Fifty-eight savings and credit co-operative societies (saccos) risk bank account freezes and property auction in efforts to recover Sh1.36 billion they owe the Kenya Union of Savings & Credit Co-operatives (Kuscco), which was hit with a multi-billion shilling fraud.
The 58 tapped loans in the 23 years to 2024 and have defaulted as the State seeks to prevent Kuscco from collapsing after a Sh13.3 billion heist, which triggered the arrest of four top officials and a lawyer.
The saccos tapped the Sh1.36 billion against deposits worth Sh368.39 million, with the State issuing notices for the immediate payment of the Sh987.86 million difference.
Top defaulters include Kencom Sacco, which borrowed a Sh377.5 million loan, Nacico Sacco and its sister entity Nacico Investment Co-op (Sh358.01 million) and Maseno University (Sh106.43 million).
Now, the Commissioner for Co-operative Development, David Obonyo, has issued demand notices to the defaulting saccos, and Kuscco hopes to use the nearly Sh1 billion to partly settle other co-operatives whose billions of shillings are stuck in the umbrella organisation.
“It has come to the attention of this office that your sacco owes Kuscco an outstanding loan...The continued failure to meet obligations to Kuscco as per the loan agreement entered into by both parties has been detrimental given the current status of the union,” says the letter dated June 27, 2025.
“You are hereby required to settle the outstanding loan balance with immediate effect. In case full settlement of the said amount is not feasible, a written plan on how you intend to settle this outstanding loan should be submitted to both this office and Kuscco within 14 days from the date of this letter.”
The defaulting saccos will have to forego the Sh368.39 million deposits in Kuscco and raise additional money to settle the loans or risk surcharges from the commissioner, including freezing their accounts to recover the loan balances.
Saccos with defaulted obligations, such as loans, are also barred from declaring and paying dividends. This could rattle thousands of members in the saccos.
Some top saccos have set aside partial funds or provisions to cover the expected loss of billions of shillings worth of deposits and shares at Kuscco.
Wrongdoings at Kuscco include the cooking of books, large-scale theft by executives, bribery, unexplained bank withdrawals and conflict of interest through issuance of contracts to firms owned by top managers and masking the schemes through manipulation of financial statements to report non-existent profits.
In the end, Sh13.3 billion has been lost, the umbrella body of saccos is insolvent to the tune of Sh12.5 billion and part of the Sh24.8 billion it received from 247 saccos as deposits are at risk.
Kuscco aims to recover at least 70 percent of the Sh8.8 billion principal amount that saccos had invested in the umbrella entity within the next three years.
Recovering the amount, about Sh6.2 billion, is among the targets set for the nine-member board that was installed in May to steady Kuscco after theft and mismanagement.
Other top defaulters are Stegro (Sh68.58 million), Umowa (Sh49.07 million), Kakamega County Maendeleo (Sh44.93 million), Sonygar (Sh43.79 million), Migori Teachers (Sh35.76 million), Malindi Biashara (Sh35.05 million) and Lamu Teachers (Sh23.92 million).
Saccos from the western part of Kenya top the list with Sh325.04 million defaults, followed by Rift Valley (Sh95.82 million), Mount Kenya (Sh80.42 million) and Coast (Sh77.36 million).
The rot has left Kuscco with assets of Sh5.2 billion against liabilities of Sh17.7 billion, sinking it into Sh12.5 billion insolvency for an organisation that operated without a regulatory watchdog.
A forensic audit by consultancy firm PricewaterhouseCoopers (PwC) revealed the cooking of the books and theft.
The audit retrieved the trove of incriminating information from e-mails, computer logs, M-Pesa statements and documents of at least 23 top managers at Kuscco in a review that placed eight executives in the spotlight, including then managing director George Ototo, finance manager George Owino and chairman George Magutu.
The PwC audit unearthed the cooking of financial books to the tune of Sh9.3 billion following understatement of costs like commissions and interest expenses and overstating incomes—a scheme which saw Kuscco book phantom profits.
The audit found that between 2018 and 2023, Sh206 million may have been stolen through withdrawals from the Kuscco Sacco savings bank account in the name of replenishing cash at Kuscco Fosa branches.
Records unearthed by PwC indicated false entries of commissions of up to 3.0 percent. As a result, the executives withdrew Sh1.6 billion, but paid out Sh1.1 billion.
Mr Ototo, Mr Magutu and Mr Owino have since been charged with theft, uttering false documents and money laundering.
In addition to loan recoveries, Kuscco is now auctioning houses and land held by defaulters of mortgages issued under its housing subsidiary.
It is also looking for an investor to buy a 60 percent stake in its insurance subsidiary called Kuscco Mutual Assurance.
The land and houses are located in different parts of the country, including Kitengela, Kiserian, Kajiado, Nyayo Estate, Kisumu, Thika, Machakos, Webuye, Bungoma, Kisaju, Lukenya and Syokimau. The Kitengela houses are going for Sh9.5 million, according to auction details.
Kuscco had paid Sh132.22 million to small saccos as of February, being the principal amount they had put in the union. The move was aimed at averting the collapse of the saccos, which had put most of their members’ deposits in the union for a return.
Kuscco has sold over 32 vehicles and continues to liquidate other non-core assets in the recovery plan. It has also trimmed its workforce to 87 from 246 and closed the branches it had in Kitengela, Thika, Nyeri, Meru, Eldoret, Kericho, Kisii and Kisumu.
