News and Analysis
March 14, 2025
The Sacco sector in Kenya has faced a historical crisis in the aftermath of the insolvency that has hit Kenya Union of Savings and Credit Co-operatives Ltd (KUSCCO) on account of massive fraud.
An audit undertaken by PricewaterhouseCoopers (PwC) detailed how top officials at the umbrella body engaged in unethical financial practices that have put many Saccos across the country at the risk of losing billions of shillings.
Here is a deep dive on how the Ksh13.3 billion heist was done, Saccos which are facing uncertainties of recovering their money and the progress of recoveries and police investigations.
What is KUSCCO? - It is an umbrella body/ union that was formed in 1973 to lobby and advocate for saccos. The union has a membership of over 4,000 Saccos. KUSCCO itself is not
A financial audit exercise on KUSCCO's books uncovered major financial malpractice dating back to 2013. Notably, one red flag uncovered during the audit was that top officials at the union forged the signature of a dead man to cook the books.
As detailed in the report, the 2022 financial records bore the signature of Alfred Basweti of Omenye and Associates - who was deceased at the time the audited books were signed.
Through the forged documents, top officials portrayed the union as financially sound and making a profit to conceal financial mismanagement. The report indicated that the cooked figures amounted to Ksh9.3 billion.
This put the spotlight on three individuals, the former MD George Ototo, finance manager George Owino and the Chairman George Magutu.
A further investigation unearthed the loss of another Ksh206 million through withdrawals from the bank accounts. In this instance, some of the officials allegedly withdrew millions from the organisation's saving account under the pretext of replenishing the Front Office Service Activity (FOSA) of their branches.
In the end, they would only take a fraction of the money to the FOSA branches. The audit further revealed that top officials received loans amounting to Ksh489.2 million. Some of the loans issued to the members were contrary to the Sacco guidelines. The officials also failed to repay some of the loans given to them.
Other irregularities included overpayment of commissions amounting to Ksh821 million (with some of the money paid to the top officials) and potential irregularities of a home project estimated at Ksh1.2 billion.
For instance, for the KUSCCO Estate project in Kitengela, the audit exposed irregularities in the award of the tenders. It was detailed that some tenders were awarded to contractors via email. The Kitengela housing project involved the construction of 120 houses and shops that were to be rented out.
Additionally, there is evidence that some contractors were paid more than their original quotation in the tender documents.
Equally, the audit established that some officials received kickbacks from the contractors. This was in addition to another red flag that was raised, which was the payment of Ksh18 million to some officials who often visited the construction site. According to the audit report, the money was paid as part of allowances for site visits.
Interestingly, this is not the first time that the umbrella body is in the spotlight. In May 2024, former Cooperatives CS Simon Chelugui dismissed the entire board over misadministration.
At the time, the former CS highlighted an audit that questioned high cash withdrawals from the bank accounts, disbursement of loans and the transfer of money to personal accounts of some officials.
While there is little optimism that the government will recover the money, Cooperatives CS Wycliffe Oparanya announced that the government would undertake various measures, including selling assets belonging to the union.
Oparanya, however, directed Saccos that had invested member savings in KUSCCO to discount them as losses in their financial records.
Here are some of the affected saccos and the amounts they held at KUSCCO:
Oparanya announced that the government was looking at Kuscco’s ventures to determine which ones are viable for closure.
During a press briefing on Thursday, March 13, the CS also announced that the government had recovered close to Ksh136 million - which had already been disbursed to members with the least savings with the union.
"The small savers who had deposited with KUSCCO have already been refunded Ksh136 million. We are going to do this progressively as we realise some of the assets that we believe are unnecessary to be held by KUSCCO," he remarked.
According to Sacco Societies Regulatory Authority (SASRA) CEO Peter Njuguna, loopholes in the law prevented the government from regulating the umbrella body.
Njuguna, while on an interview with NTV, indicated that KUSCCO was established as an umbrella body for advocacy before it decided to venture into financial services. Therefore, this limited the control and powers the authority could exercise over KUSCCO.
Consequently, in 2022, SASRA wrote to the Ministry of Cooperatives calling for enhanced policies to regulate KUSCCO.
“We are looking at a situation where if these policy reforms were concluded, I think we would be having a different story. KUSCCO would have separated advocacy and financial, maybe for the last three years,” he stated.
Following Oparanya's submission of the audit report to the Inspector General of Police, Douglas Kanja, in February, police arrested some of the former officials. Investigations into the heist continue.
George Magutu Mwangi, Mercy Muthoni Njeru, George Ochola Owino, and Jackline Pauline Atieno were among those arrested.
The four, who were arrested on February 12, are facing charges of conspiracy to defraud contrary to Section 317 of the Penal Code, stealing by directors of companies contrary to Section 282 of the Penal Code and making a false document contrary to Section 347(a) as read with Section 349 of the Penal Code.
Former MD George Ototo also surrendered to the authorities on February 18.
More officials are expected to be arrested, as Oparanya insisted that the government would also pursue other SACCO officials believed to be misappropriating money belonging to their members.
"There are others that have problems, and you will see action being taken. As long as you are alive, we will come for you," he stated.
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