Since 2023, Kenyans, especially those working in formal employment, have faced tough times with increased taxation and new statutory deductions eating into their payslips.
Over the last three years, the government has increased deductions among salaried Kenyans with the Social Health Insurance Fund (SHIF), requiring a mandatory contribution of 2.75% of an employee’s gross monthly salary.
At the same time, effective February 2026, Kenya’s National Social Security Fund (NSSF) contributions entered Phase 4 of the 2013 Act, raising the maximum monthly employee deduction to Sh6,480 (matched by the employer). The Lower Earnings Limit (Tier I) increased to Sh9,000, and the Upper Earnings Limit (Tier II) rose to Sh108,000.
The Kenya Housing Levy is also a mandatory 1.5% deduction from an employee’s gross salary.
According to the Central Bank of Kenya (CBK) 2024 FinAccess Household Survey Report, the rate of households actively saving has dropped to 68.1 per cent from 74 per cent in 2023, due to dwindling pay slips and generally lower incomes.
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Income constraints and over-indebtedness are widespread. Some 39 per cent of Kenyans reported going without food due to lack of money, with 21 per cent experiencing this multiple times in a single month. Meanwhile, 57 per cent of men and 63 per cent of women have had to reduce their food expenses just to meet financial obligations. Loan defaults are also on the rise, increasing from 10.7 per cent in 2021 to 17 per cent in 2024.
In this environment, credit and savings are being used less to build the future and more to get through the present. Today, 75 per cent of Kenyans use credit or savings to meet daily expenses—up from 60 per cent in 2016. Financial constraints remain a major barrier to saving, making it difficult to accumulate the kind of resources needed for long-term investment.
According to Ken Gichinga, the Chief Economist at Mentoria Economics, the dwindling incomes are becoming a problem for Kenyans, especially those who want to save in established entities such as cooperative societies.
“Savings in many Kenyan Savings and Credit Cooperative Societies (SACCOs) are experiencing pressure and, in some cases, declines due to a combination of high living costs, reduced disposable income, and high-profile financial mismanagement scandals. While the overall SACCO sector has shown resilience, with assets growing to over KSh 1 trillion by late 2024, voluntary savings have been severely impacted,” said Mr Gichinga in an interview.
“High inflation and economic challenges have forced many Kenyans to reduce their monthly contributions or withdraw their voluntary savings from Front Office Service Activities (FOSA) to meet daily needs.”
Gichinga further explained that it’s time the government intervened and lessened the pressure on incomes to enable people to save more.
“Saccos are where a majority of Kenyans go for credit. Commercial banks are too risk-averse to attract ordinary Kenyans. With little savings, there will be less access to credit, which will negatively impact development nationally,” he explained.
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He also urged the Sacco regulator to strike a balance when it comes to strict oversight: “The Sacco Societies Regulatory Authority (SASRA) is increasing regulation and demanding stricter capital requirements, which, while beneficial for long-term stability, often means SACCOs must retain more earnings and reduce immediate payouts to members.”
Despite these challenges, some SACCOs have maintained growth in mandatory non-withdrawable deposits, which are often tied to loan qualification. Furthermore, for many, SACCOs remain a preferred option over commercial banks for affordable credit, with interest rates often ranging between 12-14%.
By Peter Mukunga
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