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Why Sh1trn Kenya Saccos are a ticking time bomb

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Mary Mungai , Commissioner for Co-operative Development. FILE PHOTO | NMG

An increasing number of Kenyan Saccos are reeling under the weight of mismanagement, fraud and bad loans that have put the Sh1 trillion sector on a path of instability that if not reversed could have damaging contagion on the entire economy.

At stake are hundreds of billions of shillings of members’ savings that have either been lost or are at risk of being lost as more and more cases of financially troubled Savings and Credit Co-operative Societies (Saccos) come to the fore.

Just three Saccos; Mwalimu, Ekeza and Stima Investment Co-operative, are together estimated to have lost their members upwards of Sh3.6 billion through mismanagement or outright fraud by officials and boards.

With the situation seemingly getting out of hand, the State Department of Co-operatives has called in the Ethics and Anti-Corruption Commission (EACC) to help in investigating and prosecuting fraudulent officials to protect the savings of an estimated 14 million Kenyans who are Sacco members.

The Commissioner of Co-operatives, Mary Mungai, told the Business Daily that weak governance and outright fraud were the biggest challenge facing the co-operative movement.

The State Department of Co-operatives has formed a special unit, the Ethics Commission for Co-operative Societies (ECCOS), which is involved in tracking fraud in Saccos. Eccos has signed a memorandum of understanding with the EACC to curb fraud in Saccos.

“We want to bring all Saccos under a prudential framework, strengthen the reporting line and ensure sustainability of the sector is credible and guaranteed,” said Ms Mungai. Kenya’s co-operative movement is rated among the best in Africa with over 22,000 registered co-operative societies.

The Saccos employ more than 500,000 Kenyans directly and another 1.5 million indirectly, according to official records.

Sacco savings and deposits are estimated at over Sh732 billion, equivalent to about 30 percent of national savings. The movement had an asset base of over Sh1 trillion and a loan portfolio exceeding Sh700 billion as at the end of 2017.

The government formed the Saccos Sector Regulatory Authority (Sasra) to police deposit-taking co-operatives but this, according to Ms Mungai, has not deterred fraud and mismanagement. About 174 Saccos holding Sh305.3 billion deposits from 3.6 million members are under Sasra’s regulation.

Ms Mungai said her office is working with Sasra and the EACC to address challenges in the sector. Another emerging problem in the sector is the issue of fraudulent people setting up Saccos as personal businesses.

Co-operative societies are currently classified as private entities, which limits the Department of Co-operatives’ power to enforce compliance in governance, procurement and disposal of assets. Sasra chairman Sammy Ruto in the sector report for 2017 identified the need for a deposit insurance facility to spur confidence in the deposit-taking Saccos to compensate members in the event of failures of the institutions.

The Commissioner of Co-operatives last month stopped televangelist-turned-politician David Kariuki Ngare from selling hotels and land belonging to his real estate company to protect Ekeza Sacco members’ savings.

He had planned to dispose of the assets on February 14 through public auction. He had claimed that he would use the money to repay members their claims in excess of Sh1 billion. The televangelist is accused of running the Sacco single-handedly, more of like a personal business, hence putting members’ interests at risk. The Sacco is already under scrutiny by a team appointed by the Commissioner of Cooperatives in December.

Through a Gazette notice published on March 23, 2018, the commissioner cancelled the registration of the Sacco, saying it had failed to meet its objectives. The move prompted Ekeza to move to court.

Ekeza then argued that the move was in breach of rules of natural justice and motivated by malice, and that it jeopardised the business which had collected deposits from some 50,000 members.

But last May, both Ekeza and the commissioner reached an out-of-court deal and the suit was withdrawn.

The issue has now re-emerged on an even bigger scale.

It’s a scandal that has attracted the attention of other arms of government with the Interior Secretary saying action will be taken against the officials of Ekeza once investigations by the Director of Criminal Investigations are completed.

Other Saccos are also facing different forms of fraud. Stima Investment Co-operative Sacco is facing sanctions after a forensic audit revealed massive fraud at the society, which has exposed members to losses exceeding half-a-billion shillings.

The Commissioner of Co-operatives recently removed from office the entire board of Stima Investment Sacco.

Documents filed in court challenging the ouster of the officials reveal massive fraud at the institution.

The audit by financial consulting firm Deloitte reveals how Stima Investment lost money through multiple irregular land purchases across the country in which officials bought occupied land without conducting any due diligence or site visits, failed to settle transactions after putting down initial deposits and in other cases collected funds from members even before the preliminary purchase agreements were signed.

The audit revealed that the Sacco acquired properties valued at over half a billion but its facing losses ranging from contested ownership, lack of approvals from government authorities and failing to pay for outstanding amount after paying for initial deposits, leading to forfeiture of advance payments.

The Sacco is also accused of falsifying the audit report of 2017 financial report and is set to review it.

Ms Mungai says her office has seconded more officials to the work of looking at the Sacco reports to weed out the falsification of financial reports.

“We have sent back many financial reports,” she said without giving numbers, but adding that her office is working on modalities to blacklist the external auditors who conspire in falsifying the books.

Mwalimu National Sacco has accumulated losses of more than Sh2 billion from its 2015 acquisition of a majority stake in Equatorial Commercial Bank, in which business tycoon and founder Naushad Merali had a controlling interest.

The Sacco, owned by teachers, invested a total of Sh2.4 billion to take a 75 percent stake in the lender, which later rebranded to Spire Bank.

The buyout of the bank raised eyebrows when it became public, with various government agencies halting the deal but later approving it. It emerged that Mwalimu had agreed to make the acquisition without conducting due diligence on the bank.

The giant Harambee Sacco, Kenya’s third-largest deposit-taking savings society, last year reported Sh145 million loss.

Harambee last year was also hit with leadership wrangles with some suspended members moving to the Cooperative Tribunal accusing directors of planning to block their participation in board elections to challenge the incumbents. The nine suspended delegates sought a reversal of the suspension on grounds that it was meant to stop them from vying for elective posts at the annual general meeting. The society’s management, however, denied the allegations.

The government in 2018 revoked the licence of Moi University Sacco and placed it under liquidation.

Commissioner for co-operative development Mary Mungai cancelled the registration of the deposit-taking sacco and appointed two liquidators to take custody of the troubled sacco for a year.

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Second-round M-Akiba bond issue a letdown again

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By JAMES ANYANZWA
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The Kenya government’s attempts to boost national savings through its retail market bond dubbed M-Akiba failed to excite the market for the second time in a row posting a 21 per cent undersubscription.

The government reopened the mobile-based infrastructure bond hoping to raise Ksh250 million but only managed Ksh197 million ($1.97 million), accounting for a 79 per cent subscription rate.

The bond, which was listed on the Nairobi Securities Exchange on March 12, has a duration to maturity of 18 months and will be redeemed on September 7, 2020.

The proceeds of the bond issue were meant to settle total interest payments valued at Ksh12.38 million ($123,800) for investors who bought into the initial tranche of Ksh150 million in March 2017.

The Central Depository and Settlement Corporation Ltd has so far paid out, on behalf of the government, a total of Ksh59.67 million ($596,700) in interest to M-Akiba bondholders since the first issue.

The government is targeting investors with as little as Ksh3,000 ($30) in investment capital to purchase the bond and benefit from an annual rate of return of 10 per cent paid after every six months, implying that such an investor would receive Ksh150 ($1.5) through his phone after six months and a total of Ksh300 ($3) in a year.

But according to Financial Sector Deepening Kenya, some investors feel that the Ksh3,000 would be better allocated to alternative savings groups or investment opportunities that could provide quick returns or access to credit.

Although the M-Akiba bond was launched with the aim of promoting a national savings culture and reducing the government borrowing costs, this is yet to happen. The government had set a target to raise Ksh1 billion ($10 million) through the M-Akiba bond but last year the issue failed after a successful pilot project.

The government had put M-Akiba bond worth Ksh1 billion ($10 million) on offer, with hopes that the issue would sell out and even allowed a green-shoe option of Ksh2.8 billion ($28 million), that in case of oversubscription it could take up a massive Ksh3.8 billion ($38 million.

However, the government managed to raise only Ksh247 million ($2.47 million) of the targeted Ksh1 billion ($10 million).

Over 300,000 people registered on the M-Akiba platform but only 5,988 purchased the M-Akiba $2.47 million, less than a quarter of the Ksh 1 billion ($10 million) on offer.

It was a three-year bond with a coupon rate of 10 per cent paid semi-annually and a tax-free status in line with other infrastructure bonds.



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Uhuru visits Africa’s biggest fish freezing factory, says Kenya will copy Namibia’s example

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He said African nations should work together and learn from the examples of countries like Namibia, which has implemented progressive measures to develop its fisheries sector/PSCU

, WALVIS BAY, NAMIBIA, Mar 23 – President Uhuru Kenyatta has said African countries must take stronger steps to benefit from their immense marine resources.

He said many nations including Kenya gain almost nothing from their sea resources including fish.

The President said it was disappointing that foreign nations are benefiting more from the abundant fish in the territorial waters of many African countries.

He said African nations should work together and learn from the examples of countries like Namibia, which has implemented progressive measures to develop its fisheries sector.

The Kenyan leader spoke when he toured Seaflower Pelagic Processing factory in Walvis Bay, Namibia, which has the distinction of being the biggest fish-freezing factory in Africa.

The factory was set up recently at the cost of $40 million (about Sh4 billion) through a partnership between the Namibian Government and a private investor.

The factory freezes 600 tonnes of fish on a daily basis and has created jobs for 700 people.

President Kenyatta instructed Agriculture Cabinet Secretary Mwangi Kiunjuri and Trade and Industry CS Peter Munya to immediately take steps to learn from the Namibian experience so that Kenya can have a similar factory.

Namibia’s Vice President Dr Nangolo Mbumba and Fisheries Minister Bernhardt Esau said the Government embarked on strengthening fishing in order to give Namibia a food security guarantee.

Vice President Mbumba said Namibia and Kenya are united by true friendship that started when Namibians were fighting for freedom.

“When SWAPO was fighting for freedom, the first vehicle it ever owned was bought by Kenya. We will also never forget the role played by the Kenyan contingent of UNTAG which remained behind at the cost of Kenya to protect Namibians until the country was stable,” said Vice President Mbumba.

President Kenyatta toured the fish factory after visiting the headquarters of Namibia port authority, Namport, also in Walvis Bay.

“We are here to learn from how Namibia is benefiting from its blue economy even as we continue to support and partner with them in various other fields,” said President Kenyatta.

The port of Mombasa and Walvis Bay are similar because they serve many nations in the interior of Africa.

The President was taken on a tour of the port and shown how the Government is reclaiming land from the sea to enable the port to handle ships with bigger capacity.

To enhance its efficiency in serving neighbouring landlocked countries, Namport has assigned dry ports to the different nations so that they can manage their own cargo.

President Kenyatta said Kenya would study the idea of dry ports for neighbouring countries that depend on the Port of Mombasa for their imports and exports.

“That kind of arrangement can let them manage their own cargo and our job will be to be efficient port owners,” said President Kenyatta.

He said the port of Mombasa and Namport would partner in the areas of efficiency enhancement, and the bridging of management and administration gaps that lead to corruption with the aim of improving service delivery.

The President said mismanagement and other malpractices at the ports create inefficiencies, which in turn affect economies of many countries that depend on these ports as gateways into their countries.

The Namibian Government has already requested guidance from Kenya in the setting up of a single window system for processing and clearing transit cargo across many borders. The system allows importers to input data once which is then used by all countries through which the goods pass on their way to their destinations.

President Kenyatta said Africa would only succeed when all nations agree to collaborate to achieve progress.

“If Africa succeeds Namibia has succeeded and if Africa succeeds Kenya will also have succeeded,” said President Kenyatta.

President Kenyatta is on a State Visit to Namibia and was Friday hosted at State House, Windhoek, where he held bilateral talks with President Hage Geingob.





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Transfast upgrade to facilitate inter-Africa transfers : The Standard

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The firm is set to unveil new modes of money transfer that seek to guarantee users much convenience at lower cost.

Global money transfer and payment firm Transfast has revealed plans to re-engineer its platforms to allow Kenyans and other East Africans to send money both across and outside Africa.

This is even as transaction times are set to be radically adjusted to allow for much efficiency and further cost reductions.
The far-reaching changes were announced as Transfast recently met with East African business partners to build its network strength in Africa by partnering with a number of banks and other institutions.
New on the list of 18 partners was Postbank Uganda and Tanzania’s NMB Bank. Others were Ecobank Rwanda, Safaricom, Commercial Bank of Africa, as well as Guaranty Trust Bank Kenya.
Gulf African Bank and Kenya’s payment solutions provider PI Consulting, also came on board as Transfast agents.
“As we seek to be a leader giving the best service across the globe, we are looking to invest heavily is upgrading our systems to facilitate transactions at very affordable rates,” said Transfast Eastern Africa Regional Manager Daniel Muchika.
Further, he said the firm is set to unveil new modes of money transfer that seek to guarantee users much convenience at lower cost.
“We are also working at supporting freelance work around the world through integration partnerships with as many job platforms,” he said.
Transfast is a growing international money transfer and cross-border payments company headquartered in New York with additional offices in the UAE and the Philippines.
Founded in 1988, the company is a provider of multi-currency, cross-border payments solutions for consumers and businesses around the world.
Remittances are processed through its direct-to-bank network, and the company offers over 350, 000 cash payout points across 130 countries.
In Africa, Transfast operates in over 30 countries where the company’s bank network covers up to 90 per cent of adult bank account holders in those nations.
Transfast has crossed the 45,000-location mark in India with more than four million customers globally.
To date, the platform is on record for having processed about $8.5 billion worth of transactions.

TransfastMoney transfer





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