The Directorate of Criminal Investigations (DCI) has initiated an investigation into alleged financial misconduct by the former leadership of the Kenya Union of Savings and Credit Co-operative Society (KUSCCO).
Former Managing Director George Ototo has already been questioned by detectives, where he reportedly denied allegations of fraud related to the management of the Central Finance Facility (CFF). This fund was flagged by the Ministry of Cooperatives and Small and Medium Enterprises (SMEs) Development last year for operating without a proper license or oversight from the Sacco Societies Regulatory Authority (SASRA).
The CFF was designed as an inter-lending facility for approximately 4,000 Saccos across Kenya, akin to similar systems used by banks. However, accusations have emerged, including financial fraud, unauthorized loan advances to board members and senior executives, and other economic offenses.
Former Cabinet Secretary for Cooperatives and SMEs Development, Samson Chelugui, instructed SASRA to audit KUSCCO’s accounts amid concerns that the organization was engaging in unregulated deposit-taking activities. KUSCCO currently manages over Ksh20 billion in assets from member Saccos.
Additional claims have surfaced regarding manipulated financial statements, with discrepancies between Sacco deposits and the actual funds held by KUSCCO Limited. Ototo, who along with Chairman George Magutu, was ousted earlier this year, is accused of using a loan from the lobby to develop Langata Mall.
Chelugui emphasized that SASRA had the authority to oversee KUSCCO’s operations, stressing the importance of auditing the organization. In a letter dated October 5, 2023, Chelugui informed SASRA CEO Peter Njuguna of concerns that KUSCCO was engaging in regulated Sacco activities without the required licenses under the Sacco Societies Act No. 14 of 2008.
However, it later emerged that part of the difficulties faced by Ototo and Magutu may have been due to a government plan to take over the profitable CFF and replace it with an inter-Sacco platform, which faced resistance.
Chelugui also noted that SASRA had begun inspecting KUSCCO’s operations following directives under section 49 of the Sacco Societies Act. Updates were regularly provided, but the inspection was halted by a court order on November 15, 2023.
Notably, KUSCCO had, nearly three years ago, written to then Central Bank of Kenya Governor Patrick Njoroge, accusing SASRA of negligence in its regulatory duties. In response, Njoroge reaffirmed that KUSCCO fell under SASRA’s jurisdiction.
Though KUSCCO was initially established to focus on advocacy, it has since expanded its activities to include financial services, training, research, consultancy, and the CFF.
