Fraud inside Kenyan Saccos continues even as the authorities threaten to crack the whip.
Recently, Cabinet Secretary for Agriculture Peter Munya announced that the Sacco Fraud Investigation Unit (SFIU) has been formed to police the sector that has been marred by fraudulent deals and embezzlement.
About two years ago, a report sounded a dire warning about the savings outfit. Part of the story went something like this: “at stake are hundreds of billions of shillings of members’ savings that have either been lost or are at risk of being lost as more and more cases of financially troubled Savings and Credit Co-operative Societies (Saccos) come to the fore. Just three Saccos; Mwalimu, Ekeza and Stima Investment Co-operative, are together estimated to have lost their members upwards of Sh3.6 billion through mismanagement or outright fraud by officials and boards”.
The Sh1 trillion sector has not changed its ways, even by the time CS Munya and Sacco Societies Regulatory Authority (SASRA) were launching SFIU.
“I am happy to report that the Fraud Unit has been established and fully operational. The unit is staffed by specialised officers seconded from the Directorate of Criminal Investigations and is functionally supported by SASRA’s technical staff,” Mr Munya had said.
Even as these happens, it is emerging that there’s a bigger scandal at Stima Sacco.
Osman Khatolwa, Stima Sacco’s secretary is a very corrupt and conniving man.
The small man has been able to edge out some leaders and run the rich Sacco like personal property.
For example, when Othieno was the Acting MD of Kenya Power & Lighting Company (KPLC), Khatolwa was able to block him from assuming the chair of the Sacco on grounds that Energy CS Charles Keter had told him that Otieno will not be confirmed in the position.
The man with his cartel side of the management pushed for the Sacco to join the newly formed Kenya Mortgage Refinance Company (KMRC).
The man who at one time swindled farmers attached to Mumias Sugar Company (MSC) is said to have chaired the embezzlement of funds from the Sacco through sitting allowances.
Expensive check signing
The report reveals, directors emoluments have been on the increase with growing disparities between allowances paid to individuals board members regardless of the number of committees involved. The report reveals, contrary to sitting allowances paid when attending board meetings, training both local and international, representing the Sacco at official events, branch visits and attending a subcommittee meeting, a section on the board are paid allowances to sign cheques for members, with Khatolwa and Mudany being the culprits.
For example, in 2018, the directors were paid millions in allowances: Khatolwa Sh5 million, Joyce Ochieng Sh3.2 million, Mudany Sh3.1 million, Ann Owuor Sh2.5 million, Albert Mugo Sh2.4 million.
Josslyn Mutua was paid Sh2.1 million and Beatrice Meso Sh1.5 million for nine months service. Surprisingly, Ken Tarus served for the same nine months but received Sh730,000 without any explanation to the variation. Florence Obura three month service saw her earn Sh929,000 in allowances.
Joseph Masibo in supervisory committee pocketed a cool Sh2.2 million in allowances for 12 months with another Sammy Ndung’u getting Sh2.1 million. Abu Swaleh the link of Khatolwa on supervisory committee sat for nine months but was rewarded with Sh1.3 million in allowances.
As a result, the report recommends empowerment of branch leadership to stop board members frequent travel to branches, signing of cheques and should not be an expensive affair for the society in terms of allowance, clear definition of events which allowances should be paid besides meetings and events.
A supervisory committee elected on July 12 2019 recommended a raft of measures that proposed radical surgery and shift in the Sacco’s operations.
The supervisory committee unearthed a lot of corruption and illegal credit dispensing at the Sacco. Glaring irregularities that demonstrated clear intention to perform a fraud were detected.
The audited accounts reveal that Micol Limited were for Royal City Hotel, an entity whose ownership and control is by Kajina Holdings Limited though Micol Limited did not have any shareholding in the Royal City Hotel Limited. It recommends the management to provide the current statusofte loan.
The forensic investigators discovered a scheme choreographed to loot millions of shillings from the Sacco through an illegal loan of Sh25 million to Migori Teachers Cooperative Society.
A red flag was raised because Migori Teachers Cooperative Society had just deposited a paltry Sh9,000 only and had joined Stima Sacco less than a month by the time of applying for the loan.
Corruption was uncovered in a case where Maseno University Sacco was loaned a whopping Sh75 million despite only being eligible for a loan of Sh90,000 and no security was provided by the borrower.
There is also a case where Lean Energy Solutions Limited had a loan of Sh44.5 million approved on insufficient deposits.
In another case, the forensic report found out that Triple Edge Media Limited also benefited under a racket where loans were being maliciously approved after it was awarded Sh29 million despite insufficient deposits at the time of applying for the loan.
These were tough questions raised over Non-perfoming loans (NPL). NPLs has turned out to be a key risk area for Saccos and other credit providing financial institutions.
Stern warning was given over non-compliance to the credit policy both at management and board level but the circus still continues threatening the over Sh1 trillion sector.
The consequences will be dire.
Many other SACCOs are experiencing financial problems due to mismanagement of funds.
SASRA whose mandate is to regulate and supervise Sacco societies might be waking up late.
I hope the directive to put all Non-Deposit Taking SACCOs currently holding members’ deposits amounting to Sh100 million and above, under SASRA will help.