Government unveils three-year plan to reimburse SACCOs affected by KUSCCO scandal
The government has announced a three-year plan to compensate savings and credit cooperative societies (SACCOs) affected by the Kenya Union of Savings & Credit Co-operatives (KUSCCO) scandal.
Speaking at the Kenya National Police DT SACCO Best Savers Education Conference in Mombasa, Cabinet Secretary for Cooperatives and MSMEs Wycliffe Oparanya pledged that the Ksh13 billion shortfall would be fully settled by 2028.
The commitment comes a month after the government directed 247 SACCOs to reduce dividend payouts and set aside funds to cushion against potential losses linked to the multi-billion-shilling fraud at KUSCCO. The State Department for Cooperatives urged SACCOs to prioritize financial stability over immediate returns, emphasizing the need to protect members’ savings.
However, Oparanya assured SACCO members that their funds would be reimbursed, offering relief to those affected by the financial malpractice. He further revealed plans to fast-track the establishment of a Deposit Guarantee Fund (DGF) to safeguard SACCO deposits in case of institutional collapse.
“If a SACCO goes down, members should be able to recover their deposits, just as is done in banks,” Oparanya stated, noting that legislation to establish the fund is currently under Senate review.
PwC Audit Uncovers KUSCCO Fraud
A forensic audit by PricewaterhouseCoopers (PwC) exposed widespread financial mismanagement at KUSCCO, including fraudulent bookkeeping, large-scale theft, unauthorized withdrawals, and conflicts of interest involving top executives.
The report revealed that KUSCCO manipulated financial records to conceal fraud, falsely projecting profitability while accumulating massive losses. The audit determined that Ksh13.3 billion had been lost, leaving the umbrella body insolvent by Ksh12.5 billion, despite collecting Ksh24.8 billion in deposits from 247 SACCOs.
Last month, the Sacco Societies Regulatory Authority (SASRA) attributed the crisis to gaps in legal and policy frameworks, stating that Ksh14 billion in losses could have been prevented if reforms had been implemented earlier. SASRA warned that policy gaps and slow regulatory action allowed KUSCCO to operate unchecked, leading to a 10% core capital erosion across 201 SACCOs.
Reforms to Strengthen the SACCO Sector
To prevent future financial scandals, the Cabinet has approved key reforms, including the creation of a SACCO Shared Services Framework to enhance financial technology adoption while maintaining operational autonomy.
The Cabinet has also endorsed the establishment of a Central Liquidity Facility (CLF), which will allow SACCOs to conduct inter-Sacco transactions, access short-term lending, and integrate into the National Payment System.
“SACCOs with surplus funds can deposit them in the Central Liquidity Facility, allowing other SACCOs to borrow for short- or long-term needs,” Oparanya explained.
Additionally, the Cabinet has approved reforms to the Deposit Guarantee Fund, aiming to strengthen protections for SACCO members, reduce government bailouts, and enhance financial stability in the cooperative sector.
“By lowering operational costs, fostering innovation, and boosting public confidence, these reforms position SACCOs as key players in Kenya’s financial inclusion and economic empowerment agenda,” the Cabinet’s statement read.
Author: Andrew Walyaula
Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com
