The Cabinet has approved a Bill that, if passed, will significantly reduce the mandate of the Kenya Union of Savings & Credit Co-operatives Ltd (KUSCCO), which is currently at the centre of a Ksh 12.5 billion scandal. The Sacco Societies (Amendment) Bill, 2023, which is already under consideration in Parliament, will, among other reforms, pave the way for the establishment of a Central Liquidity Facility (CLF).
This will enable inter-Sacco transactions, short-term lending, and participation in the National Payment System. Additionally, the Bill provides for the creation of a centralised data repository to improve regulatory oversight and operational efficiency.
There are concerns that while KUSCCO is a lobbying body, losing control of its central finance facility could cripple the organisation, as this facility is its primary source of funding. At present, Saccos utilise KUSCCO’s Central Finance Fund, to which they regularly deposit funds in exchange for interest, disbursed quarterly to member societies.
However, the future of this facility is uncertain after a forensic audit by PwC revealed that senior executives, including former Managing Director George Ototo, Finance Manager George Owino, and Chairman George Magutu, were allegedly involved in falsifying financial records, large-scale theft, bribery, and unexplained bank withdrawals, leaving KUSCCO insolvent by Ksh 12.5 billion.
Saccos are now scrambling to recover their funds, while others are adhering to a directive from the Sacco Societies Regulatory Authority (SASRA) to make provisions for the money deposited in the facility. The Cabinet’s decision, made during a meeting chaired by President William Ruto at State House, Nairobi, is seen as a response to the KUSCCO scandal.
Before the crisis emerged, KUSCCO had been resisting the establishment of the Central Liquidity Facility, arguing it would undermine the organisation. The Cabinet stated that enacting the Bill would enhance the stability, efficiency, and competitiveness of Saccos in the country.
It noted that amending the Sacco Societies Act of 2008 would modernise financial and technological operations, benefiting smaller Saccos by enabling them to pool resources, adopt fintech solutions, and foster collaboration, all while maintaining their operational independence.
“Reforms to the Deposit Guarantee Fund will ensure better protection of Sacco deposits, reduce the risk of government bailouts, and strengthen the cooperative financial sector. By lowering operational costs, promoting innovation, and increasing public confidence, these reforms position Saccos as key contributors to Kenya’s financial inclusion and economic empowerment goals,” a Cabinet brief stated
