SACCOs (Savings and Credit Cooperative Societies) that stashed huge sums of cash as deposits in the financially-crippled central finance facility at the Kenya Union of Savings Credit Cooperative Union (KUSCCO) are now making write-off provisions.
- •This follows a directive from the Sacco Societies Regulatory Authority (SASRA) for SACCOs that are financially exposed to KUSCCO’s financial instruments make provisions in their accounts.
- •KUSCCO has been facing financial challenges resulting in its inability to meet obligations associated with the investments by its member SACCOs.
- •In November, an internal audit showed the Union had lost KSh 12.5 billion as a result of illegal withdrawals and widespread mismanagement.
“We are making provisions for lost investments at KUSCCO as a financial reporting requirement. It is a difficult moment for SACCOs that made investments in KUSCCO but we have to make these provisions as a bitter pill so that we can be financially healthy,” Solomon Atsiaya, Chief Executive Officer of Kenya National Police DT SACCO says.
The KUSCCO Central Finance Facility (CFF) began encountering significant challenges precipitated by panic withdrawals between October 2023 and January 2024, affecting its operations and ability to reimburse deposits to members. The Government ordered for a probe into allegations that it was running several businesses and offering products without the requisite licensing and approvals, piling onto the growing woes at the organisation.
“The Authority expects SACCOs to immediately start recognizing impairment losses and make provisions for future write offs that may arise from any such financial investments, in their financial statements,” Peter Njuguna, Chief Executive Officer, Sacco Societies Regulatory Authority (SASRA), said in a letter to registered SACCOs in mid-January 2025.
Both Kenyan laws and International Financial Reporting Standards (IFRS) require Saccos to make provisions for losses from any financial investments made.
A glimpse at the published financial statements of several Deposit-Taking SACCOs, who have already held their Annual General Meetings(AGMs) reveals provisions as a result of the lost investments.
For instance, Univision Deposit-Taking Sacco, which has already published their financial statements for the period ended 31stDecember 2024, saw its provisions for Loan Loss and Other Losses rise from KSh 113.9 Million in 2023 to KSh 120 Million at the end of 2024 financial period.
Tower DT SACCO, which has its Head Offices in Nyandarua County made a provision of KSh 28,724,940.00 to cover part of the impairment cost of financial assets held at KUSCCO. Tower SACCO has shares in KUSCCO worth KSh 41,087,914.00 at the close of 2024 financial year from KSh 40,784,652.00 in 2023.
Can KUSSCO Be Salvaged?
In 2024, there were 176 DT Saccos licensed to undertake deposit-taking business while 183 were licensed to undertake non-withdrawable deposit-taking business. Statistics also show that the Sacco sub-sector commanded a balance sheet size worth more than KSh 257 billion in 2013 to over KSh 981 billion a decade later, while members’ deposits rose to KSh 673 billion from KSh 183 billion in 2013.
This makes the sector a key cog in the country’s financial framework, as it is closely tied to the savings and investments of more than 6 million people. The Union provides a key central financing facility to cover liquidity, and several societies own shares and deposits that are now at risk. Acting KUSCCO Limited Managing Director Arnold Munene has urged the Government to quickly resolve the issues facing the Union so that it can resume normal operations.
“It will be irresponsible for KUSCCO, which plays a critical role in the survival of the Sacco industry, to collapse. It is not too late to salvage it,” said CEO Atsiaya.
Industry experts estimate that some SACCOs will take upto more than 5 years of provisioning to fully recover from their lost investments if the Union collapses completely. This is in addition to the loss of the key central facility, although stakeholders have been pushing for it to be brought under SASRA oversight, issued with a fresh license, and revived.