SASRA told to commit to the values of ethics and integrity

The Ethics and Anti-Corruption Commission (EACC) has asked SACCO Societies Regulatory Authority (SASRA), Government agency charged with the supervision and regulation of savings and credit cooperatives to collaborate with it in enhancing compliance with ethics and integrity laws.

Speaking during week-long capacity building for senior officers of SASRA in early November, Dr. Emily Mworia, EACC’s Deputy Director Education and Public Awareness, said the Commission is ready and available to assist the government agency in its endeavors to entrench good governance in the running and management of SACCOs.

Dr. Mworia stressed that the training of senior officers of SASRA on anti-corruption strategies is a key starting point in dealing with the ills bedeviling the financial subsector.

“It is my strong belief that SASRA can only better realize its objectives as a watchdog and regulator if it has strong commitments to the values of ethics and integrity,” Mworia said.

The workshop specifically sought to build the capacity of SASRA on the implementation of bribery and corruption prevention strategies, and is part of the implementation of the Memorandum of Understanding on collaboration and partnership signed between the Commission and the State Department of Cooperatives in 2019 on combating and preventing corruption and unethical practices in the cooperative sector.

The training comes at a time when the Government’s Sh50 billion annual Hustler Fund savings and loan product, which will be administered through SACCO Societies targeting micro, small and medium enterprises (MSMEs) is taking shape.

“It (Hustler Fund initiative) will take MSMEs a long way, knowing that they actually command the economy of the country,” she told the media on the sidelines of the training, which took place in Mombasa.

Senior officials of SASRA during the training held in Mombasa in early November.

The history of local co-operative movement, according to a report by International Co-operative Alliance – Africa, dates back to 1908 when the first dairy co-operative was established by white settlers in Kenya. Notable cooperatives which were registered include Kenya Co-operative Creameries (KCC-1925), Kenya Planters Co-operative Union (KPCU-1923) and Kenya Farmers Association (KFA-1923).

These organizations were originally registered as companies and only became registered as co-operatives in 1931 when the first Co-operative Ordinance was promulgated. It seems the colonial government acknowledged the need for Africans to participate in economic development through cooperatives by enacting a new Cooperative Societies Ordinance in 1946.

In 1955, the Swynnerton Plan paved way for the Africans to form more cooperatives as they were involved in growing cash crops. During the period 1932 to 1969 a total of 1,894 cooperatives were registered.

Over the years, SACCOs have gained immense popularity in the country, accounting for 45% of the GDP and 30% of national savings and deposits. According to SASRA’s annual report released in July 2022, the sub-sector grew by 9.93% from Sh734.2 billion in 2020 to Sh807.1 billion in 2021, making SACCOs key players in the realization of vision 2030 through the mobilization of savings for the country’s investment needs

SACCOs have been, in particular, identified as one of the most effective models for enhancing agricultural and non-agricultural productivity in Kenya by helping members procure, trade and distribute large volumes of farm inputs. They also help members realise industrial development in rural areas by assisting agricultural and non-agricultural produce as well as marketing, with dairy and coffee sectors being the biggest beneficiaries.

In housing, nine out of ten houses, a World Bank report reveals, are constructed with the help of SACCOs. Vision 2030 envisages that SACCOs would offer 25% of housing stock in urban areas.

Humongous challenges

The financial sub-sector is, however, faced with humongous challenges that if not well and timely arrested, would cripple it. One, is the issue of corrupt officers in the management of SACCOs. The blatant looting in SACCOs and the lack of teeth to bite by the regulatory authorities is a major challenge. Worse still, whistle blowers for such ills in the SACCOs management are either sacked, or ejected from the boards.

SACCOs also abuse their borrowing powers approved by members at the Annual General Meetings (AGMs) to engage in non-core business in clear contravention of the Co-operatives Act. This is because it is easier to collude with vendors of non-core business services such as land sellers to reap off SACCOs’ funds.

Then there is the falsification of financial statements. SACCOs window dress their books in a race to declare pleasant growth in profitability to their members to hoodwink them that the SACCO is well managed and consequently promise them hefty returns inform of dividends and interest on their shares and deposits respectively.

Another gaping hole for siphoning SACCOs funds is by acquisition of assets and procuring of services. Ministry officials are sometimes duped by SACCO management to convince members at the AGMs why upping borrowing powers is good for SACCOs without proper briefing. Ironically, some SACCOs actually borrow huge amounts of money for non-core business, fail to declare this information at the AGMs and eventually misappropriate or embezzle it.

SACCOs also engage in ‘overvaluation’ of their assets mostly land, buildings, office equipment, furniture and fittings in order to have a sparkling balance sheet that can enable them access credit facilities from other financial institutions such as banks, which paints a completely different picture of their books of accounts.

Various complaints

EACC has indeed received various complaints about SACCOs touching on abuse of office, embezzlement, misappropriation of funds, bribery, breach of trust and tax evasion. Notably, 31% of the total reports touch on maladministration and 91% of the persons involved are in low and middle ranks of the institutions. Regulation and supervision, therefore, become critical in streamlining of SACCO societies in view of their value to the economy.

“I am confident that the product of this workshop will inform critical decisions aimed at fulfilling part of the Authority’s obligations of preventing bribery, corruption and unethical conduct so as to better deliver its mandate,” Mworia said, adding that SASRA occupies a pivotal role in ensuring that all SACCOs mainstream sound governance practices in their operations.

As per the SACCO Societies Act No. 14 of 2008, the SASRA licenses SACCO Societies to undertake deposit taking business and also supervises and regulates both deposit taking and specified non-deposit SACCO Societies.

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