Under the blind eye of two regulatory bodies, assets and cash deposits held at Kenya Union of Savings and Credit Cooperative Society (KUSCCO) Limited were carted away, leaving behind a trail of losses to SACCOs, insurance companies, capital market and real estate firms that had invested heavily in the union’s financial instruments.
In a damning report by the Central Bank of Kenya(CBK), the monetary authority attributes the heist at KUSCCO to weak internal audit. It says audit could have been weakened strategically to facilitate theft, fraud and misreporting.
The Kenya Financial Sector Stability Report, 2025 published by CBK, mentions that KSh 1.33 billion worth of loans to dormant SACCOs, KSh 9.3 billion in overstated incomes from a fraudulent scheme, and KSh 206 million in cash of member funds, was lost. The worst hit was some 247 out of 257 licensed Deposit-Taking SACCOs which lost their deposits with the Union. 201 SACCOs reported a 10% erosion of core capital owing to KUSCCO exposure.
Members of affected SACCOs earned less dividends as SACCOs increased provisioning to cater for losses. SACCO borrowers also faced tighter credit conditions while a decline in deposit mobilization and investment activities increased inter SACCO exposure.
See Also > 60,000 Kenyans to Loss Jobs if Trump Ends AGOA Deal
The insolvency at KUSCCO continues to affect liquidity levels of affected SACCOs. The KUSCCO shock is said to be still reverberating through insurance, money and housing markets due to interlinkages created by KUSCCO’s Assurance, Housing and Asset Management subsidiaries.
While KUSCCO is registered under the cooperative societies Act and hence regulated by the Commissioner of Cooperative Societies, CBK observes that the Union was engaged in financial intermediation. This created regulatory arbitrage whereby KUSCCO mobilized deposit and extended loans without adhering to the prudential requirement of a Deposit-Taking SACCO.
Plans to salvage KUSCCO begun with the dismissal of its Board and Executive Wing, followed by a forensic audit to establish the losses, exposures, trace assets and identify regulatory gaps. KUSCCOs has identified KSh 1.36 billion targeted for recovery, but this is still less than the KSh 14 billion of liabilities, sitting on its balance sheet.
Under a new Board of Directors, chaired by David Mategwa, who is also Chairman of Kenya National Police DT SACCO Board, his team has the task of executing a tedious debt recovery exercise. Options on the table of the KUSCCO board is recapitalization of the Union with conservative collateral haircuts across all SACCOs.
Mategwa’s Board also plans to settle KUSCCO creditors, negotiate with SACCOs that lost their cash; or convert a portion of residual claims into long-dated loss-absorption instruments. If all these options fail, KUSCCO could be staring at the prospects of liquidation.
Figures indicate that as at December 31st 2023, KUSCCOs had KSh 12.5 billion in assets and KSh 17.7 liabilities, making the Union technically insolvent. In 2025, the Union’s assets declined to KSh 5.2 billion against liabilities of KSh 17.7 billion, making the financial health of KUSCCO worse.
CBK is now pushing for establishment of the long awaited Deposit Guarantee Fund(DGF) for SACCOs as well as giving more teeth to Sacco Societies Regulatory Authority(SASRA) to regulate KUSCCO.
> Brands Tap Into Kenya’s Growing Podcast Marketing Scene
Leave a comment