Kenyan SACCO members risk losing KSh 11.6b after Kuscco liquidation
Kenyan SACCO members risk losing KSh 11.6b after Kuscco liquidation
Kenyan SACCO members are staring at losses of at least KSh 11.6 billion after the Kenya Union of Savings and Credit Co-operatives (KUSCCO) was placed into voluntary liquidation following a vote by its membership on Friday, August 28.
Members resolved to wind up KUSCCO after efforts to revive the insolvent umbrella body collapsed, with external auditors informing attendees at a special general meeting (SGM) that any rescue would require fresh capital that member SACCOs were unwilling to commit.
KUSCCO’s known assets are valued at approximately KSh 5.4 billion, far short of the nearly KSh 17 billion owed to member SACCOs. That gap of KSh 11.6 billion is what creditors now risk losing entirely.
Complicating the recovery process further, 292 SACCOs, individuals and service providers have filed lawsuits collectively seeking KSh 6.48 billion from KUSCCO, a sum that alone exceeds the total assets available for distribution.
KUSCCO managing director Arnold Munene explained the rationale behind choosing liquidation over continued attempts at resuscitation.
“It is not about avoiding losses. It is about cutting those losses and protecting whatever assets are left so they can eventually be equitably distributed to members,” Munene said, as reported by Business Daily.
Members opted for liquidation as the most practical route to recovering whatever value remains, rather than pouring additional billions into a deeply troubled institution.
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The state had previously directed SACCOs to freeze or reduce dividends and set aside funds to absorb anticipated losses tied to the fraud.
That move is set to affect ordinary SACCO members who had received annual payouts ranging between 8.22% and 10.22% over the five years to 2024, a period that included the economic disruptions caused by the COVID-19 pandemic.
SACCOs owed significant sums are being advised to spread their loss provisions across several years, with some directed to seek bank loans to build the required risk buffers.
The crisis at KUSCCO stems from a forensic audit that exposed systematic fraud amounting to KSh 9.3 billion.
Investigators found that executives understated costs such as commissions and interest expenses while inflating income figures, allowing the institution to report profits that did not exist.
Beyond the manipulation of financial statements, the audit identified large-scale theft by senior managers, bribery, unexplained cash withdrawals from bank accounts, and conflicts of interest involving the award of contracts to companies owned or controlled by top KUSCCO officials.
The Directorate of Criminal Investigations (DCI) had previously launched a probe into the scandal, and several KUSCCO executives faced arrest in connection with the financial crimes uncovered at the institution.
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