The Kenya Union of Savings and Credit Co-operatives (Kuscco) financial crisis, involving the suspected mismanagement of Sh13.3 billion, has prompted significant introspection within Kenya's Sacco sector. Despite this turmoil, industry leaders maintain that Saccos remain a viable avenue for wealth creation and financial security for Kenyans, who have entrusted close to Sh1 trillion in savings to these institutions.

The Kuscco scandal has forced Saccos to re-evaluate their strategies and financial positions, with many having to account for losses incurred from their investments in the troubled umbrella organization. The new Kuscco management aims to recover Sh8.8 billion, representing capital shareholding, within five years, partly through the sale of associated subsidiaries. This restructuring is being closely monitored by the State Department for Co-operatives and the Sacco Societies Regulatory Authority (Sasra).

At a recent industry forum, Sacco executives emphasized the cooperative model's strength in promoting financial inclusivity and wealth accumulation. Patrick Kilemi, Principal Secretary in the State Department for Cooperatives, highlighted that governance issues, particularly concerning investment and borrowing practices, are a primary concern. The government is addressing these issues through new legislation designed to enforce transparency and accountability in cooperative decision-making processes.

Kilemi clarified that the newly approved Sacco Liquidity Fund (SLF) is intended for Saccos with excess liquidity, enabling them to invest in instruments like Treasury bonds. He cautioned against Saccos with limited liquidity engaging in such investments, questioning the rationale behind borrowing to invest in T-bills. He noted that the SLF is not designed for Saccos whose deposits are equal to their loans, as they should be borrowers, not investors.

George Ombado, Executive Director of the Africa Confederation of Cooperatives, Savings, and Credit Associations (Accosca), attributed the failure of several cooperative banks in the region to governance-related deficiencies. He cited the Co-operative Bank of Kenya as a notable exception, attributing its success to a strong governance framework. Ombado stressed that ethical decision-making is crucial for the success of cooperative ventures.

Solomon Atsiaya, CEO of Kenya National Police DT Sacco, underscored the resilience of the cooperative movement, emphasizing its member-owned and controlled structure, which prioritizes social and economic benefits for its members. He highlighted the role of Saccos in enabling individuals to accumulate wealth through disciplined savings, noting that the cooperative sector has created numerous millionaires.

Atsiaya pointed out that Saccos prioritize the welfare of their members, offering benefits such as benevolent funds to support them during difficult times, contrasting this with banks that are primarily focused on profit. David Mategwa, Chair of both the Kenya National Police DT Sacco Board and the interim Kuscco board, defended the cooperative sector, emphasizing its innovation and the fact that not all Saccos had invested in Kuscco. He noted that Kenya's financial sector is advanced, with innovations in the cooperative space being emulated by other markets.

Gamaliel Hassan, CEO of Stima Sacco, highlighted the sector's significant employment contribution, employing over 500,000 people directly and impacting 1.5 million lives indirectly. He drew attention to the different reactions to the collapse of banks like Dubai Bank and Chase Bank compared to the Kuscco situation, questioning why the same level of scrutiny and outrage was not directed towards the investors in those failed banks. He emphasized that governance issues in one institution should not tarnish the entire Sacco sector. Hassan stressed that Saccos offer members the opportunity to be owners of the entity, providing quick and affordable loans.

Sasra data indicates that Kenya's Sacco sector has a Sh1 trillion asset base, shared among 6.48 million members across 357 cooperatives. The discussions during the 9th Sacco Leaders’ Convention underscored the commitment to addressing governance challenges and restoring confidence in the cooperative model as a vital component of Kenya's financial landscape.