The cooperative sector is being urged to uphold ethical standards amid growing concerns over unsustainable financial practices. Cooperative and MSMEs Development Cabinet Secretary Wycliffe Oparanya has raised alarms about cooperatives borrowing excessively to pay dividends, a trend that misrepresents their true financial health.
Oparanya warned that some sacco leaders are prioritizing payouts over prudent financial management, leading to severe liquidity issues. “Leaders are borrowing heavily to pay dividends, disregarding their actual profits, which has caused significant debt and regulatory challenges,” Oparanya stated.
Speaking at the national Ushirika Adjudication Award ceremony, Oparanya highlighted the troubling trend among coffee cooperatives, where leaders have taken on large loans to meet unrealistic member expectations. He cited a case where a coffee cooperative sold its product at Sh80 per kilo but paid farmers Sh100 per kilo, questioning the source of the additional funds.
“This practice of paying out more than the cooperative earns is not only unsustainable but also irresponsible,” Oparanya emphasized. “Such unethical and risky financial maneuvers jeopardize member funds and undermine public trust in the cooperative movement.”
To combat these issues, the Sacco Societies Regulatory Authority (SASRA) has introduced a whistleblowing policy to promote transparency and accountability within cooperatives. The policy encourages board members and employees to report any cases of misconduct, fraud, or unethical behavior.
“Good governance is not just a principle; it’s a necessity,” Oparanya remarked. “We must act decisively to protect the integrity and future of our cooperatives.”
Macloud Malonza, Chairman of the National Council for Ushirika Day, acknowledged the resilience of the cooperative sector amid these challenges, highlighting positive strides in agricultural and financial performance. He noted improved coffee prices, increased food production, and record bonuses for tea farmers as signs of the sector’s strength.
Despite these gains, the call for ethical leadership and responsible financial practices remains urgent. Recognizing excellence in management, Kenya National Police Deposit Taking Sacco, Tembo (EABL) Sacco, and Ports Sacco were honored for their commitment to good governance.