Kencom, 57 Other SACCOs Risk Auction for Defaulting KSh 1.36b KUSCCO Loans
- Over 50 Savings and Credit Co-Operative Societies (SACCOs) could be penalised by the government over multi-million loans
- The SACCOs defaulted on huge loans they took out from the Kenya Union of Savings & Credit Co-operatives (KUSCCO)
- David Obonyo, the commissioner for co-operative development, issued a notice to the financial institutions explaining the consequences of loan default
TUKO.co.ke journalist Japhet Ruto has over eight years of experience in financial, business, and technology reporting and offers deep insights into Kenyan and global economic trends.
Fifty-eight Savings and Credit Co-operative Societies (SACCOs) face bank account freezes and property auctions by the Kenya Union of Savings & Credit Co-operatives (KUSCCO).
Source: Twitter
KUSCCO seeks to recover KSh 1.36 billion borrowed by the financial institutions over the 23 years to 2024.
This comes after four senior officials and a lawyer were arrested in connection with a KSh 13.3 billion fraud as the government attempts to keep KUSCCO from going bankrupt.
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The SACCOs took out a combined loan of KSh 1.36 billion against KSh 368.39 million in deposits.
According to Business Daily, the state has issued notices requiring the loans to be repaid immediately.
"This office has discovered that your SACCO has an unpaid loan balance owed to KUSCCO. Given the union's current state, the ongoing noncompliance with KUSCCO's obligations under the loan agreement that was signed by both sides has been damaging," David Obonyo, the commissioner for co-operative development stated.
Which are the top KUSCCO loan defaulters?
The top defaulters are Kencom SACCO (KSh 377.5 million), Nacico SACCO and its sister company Nacico Investment Co-op (KSh 358.01 million), and Maseno University (KSh 106.43 million).
Others are Stegro (KSh 68.58 million), Umowa SACCO (KSh 49.07 million), Kakamega County Maendeleo (KSh 44.93 million), Sony Sugar SACCO (KSh 43.97 million), Migori Teachers SACCO (KSh 35.76 million), Malindi Biashara (KSh 35.05 million) and Lamu Teachers (KSh 23.92 million).
Obonyo asked the SACCOs to clear the dues or explain how to settle them.
"As a result, you must pay off the remaining loan balance immediately. In case full settlement of the said amount is not feasible, a written plan on how you intend to settle this outstanding loan should be submitted to both this office and KUSCCO within 14 days from the date of this letter," he added.
Source: Facebook
Which consequences will defaulters face?
SACCOs that have loan or other defaulted commitments are not allowed to declare or pay dividends, dealing a blow to thousands of members.
To compensate for the anticipated loss of deposits and shares at KUSCCO totalling billions of shillings, a few leading SACCOs have set aside some cash or provisions.
The cooking of the books, widespread executive theft, bribery, mysterious bank withdrawals, and conflicts of interest through contract issuance to top-manager-owned businesses, as well as financial statement manipulation to conceal schemes reporting nonexistent profits, are among the wrongdoings at KUSCCO.
Why did Oparanya suspend registration of new SACCOs?
In related news, Co-operatives CS Wycliffe Oparanya suspended the registration of new SACCOs for three months starting Wednesday, May 21.
The announcement came as Oparanya established a five-person expert panel to review the Sacco Societies Act of 2008 and recommend legislative and institutional modifications to improve the sector's governance.
He stated that one of the causes of the suspension was the proliferation of SACCOs.
Proofreading by Mercy Nyambura, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
