The SACCO sector is recording strong growth, but the expansion is increasingly being driven by aggressive lending rather than fresh savings, even as bad loans remain stubbornly high.
New data from the sector show that while assets and credit are rising at a double‑digit pace, the quality and structure of that growth are tightening pressure on liquidity and heightening long‑term risk.
By September 2025, regulated SACCOs held assets worth KSh 1.16 trillion, representing an annual increase of nearly 12 %. Over the same period, gross loans climbed by 12.9 % to KSh 923.7 billion; this outpaced deposit growth, which rose by 11.4 % to KSh 814.6 billion.
This imbalance means deposit‑taking SACCOs are now lending about KSh 115 for every KSh 100 in deposits, leaving them more vulnerable if member incomes weaken or withdrawals spike.
ALSO READ:
SACCO industry defies economic pressures, records robust Q3 growth
Despite the rapid expansion, credit quality has not kept pace. Non‑performing loans stand at just over 7 % of total lending, consistently breaching the 5 % benchmark for the past two years. This suggests that the strain on loan books is structural rather than a short‑term response to economic shocks.
The allocation of SACCO credit also raises questions about long‑term productivity as more than half of all lending goes to land, housing and education, sectors that support household security but generate limited output for the wider economy.
As of September 2025, land and housing accounted for roughly 32 % of total loans, while education took up about 31 %. Agriculture absorbed around 22 %, trade nearly 17 %, and manufacturing and services together received only about 5 % of total credit from SACCOs.
On the positive side, the SACCO sector remains comfortably capitalised. Deposit‑taking SACCOs hold core capital equivalent to about 18.5 % of total assets, which is almost double the regulatory benchmark, while capital relative to deposits stands above 26 %.
Reserves have also grown faster than assets over the past year, providing a cushion against potential losses and explaining why rising defaults have not yet triggered wider instability.
However, Analysts warn that sustained loan delinquency could gradually erode earnings and chip away at these gains.
ALSO READ:
Land, school fees and agriculture loans drive SACCO lending surge in Q3 of 2025
Profitability and efficiency indicators show little recent improvement, with returns on assets for DT-SACCOs being slightly above 3 % by September 2025, broadly unchanged from a year earlier. Cost‑to‑income ratios stood at around 43 %, pointing to stalled efficiency gains despite technological investments and scale growth.
However, Non‑deposit‑taking (NDT) SACCOs appear more exposed with their asset growth trailing. Non-performing loans exceed 8 % of total lending, and non‑earning assets represent a whopping 11 % of their capital. This drags down their income generation, leaving smaller cooperatives sensitive to shifts in employment and member cash flow.
Stakeholders say that as long as jobs, wages and member confidence remain stable, SACCOs are likely to stay resilient. But with loans growing faster than savings and bad debts, there is a need for tighter credit discipline and a shift towards more productive lending in the future.
By Masaki Enock
Get more stories from our website: Sacco Review.
For comments and clarifications, write to: Saccoreview@
Kindly follow us via our social media pages on Facebook: Sacco Review Newspaper for timely updates
Stay ahead of the pack! Grab the latest Sacco Review newspaper!
