- The CS said coffee cooperatives are particularly affected.
- He noted that leaders in these cooperatives have been resorting to substantial borrowing to meet the high earnings of coffee farmers, which goes against the principles of good governance.
Cooperative movements have been warned against unethical business practices, particularly concerning loans taken to pay dividends.
“A significant number of top management leaders in saccos have been borrowing heavily to distribute large dividends to members, which contradicts the annual profits earned,” Cooperative and MSMEs Development Cabinet Secretary Wycliffe Oparanya said.
He noted that many saccos are struggling with liquidity issues as a result of these borrowed debts.
"We have observed instances where sacco leaders are borrowing to pay dividends without aligning this to the actual profits made. This behaviour has led to unmanageable debts and challenges with regulators,” he added.
Oparanya spoke at the national Ushirika Adjudication Award ceremony for cooperative movements.
The CS said coffee cooperatives are particularly affected.
He noted that leaders in these cooperatives have been resorting to substantial borrowing to meet the high earnings of coffee farmers, which goes against the principles of good governance.
He cited a recent case where a coffee cooperative sold a kilo of coffee for Sh80 at auction but paid farmers Sh100 per kg.
“Where did the cooperative find the extra Sh40 to pay the farmers?” he questioned.
“The issue with paying out high earnings, even when the cooperative isn’t making profits, is that it leads to perpetual debts that cannot be settled.”
While he acknowledged improvements in certain areas, he pointed out that governance issues still pose significant challenges.
“We are all aware of the concerns raised by our members and the public about how some leaders risk member funds through unethical practices, risky investments, or outright theft. This is not only unethical but criminal,” Oparanya said.
“It is no longer acceptable for such practices to persist within the cooperative movement. As cooperative leaders, we must boldly address these issues.”
To facilitate this, he announced that SASRA has implemented a whistleblowing policy aimed at promoting integrity and transparency within cooperatives.
The policy encourages reporting of misconduct, fraud, and unethical behaviour, emphasizing that every board member and employee is responsible for compliance and reporting breaches.
“Good governance is non-negotiable, and we must transition from rhetoric to action to preserve the integrity of our cooperative movement,” he said.
Chairman of the National Council for Ushirika Day Macloud Malonza, highlighted the resilience of the cooperative sector, even in challenging times.
“Cooperatives remain stable, as evidenced this year by improved agricultural and financial performance. Coffee farmers are seeing better prices, food production has increased, and tea farmers are expected to receive their largest bonus in years,” he said.
“In financial cooperatives, we continue to witness double-digit growth, and returns to members have been commendable. Looking ahead, the sector's outlook is promising as we approach the final quarter of the year.”
Among the saccos recognized for outstanding management were Kenya National Police Deposit Taking Sacco, which secured first place, Tembo (EABL) Sacco in second place, and Ports Sacco in third place.