The Kenyan government has placed a three-month freeze on new registrations of Savings and Credit Cooperative Societies (SACCOs) following revelations of widespread financial malpractice at the Kenya Union of Savings and Credit Co-operatives (KUSCCO). The suspension, effective May 21, 2025, is part of an extensive effort to restore governance, accountability, and trust in the SACCO sector.
The Ministry of Cooperatives and Micro, Small, and Medium Enterprises (MSMEs) announced the temporary halt to new SACCO registrations to facilitate legislative and regulatory reforms. Cabinet Secretary Wycliffe Oparanya stated that the moratorium would help stabilize the sector and implement necessary checks to prevent a repeat of the failures recently uncovered.
A forensic audit by PricewaterhouseCoopers (PwC) found that KUSCCO had suffered financial losses of KSh 13.3 billion due to fraud, mismanagement, and regulatory breaches between 2018 and 2023. Among the irregularities uncovered were KSh 3.7 billion in non-performing loans, overstated profits of KSh 798 million, and irregular commissions of KSh 2.7 billion. Additional issues included unauthorized withdrawals, falsified financial statements, and KSh 318 million in diverted funds to unregulated subsidiaries.
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The audit also revealed that KUSCCO operated deposit-taking and insurance services without the required licensing under the SACCO Societies Act, putting KSh 24.8 billion in deposits from 247 member SACCOs at risk. The organization is currently insolvent, with a deficit of KSh 12.5 billion.
In response, the government has established a five-member Committee of Experts led by Marlene Shiels of Capital Credit Union (Scotland) to review the SACCO Societies Act of 2008. The committee has been tasked with:
- Tightening governance frameworks to curb insider lending and enhance board accountability.
- Expanding the regulatory authority of the SACCO Societies Regulatory Authority (SASRA).
- Aligning SACCO financial reporting with global standards, including IFRS 9.
- Establishing a Deposit Guarantee Fund to protect member deposits.
- Creating a central liquidity and shared services framework to modernize SACCO operations.
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As part of intensified cleanup efforts, CS Oparanya directed all SACCOs to undergo forensic audits to assess the extent of exposure to mismanagement. SASRA has also instructed affected SACCOs to provision for losses related to KUSCCO. Nine SACCOs have already set aside KSh 1.84 billion, though some like Nyati SACCO have contested the move, arguing it shifts the financial burden to members.
KUSCCO’s financial functions have been suspended, with its mandate restricted to advocacy and training. A new interim board, chaired by David Mategwa of Kenya National Police DT SACCO, is overseeing its restructuring. The government targets the recovery of KSh 8.8 billion in capital over five years.
Meanwhile, four former KUSCCO officials have been charged with embezzling KSh 82.8 million, and investigations by the Ethics and Anti-Corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI) are ongoing. Those implicated have been barred from holding SACCO positions.
The temporary freeze on SACCO registrations is expected to remain in effect until August 2025, by which time the committee is scheduled to submit its recommendations.
Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.