Social Affairs cracks down on cooperatives shops subletting amid millions in revenue losses
. . . abuse sparks corruption concerns
- Ministry inspectors uncovered suspected violations that may have caused cooperative societies to lose millions of dinars in rental revenues over several years.
- Some investors rented cooperative shops for as little as KD1,500 monthly before illegally subletting them for between KD6,000 and KD10,000 per month.
- Authorities detected suspected conflict-of-interest cases involving investors linked by first-degree family ties to cooperative board members.
- The Ministry of Social Affairs is considering referring the entire file to Kuwait Anti-Corruption Authority (Nazaha) for legal investigation.
- New regulatory measures will include stricter inspections, field visits and mandatory compliance checks before approving investment contracts.
The Ministry of Social Affairs has launched an extensive review into the subletting of branches and commercial shops owned by cooperative societies across Kuwait, in a major oversight move aimed at curbing abuses, stopping manipulation in leasing procedures and protecting cooperative revenues.
According to informed sources, preliminary findings indicate that irregularities in investment contracts may have caused the loss of millions of dinars in revenues belonging to cooperative societies over the past several years.
Sources revealed special inspection teams from the ministry recently uncovered multiple violations involving the investment and leasing of cooperative branches and shops.
Investigations showed that some investors had rented shops from cooperative societies at relatively low monthly rents before illegally subletting them to other brands and businesses for significantly higher amounts, generating substantial profits at the expense of the cooperatives.
The ministry is now preparing a series of new regulatory measures aimed at tightening controls over investment contracts and ensuring their full compliance with laws and regulations governing cooperative activities.
Sources explained that some branches initially allocated for specific activities, including snack restaurants, juice bars and beverage outlets, were later subleased to entirely different companies and commercial entities.
While investors reportedly earned massive monthly returns through these arrangements, the cooperative societies themselves continued receiving only modest rental income far below the actual market value of the properties.
According to the ministry’s findings, some sublease agreements generated between 6,000 and 10,000 dinars per month for investors, while the original rent paid to the cooperative society did not exceed 1,500 dinars per month.
Officials noted that several of these contracts date back many years and were only uncovered following comprehensive auditing and inspection campaigns launched under the directives of Minister Amthal Al-Huwaila and sector undersecretary Dr. Sayed Issa.
The inspections included detailed reviews of both old and current investment contracts and leasing files.
The ministry also uncovered suspected conflict-of-interest cases involving investors with direct first-degree family relationships to members of cooperative society boards of directors, in apparent violation of cooperative regulations and governance rules.
Sources confirmed that the ministry is moving toward taking legal and administrative action against violators after completing reviews of the disputed contracts.
The proposed measures include immediate withdrawal of shops from investors, cancellation of current activities and reoffering the properties through transparent procedures based on actual market rental values.
The ministry is also reportedly considering referring the entire file to Kuwait Anti-Corruption Authority (Nazaha) for further investigation and legal action against those involved.
Officials indicated that the coming period will witness stricter regulatory procedures governing the approval of investment contracts.
Under the new measures, ministry inspectors will conduct field visits to cooperative branches to verify compliance with all regulations, ensure activities match licensed commercial purposes and confirm adherence to requirements set by relevant government authorities.
The ministry stressed that no investment contract approvals will be granted unless full compliance is confirmed with decisions and regulations issued by the ministry and other authorities, including the Ministry of Commerce and Industry, Kuwait Municipality and the Kuwait Fire Force.
The goal, sources said, is to ensure transparent awarding procedures, protect shareholder interests and prevent future violations that could affect services provided by cooperative branches.
The ministry also identified several additional irregularities in cooperative branch investments, including direct contracting with investors without proper public auction procedures required by law.
Other violations included investors occupying larger commercial spaces than officially allocated, failure by some investors to pay the full agreed financial support amounts and weak enforcement by certain cooperative boards in collecting outstanding dues.
Sources further pointed to low financial returns received by cooperatives compared with actual market values, particularly during contract renewals where rental rates remained fixed for years without any increase despite rising commercial values.
