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Nyati sues Sasra over Kuscco loss provision order
A forensic audit by consultancy firm PwCÂ revealed malpractices at Kuscco, including the cooking of books, large-scale theft by executives, bribery among many others.
Nyati Sacco Society Limited has challenged a guideline issued by the Sacco Societies Regulatory Authority (Sasra) for Saccos to make provisions for future write-offs arising from financial losses due to bungled investments in the scandal-hit Kenya Union of Savings & Credit Co-operatives Limited (Kuscco).
In the guideline issued on January 14, 2025, Sasra directed regulated saccos to start recognising the cash losses linked to the multi-billion-shilling fraud at Kuscco with immediate effect.
Nyati Sacco, however, said the guideline does not only irregularly seek to shield Kuscco from their financial obligations, but goes contrary to the core objectives of the regulator on Sacco societies.
“The respondent’s guideline complained of above is jeopardising the applicant and putting the applicant’s members’ money at risk, yet Kuscco has not been declared insolvent by any court of law,” Nyati Sacco said in the application.
High Court Judge John Chigiti directed Nyati Sacco to serve the petition on Sasra and Kuscco within seven days. The case will be mentioned on May 7, for directions.
Nyati Sacco said the guideline only stated that Kuscco Ltd had been reported to be facing financial challenges, but without citing any authoritative source of the alleged reports.
The Sacco pointed out that Sasra directed that the guideline must be implemented immediately. The G4S Kenya-linked Sacco had invested money in Kuscco which was to mature on April 30, 2024.
Deposits under the Central Finance Fund include Shares (6,900 at Sh100) amounting to Sh690,005, Jungu Kuu Savings of Sh4.1 million, and Sacco special deposit of Sh86.4 million.
Nyati Sacco said upon maturity, it sought to access the funds but Kuscco allegedly withheld the same, without giving any plausible explanation.
Julius Bett, the chief executive officer of Nyati Sacco, said they were apprehensive that should the guideline be implemented, its members would be subjected to huge losses by being compelled to write off their financial investments held by Kuscco.
He said they believed the investments were recoverable.
“The applicant (Nyati) has no funds of its own and the funds invested in Kuscco Limited belong to our members, as such we have a duty to protect the aforesaid funds from loss especially when the same is recoverable,” Dr Bett said.
Dr Bett added that the guideline was issued without any consultation with stakeholders.
A forensic audit by consultancy firm PricewaterhouseCoopers (PwC) revealed malpractices at Kuscco, including the cooking of books, large-scale theft by executives, bribery, unexplained bank withdrawals, and conflict of interest through the 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 Sh24.8 billion it received from the 247 saccos as deposits are at risk.
