Ukaguzi Sacco: Sh47M Loan Defaults, KUSCCO Investment Recovery Woes

• Ukaguzi Sacco reported Sh47.03 million in loan defaults for 2025, with Sh3.27 million classified as losses.
• Recovery of a Sh50 million investment in KUSCCO Limited remains uncertain, with only 1.43% received in 2025.
• The Sacco also noted Sh98.85 million in unremitted member contributions from employers by year-end 2025.
• The Supervisory Committee recommended tighter credit scoring for Ukash loans and a review of the Sacco's tax exposure.
• Despite challenges, Ukaguzi Sacco's loan book grew by 6.68% to Sh3.02 billion, and membership increased to 2,455.

The substantial Ukaguzi Sacco loan defaults, coupled with the slow KUSCCO investment recovery, signal potential liquidity and solvency risks.

Ukaguzi Sacco disclosed significant financial challenges in its 2025 report, presented at its 53rd General Meeting on March 28, 2026. The Sacco reported Sh47.03 million in loan defaults for the year ending December 31, 2025. A substantial portion of these, Sh3.27 million, was categorized as outright losses, having remained unpaid for over a year.

Further analysis by the Supervisory Committee revealed that Sh13.95 million of the defaulted loans were classified as doubtful or substandard, with payments overdue between 91 and 360 days. An additional Sh29.81 million was overdue for a period ranging from 31 to 90 days. The committee specifically highlighted high default rates associated with Ukash loans, prompting a recommendation for more stringent credit scoring and eligibility criteria to mitigate future losses.

Beyond the loan defaults, Ukaguzi Sacco faces uncertainty regarding a Sh50 million investment made in KUSCCO Limited in 2023. The Sacco received only Sh756,705 from this investment in 2025, representing a mere 1.43 percent of the anticipated return. Discussions between the Sacco's board and KUSCCO management are ongoing to address the outstanding balance, underscoring the challenges in KUSCCO investment recovery in Kenya.

Despite these financial hurdles, the Sacco's loan book expanded by 6.68 percent, reaching Sh3.02 billion. Loans issued during 2025 also saw a slight increase to Sh1.69 billion, up from Sh1.68 billion in 2024. The Ukaguzi Sacco financial report 2025 also noted a rise in operating income to Sh510.90 million, surpassing its budget of Sh388.45 million by 31.5 percent. However, expenditure also exceeded its budget, reaching Sh398.36 million against a projected Sh375.37 million. Membership grew from 2,376 in 2024 to 2,455.

The Supervisory Committee's report also brought to light a significant issue of unremitted member contributions, amounting to Sh98.85 million by December 31, 2025, which employers had failed to remit. This figure, alongside the Ukaguzi Sacco loan defaults and the KUSCCO investment uncertainty, prompted the committee to advocate for enhanced risk management practices and improved oversight across the Sacco's operations.

Furthermore, the committee urged a comprehensive review of the Sacco's tax exposure. This review specifically targets potential liabilities related to excise duty and withholding tax, indicating a broader concern for compliance within the Kenya Sacco tax exposure review framework. These recommendations underscore a proactive approach to addressing financial vulnerabilities and ensuring regulatory adherence.

The findings from Ukaguzi Sacco's 2025 financial report highlight critical areas of concern for Saccos operating in Kenya. The substantial Ukaguzi Sacco loan defaults, coupled with the slow KUSCCO investment recovery, signal potential liquidity and solvency risks. The high default rates on Ukash loans further emphasize the need for robust credit assessment mechanisms to safeguard member funds.

The unremitted member contributions represent a direct impact on members' financial standing and the Sacco's operational cash flow. The call for a thorough Kenya Sacco tax exposure review, including excise duty and withholding tax, suggests a heightened awareness of regulatory compliance and the financial implications of overlooked tax obligations. These challenges collectively underscore the importance of stringent governance and financial prudence for the long-term stability of cooperative societies.

Lawyers advising Saccos or their members should note the increased financial risk and compliance scrutiny highlighted by Ukaguzi Sacco's significant loan defaults, the uncertain recovery of its KUSCCO investment, and unremitted member contributions. Compliance officers within Saccos should proactively review their risk management frameworks and tax exposures, particularly concerning excise duty and withholding tax liabilities, to prevent similar financial and regulatory challenges.

Source: Original reporting via Capital FM