Why protecting Sacco deposits is paramount

Losing money by dropping it carelessly while taking a leisurely walk is a painful thing.

But losing money that you have been agonizingly saving in a Savings and Credit Cooperative Societies (Saccos) for years is a life-changing event that can sink you into penury for the rest of your life.

That is why protecting Sacco deposits is an imperative for any country that the cooperative movement forms the bulwark of its savings culture.

The quest to protect Sacco deposits has been gaining heat in the country for many years with Saccos being urged to take insurance covers for their deposits even when liquidity is tight.

According to the Sacco Societies Regulatory Authority (SASRA), the sector is in the process of transitioning from a largely uninsured state to a regulated, insured model.

Parliament is considering proposals, including the Sacco Societies (Amendment) Bill, 2025, to create a Deposit Guarantee Fund (DGF). This fund will act as an insurance policy for Sacco depositors.

The government also aims to establish a deposit protection scheme that mirrors the Kenya Deposit Insurance Corporation (KDIC), which covers up to Ksh500,000 for bank depositors.

This move comes after significant risks were exposed, including a Ksh14.6 billion crisis involving over 200 Saccos in early 2025.

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The Sacco Societies Regulatory Authority (SASRA) is actively working to make this protection mandatory, requiring Saccos to contribute to the fund.

While not all Sacco deposits are fully insured yet, the government is moving to ensure all SACCO members’ savings are protected, particularly in light of financial mismanagement concerns.

Generally, only deposits in licensed, regulated, deposit-taking Saccos (FOSA) have the potential for protection, while unregulated ones remain risky.

The new DGF aims to protect member savings if a Sacco collapses, enhancing the security of fund.

In the face of rising technology, the need to protect Sacco deposits has become even more important.

Savings and Credit Cooperative Societies (Saccos) have been challenged to tighten their systems and take insurance covers on the back of rising digital attacks.

Cooperatives are increasingly gaining prominence among formal and informal workers and currently hold over Sh800 billion customer deposit—a sum that makes them a target of fraud attacks.

Now Saccos are being asked to review their IT systems and also take insurance covers coming on the back of a report showing they lost Sh106 million the 17 months to March 2021.

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The loss, captured in the financial sector stability report—a product of key financial regulators including Sacco Societies Regulatory Authority (Sasra) —means Saccos were losing an average of Ksh6.23 million per month or Ksh208,000 daily in the review period.

The report said the fraud-attacks were through software vendors engaged by the Saccos and has led to higher operational risks among cooperatives.

The attackers were targeting weak controls of the Sacco systems, given the minimal verification of members’ identities when seeking services.

Sasra and other financial sector regulators now want Saccos to review contracts signed with software vendors and compel such vendors to be compensating cooperatives when such losses occur.

In addition, the Saccos are being asked to take insurance so that members’ deposits are not exposed to losses and that Saccos do not collapse due to deposit losses.

“All Saccos must now review and enhance their IT security including their service level agreements to ensure that affected Saccos are compensated by the vendor in the event of an attack where the vendor is culpable. Saccos are also encouraged to undertake indemnity covers to safeguard against attacks,” says the report.

However, without proper contracts, Saccos may struggle to measure performance and hold their vendors responsible for service delivery.

Saccos will have to up their game in protecting themselves from hackers to boost their chances of joining the national payment system without becoming the weak link in cyber-attacks in the financial services sector.

By Mwiti Munyua

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