The Kenya Union of Savings and Credit Co-operatives (KUSCCO) Limited is currently under investigation by the Sacco Societies Regulatory Authority (SASRA) for suspected unlicensed SACCO operations. Initiated in mid-October, the probe specifically targets the Central Finance Fund (CFF), an inter-lending facility. The regulator is scrutinizing the legality of KUSCCO’s SACCO-related activities, raising questions about compliance with licensing regulations.
SASRA’s investigation focuses on allegations that KUSCCO has been running certain SACCO businesses without the required license. The CFF, an inter-lending facility operating for the past 34 years, facilitates the flow of financial capital from deposit-taking SACCOs affiliated with KUSCCO. Similar to traditional inter-bank lending facilities, CFF pays interest on deposits and disburses quarterly payments to member societies.
KUSCCO officials argue that the organization provides a range of unique financial products, including advocacy, risk management, and a mutual fund overseen in part by the Insurance Regulatory Authority. Despite ongoing scrutiny, the CFF is cited as a cornerstone of KUSCCO’s financial operations.
In a 2022 supervision report, SASRA noted significant growth in the Kenyan SACCO sector, with total deposits increasing by 9.84% to KES 620.45 Billion in 2022. Total assets reached KES 890.30 Billion, representing a growth rate of 10.31%, while SACCO membership surged by 7.02%, reaching 6.42 Million members.
Simon Chelugui, Cabinet Secretary for Co-operatives and Micro, Small, and Medium-Sized Enterprises Development, expressed suspicions in a letter to SASRA, suggesting that KUSCCO might be involved in unregulated SACCO business. Anonymous KUSCCO officials claim to have resisted past ministry attempts to control the CFF, emphasizing its significance as the lobby’s most lucrative product.
Despite the ongoing investigation, industry experts question the timing and motives behind the regulatory scrutiny. Reports suggest that the Ministry of Co-operatives and Micro, Small, and Medium-Sized Enterprises Development, in collaboration with the National Treasury, is working on establishing a better-funded inter-lending facility for all deposit-taking Saccos. This development raises questions about the potential impact of the probe on KUSCCO’s financial operations and the overall SACCO sub-sector.
As the investigation unfolds, uncertainties regarding the regulatory landscape loom over the SACCO sector in Kenya. KUSCCO’s role, particularly in operating the Central Finance Fund, remains a focal point. The outcome of the probe may have implications for the organization’s operations and the broader SACCO industry in the country.
