Banks target Kenya's Sh1 trillion SACCO sector as regulation tightens

Kenya's SACCO sector crossed Sh1.07 trillion in total assets in 2024 even as tighter SASRA compliance requirements squeeze smaller cooperatives. [Courtesy]

Kenya's mid-tier banks are strengthening ties with savings cooperatives as tighter regulation raises compliance costs for smaller SACCOs.

The SACCO sector grew its membership from 6.84 million in 2023 to 7.39 million in 2024, with deposits rising from Sh682 billion to Sh749 billion and total assets crossing Sh 1.07 trillion, according to the Sacco Societies Regulatory Authority (SASRA) 2024 annual report.

A Sh 2 million sponsorship for the 5th Annual Kenya Teachers Sacco Association (KETSA) Leaders' Summit, scheduled for February 23 to February 27 in Kisumu, reflects growing engagement between banks and cooperatives.

The summit will bring together SACCO leaders from across Kenya for strategic dialogue and capacity building.

SASRA's 2024 supervision report shows it has tightened compliance requirements across the sector, introducing stricter licensing timelines, mandatory reporting obligations and higher governance standards.

SACCOs operating without a valid licence risk sanction, SASRA said.

SASRA now vets all board directors, chief executives and senior management through a mandatory fit-and-proper process.

All regulated SACCOs must also register with the Financial Reporting Centre (FRC) and meet anti-money laundering reporting requirements, SASRA noted.

A forensic audit by PricewaterhouseCoopers found the Kenya Union of Savings and Credit Cooperatives (KUSCCO) insolvent, with liabilities exceeding assets by Sh 12.5 billion, following years of fraud and governance failures.

SASRA data shows member withdrawals across the sector rose by Sh 30.8 billion in 2023.

Sidian Bank, which provided the Sh 2 million sponsorship, said the partnership reflects a broader strategy of deepening ties with the cooperative movement.

Chief Executive Officer Chege Thumbi said strategic alliances with SACCOs have grown the bank's customer base and created new business opportunities.

"Strategic partnerships with SACCOs play a key role in accelerating our growth. We are keen on building strong alliances within communities that present greater expansion opportunities and shared success," noted Thumbi.

KETSA chairperson Robert Gikanju said bank partnerships have become necessary for cooperatives navigating a more competitive and digital-driven environment.

"Collaboration with financial institutions is essential for the advancement of SACCOs. Partnerships with financial institutions provide us with additional impetus for growth and innovation within the sector," he noted.

He called for increased private sector collaboration to drive digital transformation and sustainable development within Kenya's cooperative movement.

SASRA guidelines indicate that compliance with both SASRA and FRC requirements now runs concurrently, adding to the administrative load on smaller cooperatives with lean management teams.

The Kisumu summit will bring together cooperative decision-makers as banks seek closer engagement with the sector.