The interim management of Kenya Union of Savings & Credit Co-operatives (Kuscco) has started auctioning houses and land of members who defaulted on mortgages as it attempts to cut losses occasioned by years of alleged mismanagement.
The land and houses are located in different parts of the country including Kitengela, Kiserian, Kajiado, Nyayo Estate, Kisumu, Thika, Machakos, Webuye, Bungoma, Kisaju, Lukenya and Syokimau.
Kuscco on Thursday advertised the auction of 80 properties, stating that the sale will be subject to a reasonable reserve price. The reserve price is usually set at not lower than 75 percent of the prevailing market prices of what is being auctioned.
Acting managing director at Kuscco, Arnold Munene, told Business Daily in a phone interview that the 80 properties mark the first lot of what has been defaulted on and more will follow.
“These auctions relate to people who tapped mortgage facilities but are not paying. This is part of our move to recover these loans. More auctions will follow as we complete the legal process including using statuary notices,” said Mr Munene.
He explained that the loans were issued under Kuscco Housing Fund (KHF), a subsidiary of Kuscco which was issuing loans for buying houses or developing residential apartments.
Kuscco launched a Sh1.5 billion real estate project in 2013. The project, which was managed through KHF, involved building of residential homes, commercial buildings and facilities for sale to clientele in Kitengela. This was followed by similar projects in other places such as Kisumu.
Kuscco’s move comes days after sleuths from the Directorate of Criminal Investigations (DCI) started arresting former top officials after a PricewaterhouseCoopers (PwC) forensic audit revealed years of financial mismanagement that sank the entity into a Sh12.5 billion insolvency.
Ex-Kuscco managing director George Ototo, former chairman George Magutu Mwangi, ex-finance manager George Ochola Owino, Jackline Pauline Atieno Omolo who was offering legal services and Mercy Njeru who led the radio project have all been arrested and charged for various offences.
Concerning the housing project, the PwC audit showed Kuscco did not follow the procedure in picking the contractors. It also unearthed diversion of payments and non-payment for the houses by those who took them up, even as the management failed to provide for loan losses.
“We observed that KHF did not make provisions for loan losses in the financial statements for the years between 2017 and 2021, and though they made this provision in 2022, this expense was understated by 84 percent,” said PwC in the audit.
PwC audit shows as at end of December 2023, KHC had a loan balance of Sh3.93 billion that had been issued out to 1,962 members. Residential homes construction loans topped the list with Sh1.27 billion followed by housing funds (Sh883 million), house purchase loans (Sh633.48 million) and Sh417.1 million to finance purchase of plots.
