State announces crackdown on Sacco boards over lavish trips

The government has announced a sweeping crackdown on Sacco boards accused of misusing members’ savings through lavish international trips and manipulation of financial statements.

Speaking during the Harambee Sacco Annual Delegates Meeting (ADM) in Nairobi, Cooperatives Principal Secretary Kiburi Kilemi further revealed that legislative and policy reform proposals are already before the ministry and Parliament to tighten oversight of Sacco leadership.

In a candid assessment, Kilemi criticised boards that have allegedly turned member deposits into personal benefits, particularly through excessive and unjustified foreign travel.

“We want trips made by Sacco boards audited to assess their true importance,” he said. “There are societies taking advantage of members’ deposits to enrich themselves.”

He pointed to a growing trend where some Saccos enter questionable arrangements with tour and travel companies, resulting in frequent “benchmarking” trips abroad that offer little value to members.

Instead, the Ministry is advocating for local peer-to-peer learning, urging Sacco leaders to benchmark within the country by studying well-performing institutions such as Harambee Sacco.

Kilemi, who was accompanied by Commissioner for Cooperatives David Obonyo, also warned against the practice of inflating financial results to declare attractive but ultimately unsustainable dividends.

He described the practice as a “recipe for disaster” that could destabilise the sector if left unchecked.

To address this, the government has directed top-tier Saccos to engage reputable, high-level auditing firms with international operations to enhance transparency and accountability in financial reporting.

The crackdown will also target what the government termed as “over-borrowing,” with some Saccos reportedly taking on excessive debt to meet member demands they cannot realistically sustain.

Despite the cautionary tone directed at the wider Sacco movement, Harambee Sacco reported strong financial performance during the same event, signaling resilience amid a challenging economic environment.

Chairman Macloud Malonza announced that the Sacco’s asset base had grown significantly to Sh42.2 billion, up from Sh37 billion the previous year. Revenue rose by Sh1 billion to Sh7 billion, while membership increased by 7,000 new members over the past year.

The Sacco will pay out Sh2.8 billion to its members, translating to a dividend rate of 9.1 per cent, slightly higher than the 9 per cent issued in the previous financial year.

Looking ahead, the government is also seeking to influence how Saccos price their credit products.

Kilemi announced that the Ministry will launch an awards programme in October to recognise institutions that prioritise member welfare by offering loans at single-digit or otherwise affordable interest rates.

The initiative is intended to encourage prudent financial management and reduce the debt burden on Kenyan households, steering Saccos away from aggressive, commercial-style lending practices that have raised concerns in recent years.