SACCO Sub-Sector: Achievements, lost chances, challenges and 2026 outlook

As the new year begins, this publication takes stock of achievements by Kenya’s vibrant Sacco Sub sector, some of the missed opportunities and what lies ahead.

While financial cooperatives are still locked out of the National Payments System and lack an inter-lending facility, they have been able to ride on technology and other delivery channels to survive in a fiercely competitive financial sector.

Advancements in the Digital space has enabled SACCOs to onboard mobile phone lending products to their lending models, a transformation that has enabled SACCOs to join banks and other digital lenders, in the quest to reach out to customers in need of credit.

But what remains on everybody’s mind is the outdated Co-operatives Act, which has yet to be repealed more than 16 years after the new 2010 constitution. The Cooperative Act, Cap 490 remains in the books even as rapid technological changes and business models in the financial sector have changed significantly, leaving a cooperative sector that is still stuck in the past.

For instance, Co-operatives are yet to do mergers or acquisitions due to its outdated laws which is also preventing societies from listing at the Nairobi Securities Exchange (NSE), to raise capital or unlock value.

SACCOs have embraced technology to better serve their membership

Many progressive SACCOs such as Qona DT SACCOs, have managed to use technology to go paperless and now offer mobile money and digital credit platforms, providing members access to ATM, credit and debit cards, Pesalink as well as cheque issuance, clearance and settlement services.

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SACCOs are also progressively riding on agency banking platforms, which are cheaper to set up and maintain, to offer services such as cash deposits and withdrawals to members.

SASRA expects the trend of deployment of SACCO agents as an alternative to the other modes of financial service delivery based on its lower capital cost outlay and maintenance.

“There is a need for continuous investment in technology in 2026 so that SACCOs can streamline their operations and integrate so as to improve member services and enhance data management. While on this path, SACCOs need to put in place more robust cyber security measures that will protect member data and build more trust in digital services, “said Solomon Atsiaya, Chief Executive Officer, Kenya National Police SACCO.

In a fiercely competitive financial sector and a rapidly evolving business landscape, Atsiaya said, “As SACCOs usher in the New Year, they need to regularly review and adapt strategies that will ensure they remain on course and achieve their mission”.

SACCO sector hit by financial troubles at KUSCCO

The year 2024-25 saw financial instability rock the giant Kenya Union of Savings and Credit Cooperative Society(KUSCCO), sending shockwaves through the entire sector.

Problems at KUSCCO came to light in early 2025 when the State ordered for a probe into activities, accusing the directors at KUSCCO of running several illegal business operations and offering products without the requisite licensing and approvals from the Sacco Societies Regulatory Authority (SASRA). While those found culpable were forced to resign, none has been prosecuted.

A cross section of SACCO executives interviewed by this publication hold the view of the need to reform operations at KUSCCO and rescue all those SACCOs who have lost huge deposits and savings held in custody by the Union.

“There is need to align the cooperative structure so that KUSCCO can revitalize and convert into a financial cooperative federation that will enable the Union to play its role of advocacy and policy influence while championing the Financial Cooperative Agenda for favourable policies, industry collaboration and networking to share best practices, “said Atsiaya.

The KUSCCO Central Finance Facility(CFF) hit headwinds between October 2023 and January this year when it experienced significant challenges precipitated by panic withdrawals, nearly grounding its ability to operate, lend or reimburse deposits to members.

With 2025 at a close and no inter-Sacco lending facility in place following troubles at KUSCCO, financial cooperatives are still locked out of the National Payments System and thus cannot engage in overnight lending activities or inter-Sacco borrowings.

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“Inter-Sacco lending is a long pending issue. But once structures are put in place and a central pool identified, Saccos will be able to access a facility that offers loans at lower rates than that offered by banks and hence make more profits,” said Agolla.

The Sacco sector, despite holding huge deposits belonging to members, also closed 2025 without the much anticipated deposit guarantee fund in place. Thus, SACCOs members are exposed with no protection in the event that a financially troubled Sacco goes under and is liquidated.

Review of Coop Act Cap 490 still stuck

Members of the Sacco fraternity are also still holding their breath as 2026 begins with the process of repealing the outdated Coop Act Cap 490, still in limbo.

While a sessional paper has been drawn that will trigger a repeal of the old law and the proposed new Cooperatives Bill 2024 already published, the document is still stuck in parliament that is yet to be debated and approved.

“While the Coop Bill 2024 will recognize County Directors as stipulated, it is still unclear whether they will revert to being employees of National or County Governments, “said Agolla.

The Co-operative Societies Bill 2024 aims to amend the Co-operative Societies Act, No. 12 of 1997 in order to align it with the Constitution of Kenya, 2010 by setting out the functions of the National Government and the county governments in relation to governance of co-operative societies.

The year 2026 presents a big opportunity for Kenya to finally overhaul its outdated Co-op Act Cap 490, which has not been updated despite the unveiling of a new constitution which listed co-operatives as one of the devolved functions that should be under County Governments.

The new Co-operatives Bill is currently between parliament and the senate. Industry observers maintain that with the determination and zeal of the CS for Co-operatives and Micro, Small and Medium-Sized Enterprises, Hon Wycliffe Oparanya, this Bill should finally see the light of day.

When the Kenya Kwanza Government came into office in August 2023, the Co-operatives sector was once again lifted from a mere state department into a fully-fledged ministry, a move that received accolades from industry players.

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Although Kenya’s economy has been sluggish for the better part of 2025 with several listed firms issuing profit warnings, top executives and directors of some of the leading Deposit-Taking Saccos are upbeat, optimistic and looking forward to better fortunes in 2026.

Radical reforms have taken place at the giant Kenya Union of Savings and Credit Co-operative Organization(KUSCCO) and are yet to reach their conclusion. Measures taken at the Union are good for the industry, which has had legacy issues of members losing their hard earned life savings.

Meanwhile the underfunded Sacco Societies Regulatory Authority(SASRA) appears overwhelmed and has resorted to firefighting if the case involving Metropolitan National Sacco and KUSCCO, are anything to go by.

The Government has been pumping cash, including the Hustler Fund, through SACCOs as well as involving Housing Co-operatives in the Affordable Housing Program.

Although the political scene remains calm, heated political rhetoric as the country heads to the 2027 polls as well as drought caused by poor rains in parts of the country, could impact business thus affecting Co-operatives.

The Co-operatives industry also remains awakened by increased incidences of cybercrime as well as theft by own staff and insiders in an increasing number of Co-operative societies.

It is hoped that the eagerly awaited review of the Co-operatives Act- Cap 490 will address governance issues that continue to bedevil the Co-operatives sector.

By Okoth Jackson

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