April 30th, 2025

The SACCO industry continues to play an important role in the Kenyan economy through mobilisation of savings for national development and provision of credit facilities to many households. By the end of 2023, there were 357 regulated SACCOs made up of 174 Deposit Taking SACCOs (DT-SACCOs) and 183 Non-Withdrawable Deposit Taking SACCOs (NWDT-SACCOs).Despite the difficult economic conditions brought about by the effects of Covid-19, severe droughts, high inflation and rising interest rates, the regulated SACCO industry in Kenya is growing consistently.

SACCOs face challenges in responding to a highly competitive financial sector with flexible banking platforms that can respond to the dynamic environment, sources of liquidity, and seamless integration to the National Payments system. In 2024, FSD undertook two initiatives to support SACCOs to address some of these challenges. The first initiative involved supporting SACCO Central Kenya (SCK), a secondary SACCO established by SASRA to enable a shared services platform for SACCOs, to develop a 3-year business strategy. The aim of the shared SACCO platform is to address the challenges created by the costs associated with compliance, competition, and efficiency of SACCOs.

The strategy development included studying at various markets, developing economic models, and interviewing the SACCOs, regulator, banks and Fintechs to map out what opportunities existed in the market. The strategy proposed an initial phase of shared services that includes a platform that enables a shared core banking system, facilitates inter-SACCO lending and facilitates the participation of SACCOs in national payments, amongst others. The strategy also proposed the setup of an initial core staff to operationalise SCK and support the SCK Board of Directors to implement the shared service solution. The strategy was adopted by SACCOs and is currently under the initial stages of implementation.

The other initiative that was supported by FSD was a study to explored the ’Role of SACCOs in providing direct remittances in Kenya’ since they are best placed to reach rural population, women and low-income households. At present, SACCOs do not engage in direct cross-border remittance business largely due to various regulatory constraints. They therefore are only able to offer remittance services indirectly through partnerships or agency relationships with banks and money remittance operators. However, these partnerships have proven to be expensive and inefficient, with associated costs being passed on to end consumers or being borne by individual SACCOs. The study included interviewing various players in the remittances ecosystem including banks, money transfer operators (MTOs), SACCOs, financial sector regulators, remittance senders and receivers, etc. The findings of the study provided regulatory and operational recommendations that outlined how SACCOs can directly participate in remittances in Kenya. The next phase of this work is the formation of a task force comprised of SACCOs that are willing to provide remittances services to their customers to map out how this can be achieved as an industry.

Both of these initiatives are well aligned with the Central Bank of Kenya’s initiative of developing a financial sector-wide interoperability solution that will enable instant transfer of payments across the entire financial industry, thus enabling SACCOs to participate more directly in the National Payments System. FSD Kenya will continue to support both these efforts in 2025 to ensure that the envisaged benefits are realised. Concurrently, following the recent uncovering of financial fraud that took place at the Kenya Union of Savings and Credit Co-orperatives (Kuscco), plans are underway to develop regulatory policy to supervise SCK, which was what was missing for Kuscco.

---

This blog is one of the articles in FSD Kenya’s 2024 annual report. Click here to read the full report (PDF). 

TAGS

CATEGORIES