The government has unveiled a three-year plan to compensate SACCOs for the billions lost in the Kenya Union of Savings & Credit Co-operatives (KUSCCO) scandal.
Speaking on Wednesday night at the Kenya National Police DT SACCO Best Savers Education Conference in Mombasa, Cooperatives and MSMEs Cabinet Secretary Wycliffe Oparanya assured that the Ksh13 billion deficit would be fully repaid by 2028.
In a directive issued last month, the government instructed 247 SACCOs to cut dividend payouts and set aside funds to cushion against potential losses from the multi-billion-shilling fraud at KUSCCO.
The State Department for Cooperatives has urged members to focus on financial stability rather than immediate gains, advising them to set aside reserves as a safeguard against potential losses from their deposits and shares in KUSCCO.
However, Oparanya assured members that the government would ensure their accounts were settled, offering a lifeline to those affected by the scandal.
He further disclosed plans to accelerate the establishment of a Deposit Guarantee Fund (DGF) to protect SACCO members from losses in the event of institutional collapse.
“If a SACCO goes down, you can recover your deposits as is done in banks,” Oparanya stated, noting that the legislation to establish the fund remains under Senate review.
A forensic audit conducted by PricewaterhouseCoopers (PwC) has exposed extensive financial misconduct within KUSCCO, including fraudulent accounting practices, large-scale embezzlement, bribery, unauthorized bank withdrawals, and conflicts of interest involving senior executives.
The report found that KUSCCO had manipulated its financial statements to disguise the fraud, creating a false impression of profitability. The audit revealed that Ksh13.3 billion had been misappropriated, rendering the organization insolvent by Ksh12.5 billion, despite having received Ksh24.8 billion in deposits from 247 SACCOs.
Last month, the Sacco Societies Regulatory Authority (SASRA) blamed the crisis on weaknesses in legal and policy frameworks. The regulator asserted that Ksh14 billion in losses could have been avoided if corrective actions had been taken three years earlier.
SASRA cautioned that inconsistencies in policies and slow regulatory reforms had enabled KUSCCO to operate without oversight, leading to a 10 percent erosion of core capital across 201 SACCOs.
To prevent future financial scandals, the Cabinet has approved the creation of a SACCO Shared Services Framework. This initiative aims to enable financial institutions to pool resources, adopt financial technology solutions, and enhance collaboration while maintaining operational autonomy.
Additionally, the Cabinet endorsed the establishment of a Central Liquidity Facility (CLF) to facilitate inter-Sacco transactions, short-term lending, and integration 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.
The Cabinet also approved reforms to the Deposit Guarantee Fund to strengthen protections for SACCO members, minimise government bailouts, and reinforce financial stability within 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,” read part of the Cabinet’s dispatch.
