The Kuscco fraud scandal has left thousands of Sacco members facing financial uncertainty as the government orders 247 Saccos to cut dividend payouts and set aside funds to cover potential losses.
This decision follows a forensic audit by PricewaterhouseCoopers (PwC), which exposed fraudulent activities amounting to Ksh 13.3 billion at the Kenya Union of Savings & Credit Co-operatives (Kuscco).
The audit revealed that Kuscco is insolvent by Ksh 12.5 billion, putting at risk Ksh 24.8 billion in deposits collected from Saccos across the country.
The fraud involved various forms of financial malpractice, including book tampering, large-scale theft by senior executives, bribery, suspicious bank withdrawals, and conflict of interest in procurement contracts.
PwC established that financial statements were manipulated to reflect non-existent profits, creating a false impression of stability while top officials engaged in looting.
Among the institutions affected are some of Kenya’s largest Saccos, such as Mwalimu Sacco, Stima Sacco, Harambee Sacco, Kenya National Police Sacco, and Tower Sacco, whose collective assets run into hundreds of billions of shillings.
In response to the crisis, the State Department for Cooperatives has directed Saccos to stagger provisions for these losses over several years and, where necessary, seek bank loans to strengthen their financial position.
The government has also instructed Saccos to limit dividend payments to members to maintain liquidity and avoid further financial distress. Authorities have chosen not to disclose the full list of the affected Saccos, fearing that such revelations could trigger panic withdrawals and lead to a collapse of some cooperative societies.
However, it has been confirmed that larger Saccos with significant investments in Kuscco are the most exposed.Investigations have placed former Kuscco executives at the center of the scandal, including former Managing Director George Ototo, former Finance Manager George Owino, and former Chairman George Magutu.
These officials, alongside other senior managers, are accused of orchestrating the fraudulent schemes that crippled Kuscco. PwC’s forensic audit found that between 2018 and 2023, executives misappropriated at least Ksh 206 million through withdrawals disguised as cash replenishments for Kuscco FOSA branches.
In addition, records indicate that commissions of up to 3.0% were falsely recorded, allowing officials to withdraw Ksh 1.6 billion while only disbursing Ksh 1.1 billion.As a result, eight former Kuscco officials, including Ototo, Magutu, Owino, and former Advocacy Manager Mercy Muthoni, are now facing multiple criminal charges, including theft, forgery, and money laundering.
Additionally, Kuscco’s former external legal counsel, Jackline Omolo, has been charged with preparing fraudulent land purchase agreements, stealing, and engaging in money laundering. The accused have denied the charges and are currently out on bond as investigations continue.
The scandal has shaken the Sacco sector, which has long been viewed as a safer alternative to commercial banks.
Sacco members who trusted their savings with these institutions are now left with limited options as dividend cuts take effect. The government’s intervention may prevent an immediate collapse, but the long-term damage to confidence in the sector will take years to repair.
Many members are worried about the safety of their savings, and without a clear plan to recover the lost billions, the future of Kuscco and its affiliated Saccos remains uncertain.
