Lax rule of law comes with real cost to economy

The cooperative movement is responsible for generating a significant share of Kenyan wealth. It enabled farmers to buy land and sell their produce. Facilitated the dizzying growth of the transportation sector over the last 25 years.

And has been a core force behind household-level savings and investments – accounting for over 31% of national savings.

At their zenith, cooperatives handled the vast majority of sales in important agricultural sectors like tea, coffee, cotton, pyrethrum, and milk. A survey in 2018 revealed that 37 per cent of cooperatives are employee based, while 48% are commodity based. 

Given the economic importance of the sector, it is a little surprising that the government has not done more to either facilitate its further growth or root out graft.

Here, the most recent scandal at the Kenya Union of Savings and Credit Cooperatives (Kuscco) is an excellent example.

An umbrella organisation that was formed in 1973 ostensibly to train and lobby for Saccos turned predator, and allegedly facilitated the stealing of more than 5 billion shillings. 

Beyond the Kuscco leadership, several regulatory authorities stand to blame for the most recent scandal.

There is the ministry of cooperatives, which took more than a decade to seriously examine Kuscco’s books. The alleged crimes were committed from 2013-2024.

Surely, the authorities could have acted sooner. There is the Sacco Societies Regulatory Authority (Sasra), which after dropping the ball hastily urged Saccos to absorb the costs associated with the alleged theft at Kussco.

And then, of course, there is the overall law enforcement environment (including county governments that are supposed to regulate Saccos), which has created structural incentives in support of criminality.

Too many people in positions of authority are willing to commit crimes with confidence that they will get away with it.

It is outright bizarre that a government that is desperate for investments and job creation would not treat a scandal of the magnitude witnessed at Kuscco with more haste and deliberate effort to restore trust.

The private sector crucially depends on rule of law. Without it, criminals thrive while undercutting the honest. And an economy that rewards criminally necessarily ends up not operating at optimal levels. 

All this to say that it is urgent that the government investigates, arrests, and prosecutes those involved in the Kuscco scandal to the fullest extent of the law.

Anything short of that will send the wrong signal to would-be future criminals. 

The writer is a professor at Georgetown University