Kuscco to sell off loan book in bid to recover Sh8.8b amid fraud

The new management of the Kenya Union of Saccos and Credit Co-operatives (Kuscco) has offered to sell off its loan book to willing financial institutions as it seeks to recover at least Sh8.8 billion within five years.

The Saccos’ umbrella body, whose previous management has been in the limelight for the misappropriation of members’ savings, is considering this option due to the painstaking process of selling some of its businesses and assets.

The recovery process will also entail selling non-revenue-earning assets, among them 32 vehicles, while also trimming down on its workforce.

Kuscco Board Chairman David Mategwa said the union currently has 96 employees, down from 243 previously.

“We only have 96 out of 243. No dismissal has been issued to any staff that left. All of them have decided to resign,” he said. “There are still some who will go.”

Due to the multi-billion-shilling case around the embezzlement of Sh13 billion, the government, through the Co-operatives Ministry led by Cabinet Secretary Wycliffe Oparanya, has directed Kuscco to stick to its advocacy role.

Kuscco Group Managing Director Arnold Munene, while acknowledging the troubles the Kuscco fraud case has caused to the sector, particularly Sacco bosses, said yesterday the main objective of the new management is to see how at least the principal amounts invested in the union can be recovered.

While the ministry has advised Saccos to make provisions for the possible losses, Mr Munene is optimistic some cash can be accessed through the sale of some of its businesses and assets, as well as the loan book.

“Most of our assets and what we are looking at are loans that we have given to our members (Saccos), mortgages that saccos or the public enjoyed under the Kuscco Housing Fund (KHF), and we have assets under the Kitengela Homes project, which today you cannot tell our members that within the next two months we are going to recover X amount of loans because these loans are spread within a certain period—from three to 15 years for the mortgage,” he said.

“We can even sell off these loan books to any financial institutions because what we want now is cash.”

Mr Munene said Kuscco will also sell a 60 per cent stake in Kuscco Mutual Assurance Ltd when the new board takes office.

“Like insurance, for example, we are disposing of 60 per cent. You cannot wake up today and get a strategic partner to do due diligence and make the payments immediately. It takes a while. So that is why we are telling Saccos to be patient; within the three years, we would have made good strides,” he said during a media roundtable in Nairobi.

He said, for now, Kuscco will separate the principal amount from the interest.

The principal amount is Sh8.8 billion, which brings the amount expected to be recovered in three years to Sh6.1 billion.

“We want to apologise because this has tortured so many people in our community. Not only that, because even the chief executives who are here have been bashed,” he said.

Principal Secretary in the State Department for Co-operatives Peter Kilemi defended the ministry’s directive to have Saccos that have taken a hit from the Kuscco losses make provision in their books.

Mwalimu Sacco

He referenced the sale of Equatorial Commercial Bank, later known as Spire Bank, to Mwalimu Sacco, which became a loss-making business.

Later, the bank was sold to Equity Bank, and Mwalimu Sacco had to facilitate the sale by paying Sh510 million to the buyer.

He said a provision was made for Mwalimu Sacco to account for the losses across 15 years and has been doing so for six years now.

“The guideline comes from IFRS 9 (International Financial Reporting Standards). People say accountants are obliged to report, but it is common knowledge that if you provide for it, then you get a qualified report. That is transparency,” said the PS.

He said while the IFRS 9 stipulates that a provision is made for the whole amount, the advice issued to the Sacco was to spread it across several years.

“When Kuscco starts paying off, then the reverse works. They are going to realise that as an income in their books. It is an accounting procedure, but then people are saying we are suggesting saccos to break the law. But IFRS 9 is not a law to us but an accounting standard,” said Mr Kilemi.

Kuscco Chairman Mr Mategwa said even as the entity has been facing financial troubles, the membership keeps growing. Last year, 175 Saccos signed up with Kuscco.

“I have signed new Saccos registering as Kuscco shareholders as people complain; there are those who are still joining,” he said.

Kuscco boasts about 3,000 Sacco members, with those affected being 247.

Mr Munene, the Kuscco MD, said they are now concentrating on the core business of advocacy and capacity building in the Sacco sector.

“We are asking Saccos to support us; through business, we give you quality services and quality training so that the surplus we get will work towards refunds,” he said.