Africa-Press – Kenya. The Sacco sector is set for a major overhaul and tighter regulation, which could mark a turning point for millions of savers.
This follows recommendations by a committee on Saccos set up by Co-operatives Cabinet Secretary Wycliffe Oparanya last April to review the Sacco Society Act 2008 and recommend reforms aligned with emerging trends and global best practices.
Policymakers are also pushing for a review of the law aimed at creating stronger safety nets and enhanced governance, which could change how things are done in one of the country’s most important pillars of financial inclusion.
The committee report on “transformation of the Sacco system in Kenya” outlines far-reaching changes aimed at strengthening regulation, restoring public trust, and safeguarding over Sh749 billion in member deposits held across Savings and Credit Cooperative Organisations.
The high-level committee was established following growing concerns about governance failures, including the Kenya Union of Savings and Credit Co-operatives (KUSCCO) crisis last year, in which close to Sh14 billion in Saccos funds was lost.
At the core of the recommendations is a six-pillar framework designed to modernise and stabilise the sector.
Top among them is regulatory harmonisation, which seeks to expand the powers of Sacco Societies Regulatory Authority (SASRA) to enforce stricter prudential standards and risk-based supervision.
A proposed Deposit Guarantee Fund (DGF), to be administered in partnership with the Kenya Deposit Insurance Corporation, will for the first time insure Sacco deposits—bringing the sector closer to protections enjoyed by commercial bank customers.
The report also recommends the establishment of a Central Liquidity Fund (CLF). This sector-backed facility will provide emergency funding to Saccos, with support from the Central Bank of Kenya as lender of last resort.
In response to persistent governance failures, the committee proposes a mandatory corporate governance code, term limits for officials, and a strict “fit-and-proper” test for senior management under an Approved Persons Regime.
Insider lending will be capped at five per cent of total assets, while dividend payments will only be allowed from audited net profits, closing loopholes that have previously exposed members to losses.
To prevent systemic shocks, the reforms introduce a Stabilisation Protection Scheme (SPS-K) that will provide early intervention and financial support to struggling but viable Saccos, while enabling orderly resolution of failing institutions.
The report also signals a shift toward consolidation, encouraging mergers to build stronger, more resilient institutions. Regulated Saccos will be rebranded as “credit unions” to align with global cooperative finance standards.
A temporary freeze on new Sacco registrations has been proposed until the new regulatory framework is fully implemented.
In a bid to improve efficiency and compliance, the reforms propose a shared digital infrastructure across the sector, developed through collaboration among industry players.
The platform will support ICT systems, regulatory compliance and integration into the national payment system.
“The proposed reforms are intended to regulate the sector and not to exert government control,” CS Oparanya said.
The proposals are anchored in the draft Sacco Societies (Amendment) Bill, 2025, currently before Parliament, which introduces tiered licensing, mandatory credit information sharing, and enhanced enforcement powers including forensic audits and monetary penalties.
The Bill also formalises the Deposit Guarantee Fund, Central Liquidity Fund and Stabilisation Scheme, providing a comprehensive safety net for the sector.
“The committee emphasises the need for nationwide financial literacy campaigns to rebuild trust among members, many of whom have grown cautious following recent sector scandals,” the report states.
Analysts say the success of the reforms will depend on swift implementation and strong enforcement.
While the sector is in support of the reforms, the move to change saccos to credit unions has raised concerns.
“Changing to credit unions we will be losing the savings aspect and discourage the savings culture and way of driving growth through saccos,” Harambee Sacco chairman Macloud Malonza, told the Star.
The sector controls assets worth Sh1.07 trillion and serves 7.39 million members across key sectors such as agriculture, education, transport and the civil service.
Loan portfolios grew 11.5 per cent to Sh845 billion in 2024, underscoring the sector’s expanding role in credit access, even as regulatory gaps persist.
