For millions of Kenyans, Savings and Credit Cooperative Organisations (SACCOs) are trusted financial lifelines workforce borrow loans and plan their futures.
Loans from SACCOs usually have lower interest rates than banks, mobile lenders, or microfinance institution.
According to the Sacco Societies Regulatory Authority (SASRA) gross loans across the industry increased to Ksh 948.31 billion in December 2025, compared to Ksh 842.80 billion in December 2024, representing a 12.52 percent annual increase.
Yet behind the sector’s rapid growth lies a troubling reality: if a SACCO collapses today, members may lose their savings without any guaranteed compensation.
Unlike bank deposits that are protected by the Kenya Deposit Insurance Corporation, SACCO deposits currently have no operational national insurance scheme to safeguard member funds. This leaves millions of savers exposed to potential financial loss in the event of insolvency, fraud or mismanagement within their cooperative.
The risk is not theoretical. Several SACCO crises in recent years have demonstrated how devastating the consequences can be for members. One of the most troubling cases involves Metropolitan National SACCO, a 47-year-old institution that once enjoyed the trust of thousands of savers.
An audit team appointed in April 2022 by the Commissioner for Co-operatives Development, David Obonyo, uncovered massive financial irregularities. The audit revealed that the SACCO had lost more than Ksh 12 billion through theft and embezzlement.
The financial collapse left many members unable to access their savings or dividends, with some losing money accumulated over decades. Letuya, one of the investors in the SACCO, says he lost Ksh 583,000 in shares. “I don’t know what to do. How can a SACCO die and be buried with my shares of Ksh 583,000? This SACCO is Metropolitan SACCO,” he said.
Another member, Peter Wamalwa, has repeatedly posted on the SACCO’s social media pages seeking answers. “I invested my shares with you but I retired and not even a cent was given back,” he wrote. “When will you pay back our money? Your offices are ever closed,” he posted on March 10, 2026.
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Some members have taken the matter to court and judges have directed the SACCO to refund deposits. However, the institution has struggled to comply with these orders due to its severe financial problems. For many members, the prospects of recovering their savings remain uncertain.
The challenges facing the cooperative sector extend beyond a single institution. The recent scandal involving the Kenya Union of Savings and Credit Cooperatives (KUSCCO) sent shockwaves across the SACCO movement after investigations revealed financial irregularities that resulted in losses estimated to over Ksh 13 billion. Several SACCOs that had placed funds with the umbrella body were affected, weakening their financial positions and raising concerns about governance and oversight across the sector.
Another example is Kumisa SACCO in Kiambu County, which collapsed around 2020–2021 after officials allegedly diverted members’ savings into private projects. More than 3,000 members lost approximately Ksh 33 million in deposits. The collapse left many families financially distressed, highlighting the vulnerability of cooperative savers in the absence of a deposit protection mechanism.
Despite these incidents, the SACCO sector continues to grow rapidly and remains a cornerstone of Kenya’s financial system. According to the Sacco Societies Regulatory Authority, total assets held by regulated SACCOs reached Ksh 1.21 trillion by December 2025, up from Ksh 1.08 trillion recorded in December 2024.
This growth reflects the strong public trust that SACCOs continue to enjoy, particularly among middle- and low-income earners who rely on them for savings and affordable credit. However, the expansion also increases the scale of potential losses if institutions fail without adequate safeguards.
Recognising this vulnerability, a government appointed committee of experts has recommended urgent reforms to strengthen protection for SACCO members.
The committee, chaired by Marlene Shiels, Chief Executive Officer of Capital Credit Union, released its report on February 16, 2026 proposing the operationalisation of a SACCO Deposit Guarantee Fund to safeguard member deposits in licensed cooperatives.
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The proposal reflects a growing consensus within the sector that every Kenyan shilling saved in a SACCO should be as secure as money deposited in a bank. Deposit Guarantee Funds are widely used across the world to protect savings in credit unions and cooperative financial institutions.
In the United States, for example, the National Credit Union Administration administers the National Credit Union Share Insurance Fund, which protects deposits of up to $250,000 per member. In the United Kingdom, the Financial Services Compensation Scheme protects deposits in banks and credit unions up to £85,000 per account.
Kenya’s SACCO Deposit Guarantee Fund was legally established under the Sacco Societies Act in 2008. However, the fund has never become operational due to governance disputes, legal gaps and disagreements within the sector over representation on the board of trustees.
The law also lacks indemnity provisions for trustees and officers, and contains technical provisions that misdirect compensation claims to the regulator rather than the fund itself. Without a mechanism to accumulate reserves before claims arise, the government could also face immediate liability if a large SACCO were to fail.
To overcome these challenges, the committee recommends that the SACCO Deposit Guarantee Fund be incubated within the existing framework of the Kenya Deposit Insurance Corporation.
The corporation already manages deposit insurance for banks and has the infrastructure, expertise and regulatory experience required to administer such a scheme. Currently, bank deposits in Kenya are insured up to Ksh 500,000 per account, giving banks a significant competitive advantage over SACCOs in terms of depositor protection.
Support for a deposit insurance scheme within the cooperative sector appears overwhelming. A survey conducted by the Kenyan Teachers SACCO Association found that 96.5 percent of participants supported the establishment of a Deposit Guarantee Fund, while 96.4 percent believed it would significantly improve depositor confidence in SACCOs.
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A majority also supported a risk-based contribution model in which SACCOs would contribute to the fund based on their size and risk profile.
The benefits of operationalising the fund would be far-reaching. It would protect member deposits in the event of SACCO insolvency or fraud, encourage more Kenyans to save through cooperatives, and reduce the risk of panic withdrawals during financial distress.
It would also align SACCOs more closely with banks and microfinance institutions within Kenya’s broader financial stability framework while reducing the likelihood of costly government bailouts when institutions fail.
In the report presented to president William Ruto the committee of experts recommended that the Cabinet Secretary for Co-operatives MSMEs Development works with his counter-part in Treasury to agree collaboration.
The Cabinet Secretary should outline the Government’s ongoing reforms to strengthen the SACCO sector and enhance financial stability.
“A meeting should seek to explore the operationalization of the SACCO Deposit Guarantee Fund (DGF) as provided under Sections 55–61 of the SACCO Societies Act, 2008 given KDIC’s institutional expertise and infrastructure in deposit insurance, but also in risk management and resolution approach to Banks in difficulties,” part of the report read.
Until a functioning deposit guarantee scheme is established, millions of SACCO members remain exposed to the possibility that their life savings could vanish if their cooperative collapses.
By Obegi Malack
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