Caritas Microfinance agency, Ruiru Fund marred in fraud, illegal operations

A Catholic Church affiliated outfit, St Francis of Assisi Ruiru Catholic Church Self Help Group now operationalised as Ruiru Fund is marred in a web of fraud running into hundreds of millions of members’ deposits and is functioning without requisite authorisation by either the Central Bank of Kenya (CBK) or the Sacco Societies Regulatory Authority (Sasra), investigations by The Informer have established.

The outfit is an approved bank agent for Caritas Microfinance Bank Limited under the agent name of Ruiru Members Development Fund Catholic Church SHG.

Besides taking financial deposits from members, Ruiru Fund is also offering business loans and sacco savings services.

The over 22, 219 members of the fund have now demanded for an external probe on the operations of the outfit.

Both senior officials and directors at Caritas Microfinance and the Ruiru Fund are worried CBK Governor Patrick Njoroge will order immediate closure of their operations.

“We only authorised them (Ruiru Members Development Fund Catholic Church SHG) to act as our agents. Some operations they are engaged in are illegal since they are not licensed by CBK. This might affect our operations too.” A senior official at Caritas Microfinance told The Informer.

Patrick Kinyori serves as Chairman of the Board, the apex governance organ at Caritas Microfinance while David Makaru is the Chief Executive Officer.

On the other hand, Sister Mary Mbachi a director of Caritas Microfinance a director at which oversights the fund is seconded to St Francis of Assisi Ruiru Catholic Church.

Caritas has categorised their banking agents into two; SPRT – Social Promotion Registered Trustees and SHG – Self Help Group

“Agent banking is an alternative channel aimed at offering convenience and accessibility of banking services to customer of the bank.

Agent banking has been proven to be very effective in promoting financial inclusion of the un-banked and under-banked population.” Caritas management says in their official website.

In a seemingly subtle admission of the deep rooted rot in the running the affairs of Ruiru Fund, officials have sent short text messages to their members owning up to the mess.

“We wish to draw your attention to reports appearing in the print and electronic media on May 17 on the status of your fund. The reports are not factual.

The board and management have put in place measures to recover long outstanding non-performing loans and legal actions on fraudulent activities that happened in the past as reported during the ADM (Annual Delegates Conference) on April 29.We assure you that Ruiru Fund is strong and your investments are safe.” The message in our possession reads in part.

The well-coordinated embezzlement of members fund and cover-ups is being orchestrated by some staff and priests a through unsecured loans and fraudulent transactions.

Currently, the sacco has a share capital of Sh1.2 billion and a loan book of Sh1 billion.

In their books, Sh413 million has been classified as “a loss” since borrowers, who include current and former officials as well as staff.

The members further want an audit conducted by the Sacco Societies Regulatory Authority (Sasra).

However, fund does not appear in the Sasra’s list of registered saccos.

Already, Sh413 million part of the loans issued has been classified as “loss” since borrowers, who include current and former officials as well as staff and some members, among them priests, companies and self-help groups have not been servicing them.

Further, Sh85 million savings have been defrauded by staff, which the management has acknowledged.

A recent audit report exposed a possible loss of another Sh8million of “short-term savings” in the last year after the management was unable to explain the variances from Sh523,441 in 2020 to Sh7.5 million as of December 2021.

Accusations against the management include officials loaning themselves and failing to recover unpaid loans as well as a blatant breach of Sacco laws by issuing unsecured credits where money has been dished out to people who do not have shares.

This, the audit report states, had made it impossible to recover loans from former board members.

A Catholic Church in Ruiru, with a share deposit of Sh3.3 million, was on October 24, 2018, given Sh15 million (nearly five times its deposit) payable in 60 months, but the payments were done until March 18, 2020, and by December 2021, the balance was Sh12.1 million with an accrued interest of Sh3.6 million.

On March 27, 2019, the second loan of Sh15 million payable in 60 months was advanced to the same church, but instalments were made up to March 18, 2020, and as of December last year, it owed Sh10.8 million and further interest of Sh3.2 million.

Attempts have been made to reach Archbishop Phillip Anyolo for his intervention with demands that the current leadership be investigated and efforts to recover the loans launched.

One of the letters in our possession dated February 19, 2022, and documents including Sacco’s loan book indicate how some of the current and former officials and priests have been borrowing loans but have failed to pay over the years. “…the poor leadership of one of the biggest projects under the Catholic Church in your (Archbishop Anyolo) area has led to the loss of more than Sh400 million.

These funds belong to members and instead of proper management on recovering, nothing has been done over the years,” the letter.

“I have attached an analysis for this group as of December 31, 2021 (that) PAR (portfolio at risk) stands at 40 per cent. This is the biggest I have ever seen in the history of micro-finances in our country.” The letter says in part.