Wycliffe Oparanya Suspends Registration of New SACCOs after KUSCCO Fraud
- Cooperatives Cabinet Secretary (CS) Wycliffe Oparanya noted that Savings and Credit Cooperative Societies (SACCOs) have been mushrooming countrywide
- Oparanya unveiled a five-member expert team to examine the Sacco Societies Act 2008 and suggest institutional and statutory changes to strengthen the sector's oversight
- An audit by PwC revealed that the Kenya Union of Savings and Credit Cooperatives (KUSCCO) defrauded its members KSh 12.5 billion
Japhet Ruto, a journalist at TUKO.co.ke, brings more than eight years of experience in finance, business, and technology, offering deep insights on economic developments in Kenya and globally.
The Ministry of Cooperatives has suspended the registration of new Savings and Credit Cooperative Societies (SACCOs) for three months, effective Wednesday, May 21.
Source: Twitter
Why Oparanya suspended registration of new SACCOs
The decision follows the discovery of a multibillion-shilling scam at Kenya Union of Savings and Credit Cooperatives (KUSCCO) that defrauded numerous individual SACCOS of all or a portion of their deposits.
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Cooperatives Cabinet Secretary (CS) Wycliffe Oparanya made the announcement as he launched a five-member expert team to examine the Sacco Societies Act 2008 and suggest institutional and statutory changes to strengthen the sector's oversight.
"We have suspended the registration of new SACCOs for three months. The suspension will allow a committee of experts to finalise its review of governance and policy alignment," Oparanya announced.
Oparanya cited the mushrooming of SACCOs as one of the reasons for the suspension.
What will the committee review?
Among other things, the committee, chaired by Marlene Shiels, the CEO of Capital Credit Union in the UK, is expected to guide the creation of a SACCO deposit guarantee fund that will protect investors from total losses if a SACCO collapses.
In the banking industry, the Kenya Deposit Insurance Corporation operates a fund that pays savers up to KSh 500,000 in the event of a bank failure, and the deposit guarantee fund will replicate this.
Additionally, the committee will help the industry create a central liquidity facility that will allow SACCOs to increase their liquidity without having to borrow from outside sources.
"The committee will serve for a three-month period, effective immediately, and is expected to provide comprehensive and actionable recommendations to guide future legislative amendments," Oparanya explained.
Source: Twitter
Following their appointment by the commissioner for Cooperative Development, the CS also officially inaugurated an 11-member KUSCCO transition board of directors for a two-year term.
How much was lost in the KUSCCO fraud?
The government carried out a forensic audit of the KUSCCO accounts.
The PwC audit study revealed that for over seven years, the SACCO umbrella organisation defrauded its members out of KSh 12.5 billion.
Oparanya forwarded the report to Inspector General of Police Douglas Kanja for further investigations and action.
How KUSCCO defrauded its members
He pointed to a lack of KUSCCO oversight brought about by legal loopholes that allowed the umbrella organisation to function outside the purview of the Sacco Society Regulatory Authority (SASRA).
Millions of shillings in loans that were "audited and signed by a dead auditor" were used to perpetrate the fraud.
The investigation revealed widespread tampering with the books of accounts, theft, bribes, and mysterious bank withdrawals.
Proofreading by Jackson Otukho, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
