Ideas & Debate

Unclaimed assets the new cash cow

What is the difference between democracy and capitalism? In a democracy you have two cows.

Your neighbour has none. You feel guilty for being successful. You vote people into office that put a tax on your cows, forcing you to sell one to raise money to pay the tax. The people you voted for then take tax money, buy a cow and give it to your neighbour. However, in a capitalist society you have two cows. Your neighbour has none. Period.

Our government has a new milk cow and it’s being called the Unclaimed Financial Assets Authority (UFAA). You may or may not have heard about it and if you haven’t, you might want to acquaint yourself with this organisation.

You see, if you happen to die without letting your loved ones know about your little stash of cash, shares, insurance policies or National Social Security Fund (NSSF) contributions, your property would typically sit in banks, listed companies, insurance companies or the NSSF forever.

While your beneficiaries languish and suffer for lack of financial security, these institutions would turn over the cash year in, year out, getting an income from interest on the cash, which would go to the bottom line and be distributed to shareholders as profit.


In the case of listed companies, the undistributed dividends in many cases sit in the account of the shares registrar and should ideally be held “in trust” for the claimants when they eventually materialise.

Someone in government finally wisened up to the fact that these unclaimed amounts were only making shareholders of the holding institutions richer and that these funds would be an excellent source of revenue in a period of widening budget deficits.

The numbers as estimated are mouth watering: Commercial banks are said to hold about Sh7.4 billion, listed companies are said to be sitting on Sh1.4 billion of unclaimed dividends, the NSSF Sh243 million in unclaimed contributions and insurance companies with about Sh200 million in unclaimed life policies.

The UFAA has been created under the Unclaimed Financial Assets Act, 2011 (one of the most speedily passed bills in the current Parliament) to create an avenue for all the above named institutions to send the property that remains unclaimed after a period of between two to seven years depending on the type of asset.

(Oh, did I mention that the Act came into effect retrospectively so all of the unclaimed assets as at the date the Act came into effect -16th December 2011-essentially qualify?)

Well, for all the folks who love to bash banks this may come as good news. For now. But fact is that you now have to jump several more hoops to get your loved ones’ property as you have to deal with a government agency and all its attendant bureaucracies.

Yes, I’m sure you’ll feel a lot better as the Act requires the UFAA to pay your claim together with any accrued interest. But what if you never get to claim?

The Act under Section 19 requires that the original holder of the assets should first make a reasonable attempt to locate the original owners through the last known address. If this fails, then the assets are handed over to the UFAA within the statutory period.

Section 35 of the same Act says that UFAA shall also make reasonable efforts to locate the owner.

Don’t hold your breath and expect that you’ll have someone knocking on your door with the words “Surprise!” any time soon. These reasonable efforts (which are not defined) will probably be no more than a letter sent to the same postal address that the original holder of the asset communicated to.

Enough said. Back to the numbers: a quick back of the envelope calculation puts the current estimate of abandoned assets at about Sh9.2 billion.

Assuming that UFAA deposits these funds in a bank and short-term government securities today, the average blended rate of return would be approximately 15 per cent per year.

Thus in one year, the income from these assets would be Sh1.3 billion.

And, pray tell, where does that income go? The Act is silent on this. Stunningly, stupendously silent.

Of course they’ll tell you that this income is due to the claimants of the assets. Remember, the folks who got the mysterious knock on the door and found a smiling civil servant with an envelope in his hand shouting “SURPRISE!”

But perhaps there’s hope. The Act stipulates who shall sit on UFAA’s board and makes all the necessary attempts to define five knowledgeable people who are not public officers, plus the Permanent Secretary to the Treasury and the Chief Executive Officer.

The five should consist of a banker, an insurer, a lawyer/accountant/business manager, an expert in unclaimed assets and a representative of financial consumers.

In other words, as the nursery rhyme goes: a butcher, a baker and a candlestick maker.

These five independent folks will have the less than Herculean task of getting the UFAA to fulfil its mandate.

Generate income
Whatever that mandate is; be it to trawl the bowels of Kenyan villages looking for beneficiaries of abandoned assets or to generate noteworthy income from assets that are currently being utilised by institutions for the ultimate (and some may say immoral) benefit of shareholders.

Rather than legislating that the income from these funds should be channelled to health, education or charitable causes, our Parliament and Executive have created a dark, cavernous hole with nothing at the bottom of it but the virulent Kenyan vultures we have come to associate these milk cows with.

I’m not sure which is the lesser of the two evils between banks or insurance companies keeping the abandoned assets or UFAA swallowing them up, but I can say this with much certainty: Mama’s got a brand new bag of tricks and has ensured that she doesn’t have to account for it.

Why buy a cow when you can get the milk for free?