From grace to grass: Murang'a women's sacco struggles with Sh96m debt
How Murang'a sacco sank with Sh96 million debt
What you need to know:
The sacco began when the then Governor Mwangi wa Iria, in a bid to empower women, announced what he called a revolution in economic empowerment, offering to help them become property owners, contractors and investors in agribusiness.
The women now want the county government to bail them out by providing a guarantee to the creditor.
In a plot full of intrigue, Murang'a Women Cooperative Sacco, which was established in 2014 with 35,000 members, is now facing bankruptcy and public auction.
Auctioneers are already eyeing the sacco's landmark rental building, which is in a prime location near the Murang'a University of Technology (MUT) and was built as a 102-room student hostel.
The Sacco's story from grace to grass reads like a tale of deceit and ambition, manipulation and regret.
According to the chairperson, Phyllis Muraya, the members are now in debt to the tune of Sh96 million, prompting auctioneers to seize the building.
The sacco began when the then governor of Murang'a, Mwangi wa Iria, in a bid to empower women, announced what he called a revolution in economic empowerment, offering to help them become property owners, contractors and investors in agribusiness.
The women were told to form cooperatives in the eight sub-counties (Gatanga, Kandara, Maragua, Kigumo, Kiharu, Kahuro, Kangema and Mathioya), with each contributing Sh300 per month to pool investment capital.
In 2014, Wa Iria bought them the 0.06 hectare plot of land on which the building stands. The income projection for the building was that each room would fetch Sh10,000 as monthly rent, totalling Sh1.02 million.
Muraya told Nation.Africa that the project committee approached Murata Farmers Sacco, before it was renamed Amica Sacco, to finance the hostel project.
“We were advanced a Sh61 million loan that was to be serviced through Sh860,000 monthly repayment installments. We anticipated to fully offset the loan in 75 months,” she said.
Covid implications
Muraya added that things were going well for the project, which was fully implemented and fully occupied in 2019, until March 2020 when they had already serviced Sh34 million of the loan.
“Out of the blues came the Covid-19 pandemic that hit us hard, especially after students were sent home. We lost all tenants and there was no income for the full year the schools remained closed,” she said.
Muraya adds that the pandemic, combined with emerging rental competition and the social distancing inhibitions introduced by the government after the schools reopened, meant that the sacco was unable to service the loan.
“We are now at this situation where we have been served with notice to auction the building after penalties on credit default pushed our liability to Sh96 million,” she said.
The women now want the county government to bail them out by providing a guarantee to the creditor.
Calls for Audit
Murang’a Senator Joe Nyutu agrees that the women should be bailed out “but not before an audit report to ascertain how it sunk has been conducted”.
“It should be made clear who owns the investment, how previous incomes were used, whether there was any wisdom to commit the sacco into the credit facility and how it was used after it was acquired.”
He said it was also strange that a loan of Sh61 million, of which Sh34 million had been repaid, could grow to Sh96 million, including Sh16 million in recovery costs. He said this should be investigated.
How the women got into trouble with the creditors is intriguing because with their monthly subscription of Sh300 per head when they started the project, they had the potential to raise Sh10.5 million per month in cash and had saved the equivalent of Sh252 million in two years.
Muraya says the current market value of the building is Sh150 million.
On April 16, 2019, while presiding over the formation of Talented Musicians and Composers (Tamco) Sacco, which brings together musicians from the area, Wa Iria announced that he had incorporated the women sacco as a contractor and it had won three tenders for road construction.
“The women are doing well since they have put up a Sh100 million rental building and bought a 32-seater bus that was fetching it more income through hiring it out. In total, the sacco is raking in more than Sh1 million income per month,” he said.
Now, Senator Nyutu says the foundations of the sacco need to be examined to determine how a sacco that was originally recorded as having 35,000 members ended up with 5,000 members listed as project implementers and eventually 2,500 members listed as recipients of the auction order.
An auction notice seen by Nation.Africa reads: “Under instructions received from our client, we shall sell the building by public auction on June 29, 2022 at 11am at our Thika offices.”
Details of the property are given as registration number Loc11/Maragi/7196 and registered in the name of Murang'a County Women Savings and Credit Cooperative Society Limited.
Nyutu said: “If we were to ascertain that the sacco is not privately owned, I can chip in and bring the Senate Committee on Cooperatives to probe the situation”.
“However, it is not clear how the sacco is related to the county government since it (the county) does not have any declared shares.”
The senator added: “As of now, it will be hard for the sacco to get any budgetary allocation from the county since the controller of budget cannot approve such a bailout plan”.
Muraya said the sacco now has three options: seek a court injunction to stop the auction, find a strategic partner to buy the loan or call a special general meeting to raise the money.
