Sacco movement still needs strong apex federation to lobby sector interests

Ayiro Chahilu,  Advocate of the High Court of Kenya. [Courtesy]

The liquidation of the Kenya Union of Savings and Credit Co-operatives Ltd (Kuscco) has understandably shaken confidence across Kenya’s cooperative movement. It has raised difficult questions about governance, accountability and the protection of resources entrusted to institutions established to serve Savings and Credit Cooperative Organisations (Saccos).

Yet the failure of an institution does not invalidate the necessity of its mandate. Kenya’s Sacco movement still requires a strong national federation capable of representing its interests, coordinating policy engagement and providing services that individual Saccos cannot efficiently undertake alone.

The proposed Kenya Federation of Savings and Credit Co-operatives (Kefescco) could fill that space. However, it must not be presented as an automatic cure for the sector’s problems. Its legitimacy will depend on whether it is deliberately built differently. The starting point must be a clear legal and financial separation between Kussco and the new federation. Kussco’s liquidation should independently address its historical assets, liabilities, creditors and outstanding obligations.

Kefescco must commence on a clean institutional foundation without becoming a vehicle for transferring unresolved liabilities or avoiding accountability. This distinction is essential: Kenya needs continuity of national sacco representation, not continuity of failed corporate practices.

Advocacy must be a core function

The Sacco movement operates in an increasingly complex environment shaped by taxation, prudential regulation, technology, cybersecurity, data protection, consumer protection and the division of cooperative functions between the national and county governments.

Individual Saccos cannot effectively engage Parliament, regulators and government agencies on every policy affecting the sector.

A national federation can consolidate its concerns, build consensus and present an authoritative sector position. Advocacy must, however, move beyond ceremonial meetings and reactive statements. Kefescco should maintain a permanent system for monitoring legislation, regulations and public policy.

It should consult its members, undertake legal and economic analysis and submit evidence-based proposals to Parliament, the Executive, Sacco Societies Regulatory Authority (SASRA) and county governments.

This responsibility is particularly important as Parliament considers the Cooperatives Bill, 2024 and the Sacco Societies (Amendment) Bill, 2025. The Cooperatives Bill proposes a new legal architecture for the sector within Kenya’s devolved system. It recognises cooperative federations and an apex cooperative, with functions that include representation, advocacy, education, dispute resolution and shared legal and accounting services.

The Sacco Societies (Amendment) Bill proposes a regulated framework for central liquidity and shared-services businesses.

It contemplates liquidity reserve accounts, short-term lending, shared payment systems, capital and liquidity requirements, fit-and-proper tests and supervision by SASRA.

These proposals could significantly reshape the sector. Kefescco must help ensure that the final laws clearly distinguish representation and advocacy from financial intermediation, regulation and supervision.

Ambiguity between an apex cooperative, a Sacco federation and a secondary cooperative conducting central liquidity business could create institutional conflict and expose members’ funds to unnecessary risk.

Research must give advocacy authority

Advocacy without credible research can quickly become institutional lobbying unsupported by evidence.

Kefescco should establish a professional research and policy function capable of producing an annual State of the Sacco Sector Report, regional Sacco profiles, taxation-impact studies, governance assessments and research on liquidity, financial inclusion, technology and emerging risks.

The federation should be able to demonstrate how a proposed tax would affect Sacco liquidity, where county-level cooperative services remain inadequate and how Sacco contribute to housing, agriculture, employment and enterprise development.

Research should also support an early-warning system capable of detecting governance weaknesses, liquidity stress, cyber threats and deteriorating financial performance before they become institutional crises.

In this respect, research is not merely an academic exercise. It is an instrument for protecting members’ savings and strengthening policy decisions.

Shared services can demonstrate immediate value

The strongest justification for Kefescco will not be its national status but the measurable value it provides to members. Many smaller and medium-sized Saccos cannot independently afford sophisticated legal departments, cybersecurity systems, risk specialists, research teams or modern technology platforms.  A federation can aggregate demand and provide these services more efficiently.

Shared services could include legal and taxation advice, regulatory compliance, cybersecurity support, data analytics, director education, governance assessments, procurement platforms, alternative dispute resolution and common technology infrastructure.

Central liquidity and payment services could also strengthen the movement, but they present considerably greater risk.

They should only be undertaken through properly licensed, separately governed and prudentially supervised structures. Member subscriptions must never silently become investment or liquidity capital.

Representation, commercial services and financial intermediation should have clear institutional boundaries, separate accounts and distinct accountability systems.

Lessons from other jurisdictions

International experience demonstrates that cooperative financial institutions become stronger when local autonomy is supported by reliable common infrastructure.

Germany’s cooperative banking network combines independent local institutions with strong national representation, institutional monitoring and protection arrangements.

Canada’s Desjardins model demonstrates the value of federation-level technology, risk management and integrated financial services.

Ghana’s Cooperative Credit Unions Association provides advocacy, training, auditing and management-information support to affiliated credit unions.

Kenya should not copy any of these systems wholesale. It should domesticate their best principles: Germany’s institutional discipline, Canada’s economies of scale and Ghana’s focus on capacity-building and practical member support.

Any Kenyan model must also respect constitutional devolution, democratic member control, cooperative autonomy and SASRA’s statutory regulatory mandate.

Confidence must be earned

Kefescco will be judged first by its governance. Its leadership must reflect professional competence, regional and sectoral diversity and transparent fit-and-proper standards.

Board tenure should be limited, conflicts of interest disclosed, and the roles of the board and management clearly separated.

The federation should publish audited accounts, procurement disclosures, annual performance reports and related-party transactions. It requires an independent audit and risk committee, a competent professional secretariat, effective whistleblower protection and strict controls over investments, subsidiaries and borrowing.

No individual should become bigger than the federation. Authority must flow from the law, the institution’s constitution and member resolutions—not personalities or informal centres of power.

The liquidation of Kuscco should therefore be treated not only as the end of an institution, but as a warning about how the next one must be designed.

Kenya’s Sacco movement cannot afford to remain fragmented and voiceless. It needs a credible national federation to organise advocacy, generate research, coordinate shared services and represent millions of cooperative members.

Kefescco can become that institution. But confidence cannot be inherited or demanded through a change of name. It must be earned through transparency, competence, measurable member value and an uncompromising break from the governance failures of the past.

A strong apex federation may not solve every Sacco problem. Properly constituted and professionally governed, however, it could become one of the most important instruments for rebuilding confidence and securing the future of Kenya’s cooperative financial sector.

The writer is an Advocate of the High Court of Kenya