Government Establishes Sacco Societies Fraud Investigation Unit

The government has spruced up efforts to safeguard the Savings and Credit Co-operative (SACCO) movement in the country by establishing the Sacco societies’ fraud investigation unit aimed at boosting investor confidence in the subsector.

Agriculture, Livestock, Fisheries and Cooperatives Cabinet Secretary (CS) Peter Munya said that following the presidential directive for the establishment of the Sacco societies’ fraud investigation unit within the Sacco Societies Regulatory Authority (SASRA), the unit has been established and is now fully operational.

Speaking at a Nairobi hotel on Wednesday during a stakeholders forum on the Cooperatives Sector 2020 Regulations, Munya explained that the unit comprises specialised officers seconded from the Directorate of Criminal Investigations (DCI) and is functionally supported by SASRA’s technical staff.

“So far I have been informed that the fraud unit has finalised an investigation, caused an arrest and prosecuted a fraudulent embezzlement including recovery of over Sh1.3 million from the suspect and there are many other investigations and actions being taken,” highlighted the CS.

He added that the unit has done a fantastic job including preventing fraud and closing in on Saccos which are pyramid schemes that are presented to unsuspecting members of the public who would want to invest their money.

“We are in the process of strengthening this unit so that it has the capacity to investigate and have a bigger reach and support Sasra in implementing its mandate of making sure that depositors’ money is safe,” said Munya.

He encouraged members of the public to desist from joining and transacting with unregistered and unregulated entities particularly when it involves their savings and they should undertake due diligence on any entity purporting to be a Sacco.

“Kenya Sacco sub-sector is ranked first in Africa in terms of assets, members and deposit mobilization and therefore prudent measures are necessary to safeguard the member’s interest,” he said.

Munya added that the non-deposit taking Saccos targeted under the new regulations are those with over Shs.100 million in members savings estimated to be 300 from the 3, 626 reported as at December 31, 2019  and they account for 70 percent of the Shs.188 billion in assets and Shs.140 billion in deposits.

“Saccos are an integral part of the deposit taking and lending market in Kenya providing financial services to over six million households across various sectors of the economy and it is for this reason my ministry had been driving policy reforms to enhance the governance and financial soundness and sustainability of the Sacco industry in Kenya,” said Munya.

He added that the reforms are consistent with the policy development articulated in the Cooperative development policy approved by the Cabinet in 2019.

The CS explained that the regulations have given priority to the setting up of the Central Liquidity Facility (CLF) and shared technology platform, operationalisation of the deposit guarantee fund for Saccos, establishment of the Sacco fraud investigations unit and prudential supervision of the Non-deposit taking Saccos.

“The CLF will facilitate cooperation among Saccos through pooling of liquidity and connected services to enhance the financial soundness and competitiveness of the Saccos as deposit taking institutions,” explained the CS adding that there are over 50 Saccos which are working with the regulator on this initiative and have already drafted bylaws guiding the CLF and shared service business among them.

He explained that the aim is to ensure that there is good governance in the cooperatives movement as it is one of the greatest challenges bedeviling the sector.

“My interaction with members of cooperatives shows that we have a very big gap where they keep blaming the government while it is actually the weak governance structures of the cooperatives that have an issue where the officials misappropriate member’s funds,” said Munya.

The CS also sounded a warning to housing cooperatives saying that this is where there is a lot of room for misuse of peoples’ savings because most of them start as Saccos and when they grow they open other organisations they call housing companies so that they move away from regulations.

“Kenyans love to buy land and unsuspecting members of the public have been making investment decisions based on advertisements they hear over the radio, and when they lose their money they have had nowhere to turn. We want to look into these housing cooperatives and streamline them because we have seen people losing their money invested in imaginary projects,” said Munya.