How A Thriving Teachers Sacco Lost Over Ksh 12bn
Details have emerged on how current and former officials and staff of Metropolitan National Sacco, whose members are mainly teachers, have run down the previously flourishing savings society.
The board of directors and management, both current and former, have been indicted by the Sacco Societies Regulatory Authority (Sasra), exposing shocking details on how they have been presiding over wastage, irregular loans and questionable withdraws amounting to billions of shillings, and abuse of procurement laws.
As a result, Sacco has been left with a Sh12 billion loss, the largest loss by a savings and credit society in recent times.
Some officials and management have been accused of looting members’ savings and using it to spruce up their lifestyles and acquire dubious properties.
The ‘People Daily’ has established that an investigation report that was gazetted on April 22, 2022, following protests by members after Sacco began failing to meet its obligations, revealed that Sh564 million was withdrawn from teller journals. Consequently, Sasra has recommended thorough scrutiny of journal vouchers and teller transactions.
Where unaccountability will be encountered, recovery measures should be instituted on the responsible officials, the report recommended.
“All those who have been in office according to Section 73 of the Cooperative Societies Act, both past and current officials of the society, who have taken part in misappropriation of money should repay, become liable, or account for the money. We recommend surcharging,” said Sasra.
Further, the Sacco, in September 2014, according to the report, started the Metropolitan Co-operative Investment Ltd, a sister outfit to help members with alternative investments in real estate, among other ventures.
To boost the venture, the board is reported to have disbursed Sh1.014 billion of Sacco money to the co-operative in form of loans without the approval of members. This is unlawful under the law that governs the management of Saccos.
Despite Metropolitan Co-operative Investment Ltd not being a member of the Sacco, Sh500 million was loaned to it in 2014 and a further Sh307 million in 2015 without any application. The money was issued without any security, which is mandatory. An additional Sh190 million was later granted to pay for a piece of land that had already been paid for.
According to the inquiry, while over Sh1 billion was loaned to the investment arm, only Sh310 million was spent on purchasing land in Kitengela, with auditors now demanding an explanation on how Sh703 million was used.
Another Sh176 million was withdrawn by Sacco agents and Sh61 million was withdrawn from branches but was not recorded in the books. The report has now recommended that the cash be accounted for, failure to which it should be recovered.
The Directorate of Criminal Investigations and the Ethics and Anti-Corruption Commission (EACC) are expected to receive the findings for further action.
Further, Sh49 million was withdrawn from a Nakuru branch to purchase land for the construction of a building for the M-Pesa business, but the same cannot be verified, with the finance manager being accused of having carried out a questionable transaction.
There was also abuse of the procurement process, whereby the Sacco is reported to have spent Sh80 million on repairs and maintenance of its head office at Chai House, Nairobi, and Sh124 million used to procure an ICT system, yet the approved budget for this was Sh2 million only.
The development also puts Sasra on the spot over alleged complicity, given the fact that despite the Sacco demonstrating signs of decline four years ago, they have been giving it a clean bill of health.
In 2018, the Sacco started grappling with external debts after dishing out “risky” loans worth billions, which led to massive borrowing, drastically affecting its liquidity. It was at this time that members began complaining that they could not access their salaries or loans.
Other issues raised by the supervisory committee include violation of debt ratio policy, lack of proper lending frameworks, especially to non-salaried members “that led to poor performance”, bad management of loan portfolio and lack of coordination in loan processing, whereby staff approved loans “with no idea if there was enough money” for the same.
This saw investigators from Sasra raid the institution to assess its stability, something that the Commissioner of Co-operatives confirmed then, but interestingly, no report was made public.
Sixth largest Sacco
The Commissioner for Co-operative Development, David Obonyo, in a Kenya Gazette Notice Vol. CXXIV — No. 71, dated April 22, 2022, ordered an inquiry into the Society’s by-laws; working and financial conditions; and the conduct of present and past directors and management of the Sacco. Lamentably, according to Sasra’s 2018 report, the Sacco is ranked the sixth largest, with an asset base of Sh14.8 billion.
Obonyo appointed Javel Murira, who is the director of cooperative audit, David Gitonga Kahuthu (manager in charge of regulations), principal co-operative official Kennedy Otachi and Daniel Mwatu (senior compliance officer) to conduct an inquiry.
Those fingered and recommended for action include the board of directors, chaired by Christopher Karanja, heads of departments who served between 2010 and 2021 led by chief executive officer Benson Mwangi, who was elevated in 2019 when Co-operative Bank moved in to save the organisation, heads of finance, internal audit, compliance, ICT and credit, citing them for failing in their duties.
The Sacco management has been manipulating systems to cover up the mess, cooking account books and even declaring dividends and rebates.
The Commission of Co-operatives kicked out the current board of directors and appointed a caretaker committee “to further probe them and their predecessors who served from 2010. It wants recovery measures instituted to recover the loot.
The Sacco leadership was also found to have given out a loan of Sh190 million purportedly for the purchase of land in Kitengela, Kajiado County, but the inquiry established that the management had already paid for the land. The board would also borrow money beyond the powers given to it by members.
The Sacco was registered on February 10, 1977, by like-minded teachers in Kiambu, who registered it as Kiambu Teachers Sacco, and then instructed their employer (Teachers Service Commission) to channel their salaries through it.
The entity was later re-branded to Metropolitan Teachers Sacco, before changing to Metropolitan National Sacco to accommodate non-teaching members.
Today, it has over 100,000 members.
In its heyday, the Sacco was rated among the best managed, but today it’s a pale shadow of its former self.