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Financial sector players wary of cyber attacks on Saccos

Deputy commissioner for cooperative Development David Obonyo giving his speech during the Nation Sacco Annual General meeting at the All Saints Cathedral, Nairobi. February 22, 2020. Picture Kanyiri Wahito

Cybercrime and poor governance are key threats derailing operations and growth of Savings and Credit Cooperative Societies (SACCOs) in the country.

Commissioner for Cooperatives David Obonyo stated that criminal activities that target or use computers have been on the increase in the Saccos due to lack of robust technology platforms.

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“This challenge is more prominent in Saccos that are financially struggling and those that are suffering from leadership wrangles,” said Mr. Obonyo.

“Technology based challenges have led to systems in the SACCOs collapsing and to some extent members losing their resources. A good number of Saccos operate on old technology platforms but of late the same has become vulnerable to emerging threats. This puts members’ resources at great risk,” he added.

He said conmen using technology have equally infiltrated into Saccos operation platforms and tapped resources leading to massive loss to members.
what’s more, he acknowledged that in the last three two decades, the country’s cooperative movement has struggled with the emergence of pyramid schemes where members have lost their hard earned resources.

Obonyo stated that cybercrime and corruption related risks even though a global challenge can be tamed with enhancing sound governance.

“Over and above the entire board of directors, there is a need to institute strong governance structures, for example, audit and supervisory committees. The committees will help in enhancing checks and balances on the operations. The board subcommittees need to advise the directors on strategies to undertake to tame emerging threats into the Saccos operations,” he said.

Cooperative Alliance of Kenya (CAK) vice chairman David Mategwa concurs. He says cybercrime is a big threat to the growth of Sacco business in the country.

“A good number of Sacco operations structures have been hacked leading to loss of information and members resources. This has been aggravated by lack of robust technology platforms such as firewalls as some of the Saccos are still relying on old fashioned knowledge models,” said Mr. Mategwa.

The increased cybercrimes, he added, have been aggravated by inadequate capacity by directors and senior management.  And thus in cases of an attack in terms of the operations, the employees are not able to respond quickly.

One key strategy the Sacco leadership in the country is pursuing is establishment of shared platforms to offer members a third payment system, similar to that offered by banks and non-cash payment systems including Automated Teller Machines (ATMs) and credit cards.

Saccos with the support of CAK and Cooperative Bank launched the Co-opTech to share core banking services to help them expand market reach and save cash. And hook up to the National Payment Systems that will enable seamless transfer of funds from funds such as the Hustler Fund.

The utility established in March this year is designed to cushion credit unions that are struggling to install the latest Information Communication Technology (ICT) tools to deepen productivity by sharing. The shared platform is embedded with a shared fund management platform that supports inter-Sacco lending and cross-Sacco funds transfer.

Other Saccos have established the Kenya Saccos Central Liquidity and Shared Services Cooperative Society Limited KSCLCS) that will be regulated by the Saccos Society Regulatory Authorities (SASRA).

“Our Sacco subsector has registered tremendous growth and thus the need for the establishments of several shared platforms. In the USA credit unions enjoy several shared platforms. Going forward, directors and managers will continue to be trained and exposed to opportunities to enable them to confront risks facing Saccos,” he added.

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