Cooperative movements have been cautioned against unethical business practices, especially regarding loans taken to pay dividends.
“A significant number of top managers in saccos have been borrowing heavily to distribute large dividends to members, which contradicts the annual profits earned,” said Wycliffe Oparanya, the Cooperative and MSMEs Development Cabinet Secretary.
He pointed out that many saccos are facing liquidity issues due to these debts.
“We’ve seen instances where sacco leaders borrow to pay dividends without aligning it with actual profits, leading to unmanageable debts and regulatory challenges,” he added during the national Ushirika Adjudication Award ceremony for cooperatives.
Oparanya noted that coffee cooperatives are particularly impacted, with leaders borrowing extensively to meet high earnings for farmers, which undermines good governance principles. He cited a case where a cooperative sold coffee at Sh80 per kilo but paid farmers Sh100.
“Where did the cooperative find the extra Sh40 to pay the farmers?” he questioned.
He emphasized that paying high earnings despite losses leads to perpetual debts.
While acknowledging some improvements, he highlighted ongoing governance issues.
“We know there are concerns from members and the public regarding leaders risking funds through unethical practices or theft, which is not just unethical but criminal,” Oparanya stated.
“It is unacceptable for such practices to continue. Cooperative leaders must confront these issues.”
To aid in this effort, he announced that SASRA has implemented a whistleblowing policy to promote integrity and transparency within cooperatives. This policy encourages reporting misconduct and emphasizes compliance from all board members and employees.
“Good governance is essential; we must move from words to action to protect the integrity of our cooperative movement,” he said.
Macloud Malonza, Chairman of the National Council for Ushirika Day, praised the resilience of the cooperative sector, noting improvements in agricultural and financial performance, including better prices for coffee farmers and increased food production.
Among the saccos recognized for exceptional management were Kenya National Police Deposit Taking Sacco in first place, Tembo (EABL) Sacco in second, and Ports Sacco in third.
