Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
25, 000 saccos risk closure over missing audit reports
Ministry of Co-operatives and Micro, Small & Medium Enterprises (MSMEs) Development, State Department of Cooperatives Principal Secretary Patrick Kilemi (left) briefs media on October 01, 2025 held at Utalii Hotel.
About 25,000 savings and credit co-operative societies (saccos) risk deregistration for failing to prepare and file audited financial accounts with the regulator, raising concerns over the safety of more than Sh1.2 trillion deposits held in the country’s co-operative movement.
The State Department for Co-operatives says just under 5,000—representing 16.6 percent of the nearly 30,000 co-operatives in the country—are preparing and submitting their financial results to the Sacco Societies Regulatory Authority (Sasra) and the Commissioner for Co-operative Development.
State Department for Co-operatives Principal Secretary (PS) Patrick Kilemi said in an interview that many of the non-compliant co-operatives have continued to hide their financial dealings despite numerous reminders from the government.
Many co-operatives also failed to hold annual general meetings (AGMs) in line with the law, denying members knowledge of their financial dealings.
The absence of shareholder meetings has denied members the chance to elect directors and oust non-performing leaders.
“Compliance is not a suggestion. It is a legal and moral obligation. We now want to commence the process of cancelling registration certificates of all non-compliant co-operatives,” said Mr Kilemi.
“We will sustain enforcement and ensure we protect co-operative members from mismanagement, secrecy and financial abuse.”
Failure to prepare and file audited accounts is in breach of the Co-operative Societies Act and Co-operative Societies Rules, which require co-operatives to submit audited accounts within four months after the end of a financial year.
The move is part of the government’s broader push to clean up the co-operative sector, curb financial scandals and protect the over 7.4 million members from potential losses.
The sector has been hit by several high-profile scandals, including the Kenya Union of Savings & Credit Co-operatives (Kuscco) fraud, Ekeza Sacco heist and mismanagement at Metropolitan Sacco, which have collectively hurt public confidence in co-operatives.
Latest data from the Co-operatives Department shows the number of audited accounts submitted to regulators dropped to 4,062 in the year ended June 2025 from 4,130 in the previous year and 4,734 in the period ended June 2023.
This points to falling compliance levels in a sector that saw deposits jump to Sh1.224 trillion at end of June this year, compared with Sh1.126 trillion a year earlier.
Sasra oversees all deposit-taking (DT) saccos and non-withdrawable DT saccos that hold at least Sh100 million deposits, leaving the rest of the co-operatives in the hands of the office of the Commissioner for Co-operatives.
The law allows the Commissioner of Co-operatives to cancel the registration of a co-operative society and dissolve it immediately if it fails to file returns for three consecutive years. The law applies to primary co-operatives as well as apex bodies and secondary cooperatives like Kuscco, National Cooperative Housing Union (Nachu) and Cooperative Alliance of Kenya (CAK).
“Where a co-operative society has— (a) less than the prescribed number of members; or (b) failed to file returns with the Commissioner for a period of three years; or (c) failed to achieve its objects, the Commissioner may, in writing, order the cancellation of its registration and dissolution of the society and the order shall take effect immediately,” states the Act.
“Where the registration of a co-operative society is cancelled, the society shall cease to exist as a corporate body from the date the order takes effect.”
The law also provides that if a co-operative society fails to have its accounts audited within the required timeframe, the members of its management committee automatically lose their positions at the next general meeting. Such officials are barred from seeking re-election for three years unless the Commissioner determines that the delay was caused by circumstances beyond their control.
Mr Kilemi’s move looks set to trigger widespread concern among cooperatives, many of which face tight timelines and heavy documentation demands if they are to avoid the risk of regulatory sanctions at a time the government is pushing for mergers among small saccos that find regulations burdensome.
In June, the State Department—through the Commissioner of Co-operatives, David Obonyo—directed societies that had missed the April filing deadline to submit their audited results by the end of September. However, Mr Kilemi said the majority had still failed to comply, prompting the government to consider tougher enforcement measures, including deregistration.
He stressed that no society was permitted to operate without preparing and presenting audited accounts to its members and filing them to regulators.
“Ignoring official circulars is a direct violation of the Cooperative Societies Act and those who do so expose themselves to sanctions including removal from office, surcharges and deregistration,” said Mr Kilemi.
In October this year, the purge was extended to external auditors. Sasra ordered external auditors who have been hiding or failing to submit statutory reports on saccos’ operations, financial condition and regulatory compliance to the regulator to do so within 30 days or risk permanent ban from auditing the sector.
Many co-operatives have also failed to hold AGMs as is provided for in the Act, and therefore denying members a chance to know the financial dealings of the entities they have invested money in. Members have also been unable to choose leaders.
Mr Kilemi said there are large saccos that have failed to switch to the delegates system of holding AGMs, making it impractical for their gatherings to offer an equal chance for members to hold their officials accountable.
The delegates system requires large saccos—often those with over 5,000 members— to elect a limited number of representatives to attend and vote on behalf of the entire membership so as to make meetings more efficient and easier to manage.
In mid-June this year, Mr Obonyo wrote to all co-operatives, directing those with more than 5,000 members to update their bylaws within six months and adopt a delegates system for holding AGMs. Under the directive, each co-operative is required to have between 150 and 500 delegates depending on its membership size.
Mr Kilemi warned that CEOs who fail to hold proper AGMs or continue to rely on formats that reduce the meetings to mere ceremonial events with no room for members to democratically elect their officials will be surcharged for the millions of shillings splurged on such gatherings.
“Without books of accounts, many co-operatives are not holding AGMs. Failure to hold AGMs or hold proper elections means the officials claiming to be in office are doing so illegally. Such officials are liable for surcharges on all expenditures incurred during the period of non-compliance,” he said.
Some co-operatives have used the weak format of AGMs or the absence of shareholder meetings to borrow excessively and plunge their entities into debt. These loopholes prompted the State Department to issue guidelines demanding that all loan submissions be accompanied by, among other documents, certified AGM meetings, up-to-date audited accounts and a comprehensive business plan.
The State is also pursuing sacco CEOs who have failed to file their wealth declarations as part of wider efforts to tighten governance and curb malpractice in the sector.
The Co-operative Societies Act requires all co-operative officials to file income, assets and liabilities declaration forms within 30 days of assuming office. After the initial filing, officials are required to update their declarations every two years.
