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The SACCOs Carnage Continues

The extent of the financial carnage from the Kenya Union of Savings Credit Cooperative (KUSCCO) scandal is becoming clearer as more SACCOs release their financial results, making provisions for the losses to their savings and investments, ahead of their Annual General Meetings (AGMs).

• Mhasibu, LSK SACCO, Balozi, and Stima Sacco made provisions of KShs. 480.6 million, KShs 19.25 million, KShs. 437.55 million, and KShs. 108 million respectively.

• In mid-January, industry regulator SASRA directed SACCOs to “immediately start recognizing impairment losses and make provisions for future write offs.”

• The impairment charges have significantly increased operating expenses of cooperatives, and shaken confidence in the industry as a whole.

In addition to the immediate impact on balance sheets, the carnage is likely to lead to lower dividends, if any, and reduced fiscal space for individual cooperatives in the short to medium term. The damage to industry confidence in the union, which ran a much needed central finance facility, may have longer term consequences.

KUSCCO had about KSh 24.8 billion in deposits from hundreds of SACCOs. An audit by PwC showed almost half had been lost in a litany of financial crimes ranging from fraud to conflict of interest. As the wheels of justice move to recover the funds, the industry regulator and the government have limited KUSCCO’s future activities and asked SACCOs to limit outflows in dividends and interests until they have no loan arrears or pressing obligations.

The future for some SACCOs will include tightened fiscal space and probably expensive debt as they move to cushion themselves against the investment losses. This will limit the investment and borrowing space for the over 6.84 million people who rely on the country’s 357 SACCOs. The carnage also raises lingering questions about who should have regulated KUSCCO, an issue that led to a back and forth between the industry regulator SASRA and the Central Bank of Kenya in 2022.

Stay updated on this and other important news on The Kenyan Wall Street.

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Have a great week!