored the resilience of Kenya’s sacco sector. Going forward:
- Strengthening Regulations: Continued oversight will enhance transparency and accountability.
- Member Education: Empowering members with financial literacy will build confidence and ensure informed decision-making.
- Leveraging Technology: Digital solutions will drive growth and efficiency.
FAQs
1. What is the impact of the Kuscco scandal on sacco?
The Kuscco scandal exposed governance issues but prompted saccos to adopt better controls, ensuring continued growth and member trust.
2. How much did sacco distribute in dividends in 2024?
The top 40 saccos distributed Sh47 billion, a 13.7% increase from 2023.
3. Which sacco paid the highest dividends?
Mwalimu National Sacco led with a payout of Sh5.11 billion.
4. What steps are being taken to prevent future scandals?
Stricter regulations, audits, and governance reforms are being implemented to protect member interests.
5. Why are saccos important in Kenya?
Saccos provide affordable credit, encourage savings, and contribute to economic development, particularly in underserved areas.
Read: Top SACCOs Offering Highest Dividends and Interest Rates
Kenya’s top saccos demonstrated exceptional resilience by distributing record dividends despite the challenges posed by the Kuscco scandal. Their ability to adapt and prioritize member welfare underscores their critical role in promoting financial inclusion and economic growth. As the sector continues to evolve, strengthened by lessons learned, saccos remain a cornerstone of Kenya’s financial landscape.
