A major legal battle in Kenya’s cooperative sector has taken a new turn after the Cooperative Tribunal delivered a critical ruling in a high-stakes dispute involving Kenya Union of Savings and Credit Cooperatives Limited, Kencom Co-operative Savings and Credit Society Limited, and KCB Bank Limited.
The case, referenced as Tribunal Case E157 of 2020, revolves around a contested financial claim tied to a loan facility that has now escalated into a complex legal and financial standoff involving debt recovery, liability disputes, and enforcement actions.
At the center of the dispute is a substantial loan amounting to approximately KSh 183 million that Kencom Sacco obtained from KUSSCO, secured against savings deposits of about KSh 78 million.
According to filings presented before the Tribunal, only about KSh 21 million had been repaid, leaving a significant outstanding balance that triggered recovery proceedings by KUSSCO.
As the financial dispute deepened, the matter escalated to the issuance of warrants of arrest against certain individuals associated with the Sacco, a move that dramatically heightened the stakes of the case.
However, the individuals targeted by the warrants—Beatrice Chepkoech, Jeremiah Sirma, and Joseph Mutuku Wambua—challenged the action, arguing that they were not officials of Kencom Sacco at the time the transactions in question took place.
They further claimed that they had not been properly served with court proceedings and only became aware of the matter after warrants of arrest had already been issued, raising concerns about due process.
In response, the applicants sought to have the judgment set aside, arguing that liability for financial losses within a cooperative society should only apply to officials who were in office at the time of the transactions, as provided under Section 73 of the Cooperative Societies Act.
At the same time, a separate application was filed seeking to suspend or discharge the warrants of arrest, with the applicants maintaining that they had no authority, responsibility, or involvement in the financial decisions under scrutiny.
Kencom Sacco, through its Chief Executive Officer Rose Jituti, acknowledged the financial difficulties facing the institution, revealing that it currently lacks sufficient assets to settle the outstanding debt immediately.
The Sacco outlined ongoing efforts to stabilize its financial position, including negotiations with lenders, attempts to sell land in Mavoko, and engagement in a separate legal matter involving a project in Runda that could potentially unlock funds.
Additionally, the Sacco disclosed that it is pursuing a foreign loan and has requested more time to restructure its finances and develop a workable repayment plan.
The Tribunal was therefore faced with a critical decision: whether the reasons provided were sufficient to set aside the judgment, discharge the warrants of arrest, or grant temporary relief to allow the Sacco to reorganize its financial obligations.
In its ruling, the Tribunal emphasized the principle of burden of proof, stating that individuals claiming they were not officials of the Sacco must provide evidence to support that claim.
The Tribunal found that the applicants had failed to sufficiently demonstrate that they were not officials, leaving the question unresolved and preventing a full discharge of the warrants.
However, in balancing the interests of justice, the Tribunal exercised its discretionary powers to suspend the warrants of arrest for a period of three months rather than enforce them immediately.
This temporary reprieve was granted to allow Kencom Sacco time to engage with KUSSCO and develop a concrete repayment plan aimed at settling the outstanding debt.
The Tribunal also scheduled a follow-up mention on July 23, 2026, to assess compliance and review progress made toward resolving the dispute.
The ruling reflects a careful balancing act between enforcing financial accountability and allowing room for resolution without immediate punitive action.
For KUSSCO, the case underscores the challenges of recovering large-scale cooperative loans, especially when borrowers face liquidity constraints and complex financial entanglements.
For Kencom Sacco, the pressure is now on to demonstrate good faith by presenting a viable repayment strategy within the three-month window granted by the Tribunal.
The case also highlights broader governance issues within Kenya’s cooperative sector, particularly around accountability of officials, financial oversight, and the risks associated with large unsecured or under-secured loans.
As the matter heads toward its next mention date, all eyes will be on whether the parties can reach a settlement—or whether the Tribunal will be forced to take more decisive enforcement action, including reinstating the warrants of arrest.
