Dormant saccos flee with Kuscco’s Sh1.3 billion

By Newsflash Writer

The Kenya Union of Savings and Credit Co-operatives (Kuscco) has appealed to the government to help trace 150 saccos that collectively borrowed Sh1.33 billion before ceasing operations or going dormant.

In a letter to Commissioner for Co-operative Development David Obonyo, Kuscco requested assistance in locating the defaulting saccos to facilitate loan recovery.

The loans were issued through Kuscco’s Central Finance Fund (CFF), designed to provide liquidity support to struggling saccos. The union is still grappling with the aftermath of a wider financial scandal that cost it Sh13.3 billion, partly blamed on former executives. Of the 150 saccos, 35 reportedly received loans without holding any deposits at Kuscco, while the remainder had a combined deposit of Sh133.8 million. Overall, the group borrowed Sh1.46 billion, leaving Kuscco exposed to Sh1.33 billion in losses—ultimately borne by member saccos that had invested in Kuscco.

The saccos in question have either gone dormant or closed entirely, prompting concerns that some loans may have been issued to fictitious entities. Kuscco is now questioning whether some of the saccos ever existed and if any formal deregistration or liquidation procedures were carried out.

Dormant saccos and missing funds

“This is to request your assistance in confirming the operational status of certain saccos that borrowed loans from our CFF department,” Kuscco Managing Director Arnold Munene wrote in the August 1 letter. “These saccos are currently listed as dormant or non-operational, and verification is critical for our records and due diligence.”

The biggest loan exposures were recorded in western Kenya (42 saccos, Sh558.71 million), Nairobi (35 saccos, Sh290.74 million), Rift Valley (36 saccos, Sh191.53 million), Mount Kenya (21 saccos, Sh165.24 million), and Coast (16 saccos, Sh125.93 million). Notable defaulters include Nitunze Sacco (Sh320 million), Mucumewo (Sh90.02 million), Thika Tea (Sh87.19 million), Sukari (Sh78.6 million), and Soko Sacco (Sh38.19 million).

Kuscco’s move follows a forensic audit by PricewaterhouseCoopers (PwC), which uncovered large-scale financial mismanagement. The audit prompted the dismissal of former managing director George Ototo and other top officials. Kuscco is also seeking clarification on whether any of the dormant saccos were ever formally registered.

In a parallel effort, Mr Obonyo recently issued demand notices to 58 traceable saccos that collectively owe Sh1.36 billion. These loans, disbursed between 2001 and 2024, were taken against deposits worth Sh368.39 million, leaving an unpaid balance of Sh987.86 million. Top defaulters in this group include Kencom Sacco (Sh377.5 million), Nacico Sacco and Nacico Investment Co-op (Sh358.01 million), and Maseno University (Sh106.43 million).

Recovery drive, auctions and restructuring

The efforts to locate the 150 saccos and compel repayments from the 58 identified defaulters form part of a broader recovery strategy. Kuscco is auctioning land and houses held by mortgage defaulters under its housing subsidiary. Properties up for auction span across Kitengela, Kiserian, Kajiado, Nyayo Estate, Kisumu, Thika, Machakos, Webuye, Bungoma, Kisaju, Lukenya, and Syokimau. Homes in Kitengela are priced at Sh9.5 million.

Kuscco is also actively seeking a strategic investor to purchase a 60 percent stake in its insurance arm, Kuscco Mutual Assurance. Other recovery measures include asset sales—over 32 vehicles sold so far—and a reduction in operational costs by shrinking its workforce from 246 to 87. The union has also shut down branches in Kitengela, Thika, Nyeri, Meru, Eldoret, Kericho, Kisii, and Kisumu, refocusing on advisory, training, and lobbying services.

Kuscco aims to recover 70 percent—or Sh6.2 billion—of the Sh8.8 billion principal invested by saccos within three years. These recoveries are being spearheaded by a newly installed nine-member board tasked with reviving the entity following years of financial mismanagement.

The PwC audit also revealed that Kuscco had forged financial statements for 2022 with the assistance of an external auditor, Alfred Basweti of Omenye and Associates—who, it turned out, had died long before the report was signed. The scandal led to arrests of several former officials, including Ototo, ex-chairman George Magutu Mwangi, former finance manager George Ochola Owino, legal advisor Jackline Pauline Atieno Omolo, and Mercy Njeru, who headed a controversial radio venture.