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How big borrowers pressure saccos for unsecured loans
Cooperatives and Micro, Small, and Medium Enterprises Cabinet Secretary Wycliffe Oparanya addressing journalists during the inauguration of the Committee of Experts to review the Sacco Societies Act and the inauguration of the new Kenya Union of Savings and Credit Cooperative Organisations (Kuscco) Board at NSSF Building in Nairobi on May 21, 2025.
The Sacco Societies Regulatory Authority (Sasra) and the Ministry of Co-operatives have raised the alarm over a growing trend where influential individuals are infiltrating savings and credit co-operative societies (saccos) with the aim of taking huge unsecured loans.
The prominent figures reportedly make minimal deposit contributions to saccos but later use their influence to pressure officials into advancing them loans far above their savings threshold.
“We have noted that bigwigs have been invading saccos by saving little and influencing sacco leaders to lend them a lot of money beyond what is permissible by their own savings,” said Ministry of Co-operatives and Micro, Small and Medium Enterprises Development Wycliffe Oparanya on Thursday.
“I want to warn such saccos to be careful of these bigwigs. You can imagine a sacco giving a Sh100 million loan to an individual without any security. What will happen if the big man drops dead? They shall go the way of Metropolitan [sacco] and others.”
Mr Oparanya spoke during the launch of the Sasra supervision report.
Reports tabled at the Metropolitan annual general meeting of August 30, 2025 revealed untraceable loan book assets of Sh50 billion and a negative shareholder equity of Sh12 billion —a situation that has left the sacco in distress.
Sasra acting CEO David Sandagi said the watchdog has been handling cases of members borrowing huge sums without backing them with any collateral. The development means some sacco leaders are yielding to pressure to bend lending rules and therefore putting at stake the stability of saccos.
The trend also indicates that some sacco officials are being influenced to overlook their regulatory and internal risk management rules to lend excessive amounts to certain individuals.
The saccos sector plays a critical role in mobilising savings and providing affordable credit to millions of Kenyans.
Sasra’s report showed the assets of 177 deposit-taking (DT) saccos and 178 non-withdrawable deposit-taking (NWDT) saccos supervised by Sasra crossed the Sh1 trillion mark for the first time in the year ended December 2024, reflecting the growing stature of saccos in the financial sector.
The Sasra supervision report shows loans tapped by Sasra-regulated saccos had exceeded deposits by Sh95.68 billion in 2024, compared with a gap of Sh76.38 billion in the previous year.
Mr Sandagi said the gap has widened further this year, with loans surpassing deposits by Sh100.76 billion as at the end of August this year.
At Sh100.76 billion, the gap between loans and deposits is the widest on record and more than five times the Sh19 billion recorded in 2016. The widening gap highlights the rising demand for loans among members, even as deposits grow at a slower pace.
While Sasra did not directly link this rising loan-deposit mismatch to the irregular issuance of loans, Mr Sandagi said his office has been handling cases of saccos lending members beyond the limits.
Mr Sandagi urged saccos to stick to their lending limits, enforce savings-to-loan ratios, and protect members’ funds.
“We have been dealing with this case by case. The safety of members’ deposits is paramount. Sacco leaders must ensure they do not trade long-term sustainability for short-term favours,” he said.
He said the mismatch between deposits and loans partly stems from the multiplier model that allows members to borrow up to three times their deposits. However, he said, unless saccos step up on deposit mobilisation, the widening gap could destabilise the sector.
“We acknowledge that there is a significant mismatch between the extent of deposit mobilisation and the level of credit, and hence comes the question around where the funding difference comes from. We appreciate that saccos have reserves and retained earnings, but we are seeing others tap external borrowing,” said Mr Sandagi.
Saccos aim to have over 90 percent of its loans and advances portfolio to be financed principally by deposits. This is because their model is that of mobilising deposits for onward lending to members.
Saccos are under pressure to mobilise deposits at a faster pace than issuing loans, given the soft economy that has seen many savers become dormant.
Sasra data shows dormant members in saccos jumped 15.09 percent to 1.66 million last year from 1.44 million in the prior year. This came in a period when active members grew by 6.02 percent to 5.72 million from 5.39 million.
Sasra defines dormant members as those who have not transacted with their individual saccos for at least six months for DT-saccos and at least 12 months for NWDT-saccos before the end of the review period.
NWDT-saccos were the most impacted by dormancy, with the figure jumping by 41.36 percent to 205,356 last year from 145,289 in 2023. At the same time, their active members dropped by 18.5 percent to 309,285 from 379,487.
DT-saccos fared better, with their active members rising by 7.87 percent to 5.41 million from 5.02 million, while dormant ones rose by 12.16 percent to 1.46 million from 1.3 million.
Commenting on the rising number of dormant members, Mr Sandagi said part of the challenge could be saccos’ products not aligning with the demands of members or economic hardships driving them into dormancy.
“There are a host of factors. It could be perhaps because of the thinning of disposable income given certain macroeconomic variables,” he said.
The Ministry of Co-operatives said it was stepping up efforts to fix governance lapses in the sector. Mr Oparanya said while democracy is part of the co-operative principles, there is a need to “seriously look into the calibre of persons” being elected to the boards of saccos.
“The need for serious and perhaps mandatory continuous professional development of key officers of saccos must also be revisited and implemented,” said Mr Oparanya.
