How unlicensed online saccos prey on savers

Kenyans are at risk of losing their hard-earned savings through online saccos and investment schemes that are not licensed.

These digital deposit-taking saccos and schemes sign up users online and begin to take in savings via mobile money platforms, with some promising handsome returns.

The Central Bank of Kenya and Sacco Societies Regulatory Authority (Sasra) are the sole licensing authorities for deposit-taking institutions in Kenya.

For example, Milazi describes itself as an online investment co-operative society. Investors sign up online and deposit cash using M-Pesa.

Homepesa Sacco, which is not licenced by Sasra, is taking withdrawable deposits. It is registered to only undertake back-office operations, meaning it cannot take withdrawable deposits.

“Homepesa Wallet enables you to deposit and withdraw cash, anywhere any time. Deposits can be done via M-Pesa and credit cards while withdrawals are done via M-Pesa and bank transfers,” the sacco says on its website.

Zeepo, a network of mobile money and banking agents, also offers customers a savings option through a mobile app or signing up via the web.

“Save, borrow, pay, transfer and insure from one place — on mobile or an outlet near you, so that life doesn’t have to stop because of closing time, tedious processes or red-tape,” Zeepo says on its website.

J-Hela, which describes itself as a mobile sacco platform, is also taking withdrawable deposits without a Sasra licence. J-Hela is owned by Patrick Wainaina, the chief executive of Jungle Nuts, a macadamia nuts processor in Thika.

Mr Wainaina is running to be Thika Town MP.

“Withdrawal is from J-Hela to M-Pesa using withdrawal J-Hela withdrawing procedures. There is an upcoming service to withdraw from J-Hela to ATM. No limited amount when withdrawing but the membership fee of Sh60 remains as the minimum balance,” says the platform on its portal.

Milazi, Zeepo, J-Hela and Homepesa Sacco were yet to respond to our queries on their licensing to take deposits by the time of going to press. They are also missing on the latest schedules of approvals by the two regulators.

The Business Daily first wrote to the CBK on April 4, 2017 bringing to the banking regulator’s attention of these online deposit-mobilising schemes. Two days later, the CBK and Sasra put out notices in the dailies warning wananchi of unlicensed deposit-taking entities and pyramid schemes.

“Such entities entice members of the public to place money with them and promise quick and abnormally high returns on their money or acquisition of non-existent properties. CBK and Sasra advise members of the public not to place their money with such unlicensed entities,” the two regulators said in a joint communique.

Milazi promises a deposit interest rate of seven per cent monthly for six months. Members can also borrow loans of up to three times the amount they have contributed and are charged an interest rate of 15 per cent per month.

Investors can invest between Sh5,000 to Sh2 million with Milazi. Savings can be done daily, weekly or monthly, according to Milazi.

The Capital Markets Authority declined to comment on Milazi’s ‘investment units’. Milazi says on its website that a weekly investment unit of Sh700, earning interest after every 30 days will grow to Sh2,960 at end of the month. “The interest is calculated after every 30 days (100x30x7%)” it says.

“If an investor made a Sh50,000 one time investment for six months, providing an aggregate seven per cent monthly interest, the investor would receive Sh11,800 each month (principal+interest) in cash payments,” says Milazi. “Your money is used to give short term loans to members (usually one-six months)” it says on its portal about its investments.