January 20th 2018

Top Stories / National

State House meeting, Coop Bank future trigger split in cooperative sector

In 2009, following the bank's IPO, Business Daily reported that the bank's top managers, including the chairman, CEO and some executive directors had become "instant multimillionaires", indicating the scope of wealth they had accrued due to their positions.

By Free Press Reporternewsdesk@kenyafreepress.comSaturday, 17 Dec 2016 13:47 EAT

President Uhuru Kenyatta poses for a group photo after the meeting with the coop leaders. (Photo: State House website).

The visit by members of the Cooperative Alliance of Kenya (CAK) to State House last Wednesday has exposed sharp divisions within the cooperative movement in the country. The meeting was nearly botched at the last hour as some CAK members and officials of representative organisations demanded to be fully informed of its agenda, and a number boycotted it.

CAK chairman Stanley Muchiri, who is also the chairman of the Cooperative Bank, was instrumental in putting the agenda of the meeting which some members feared would be used to endorse President Uhuru Kenyatta for second term re-election, more than six months before the campaigns officially begin.

At the center of the split was the suspected political motive of the meeting and fears by some organizations that Mr Muchiri would use it to present a rosy image of a sector steeped in divisions over the chairman’s leadership of the Cooperative Bank, which is a key member of the cooperative alliance. Mr Muchiri, however, used his influence to bring members to the meeting, turning to his position at Coop Bank to ensure the meeting succeeded.

But key members expected to attend the meeting boycotted it, including leaders of societies from Coast, Nyanza and Western regions, leaving only top national officials of groups more likely to endorse the president’s re-election to take part in it. CAK is an umbrella institution drawing its membership from Cooperative Bank, CIC Insurance Ltd, Cooperative University of Kenya, Kenya Union of Credit Cooperatives (KUSCO), New KCC, Kenya Farmers’ Cooperative Union and other secondary and primary cooperative societies.

The alliance has a Governing Council comprised of 15 elected members from four National Co-operative Organizations; eight members representing Nairobi, Western, Nyanza, Rift Valley, Central, Eastern, Coast and North Eastern; one member representing countrywide SACCOs; and two members co-opted by the Governing Council. The Commissioner for Co-operative Development is an ex-official member while the Alliance’s chief executive serves as the secretary to the Council.

Many of the Council members attended the meeting, including the chairman, his deputy Mr Joseph Magomere who is also the Chairman of CIC Insurance, directors Philip Gichuki, Gladys Mwiti, who is also the Principal of Cooperative University, Simon Nganga, Ibrahim Imam, Pius Bolei, Rose Aseka, Mr Bedford Mutegi and Dr Phillip Cherono, as well as the CEO, Mr Daniel Marube. From the Cooperative Bank, which some organisations claimed was overrepresented, were the chairman, the CEO Gideon Muriuki, Vice Chairman Julius Riungu and Mrs Rosemary Githaiga, the company secretary.

According to information provided by the president’s communication unit after the visit, Mr Muchiri “thanked the President and the Government for supporting the sector, saying the support has propelled the movement to greater heights.” This formulation, according to our source, fell far short of endorsing the president’s re-election which Mr Muchiri had reportedly canvassed for among some officials ahead of the visit.

Three other attendees addressed the meeting: New KCC chairman Matu Wamae, who thanked the Government for availing Sh500 million to pay old debts owed by farmers”, Cooperative University Chancellor Joseph Nyaga and Sacco Societies Regulatory Authority (SASRA) chairman Joseph Ole Lenku, according to the State House press release.

One source told the Kenya Free Press that after the meeting, a small team including Messrs Muchiri, Riungu and Muriuki retreated to a closed door meeting with their host leaving the other cooperative leaders in the corridors for about thirty minutes. “What was discussed in that smaller meeting is unknown,” said the source, who speculated that the officials must have tried to explain why the visit did not result in an endorsement of the president’s re-election as initially planned.

According to another well-placed source, the divisions arising from the meeting reflected tensions in the cooperative fraternity over the Cooperative Bank, where some societies say their interest is being dwindled through a series of management decisions including share issues. Some Sacco officials claim Mr Muchiri and Mr Muriuki are steering the bank away from cooperative ownership into individual hands, said the source, adding that a number of Saccos have divested considerably from the bank in recent years, with some well capitalised ones now trying to form rival banks.

The source said these differences are expected to play out in 2017 when both Muchiri and Muriuki are expected to retire from the bank. Mr Muchiri has crossed age 70 which is the maximum allowed for chairmanship of boards of directors of listed companies in accordance with Capital Markets Authority regulations, while in the case of Mr Muriuki, a number of directors feel he has overstayed at the bank.

The CEO’s fifteen year tenure at the helm of the bank is reported to concern the Central Bank as well, whose new Governor Patrick Njoroge is enforcing strict management practices. During Mr Muriuki's 15-year tenure, other top tier banks such as Kenya Commercial Bank, Barclays, Standard Chartered and Stanbic have seen three or four CEOs come and go, with most claiming good results. The CEO was also a senior manager at the bank for five years prior to his promotion in 2001.

In 2009, following the bank's IPO, the Nation Group's Business Daily newspaper reported that the bank's top managers, including the chairman, CEO and some executive directors had become "instant multimillionaires" following the IPO, indicating the scope of wealth they had accrued due to their positions.

According to a tabulation by the newspaper based on the bank's stock price at the time, each of the managers had made wealth in excess of Sh40 million from the IPO, with Mr Muriuki raking in Sh600 million and becoming the leading individual shareholder of the bank.


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