Kenya’s savings and credit cooperative societies sector, valued at over Sh1 trillion, faces an existential threat as influential borrowers exploit regulatory gaps to secure massive unsecured loans, potentially destabilizing institutions that serve millions of ordinary Kenyans.
The alarm was sounded this week by Cabinet Secretary Wycliffe Oparanya and the Sacco Societies Regulatory Authority (Sasra), who revealed that powerful individuals are infiltrating saccos with minimal deposits before leveraging their influence to secure loans far exceeding regulatory limits.
“We have noted that bigwigs have been invading saccos by saving little and influencing sacco leaders to lend them a lot of money beyond what is permissible by their own savings,” Oparanya warned during the launch of Sasra’s supervision report on Thursday. His stark warning referenced the specter of institutional collapse: “You can imagine a sacco giving a Sh100 million loan to an individual without any security. What will happen if the big man drops dead? They shall go the way of Metropolitan [sacco] and others.”
The reference to Metropolitan National Sacco is particularly chilling. Once a prominent player in Kenya’s cooperative movement, the institution now faces collapse with negative equity of KSh12.3 billion, occasioned by a weak liquidity position, high loan default rates, and negative member funds. Internal reports from the sacco’s August 2025 annual general meeting revealed untraceable loan book assets of Sh50 billion, painting a picture of an institution that has lost control of its lending portfolio.
This crisis extends beyond isolated cases. Sasra data shows that across the sector, loans tapped by Sasra-regulated saccos had exceeded deposits by Sh95.68 billion in 2024, compared with a gap of Sh76.38 billion in the previous year. By August 2025, this gap had widened to Sh100.76 billion, representing the largest loan-deposit mismatch on record and more than five times the Sh19 billion recorded in 2016.
The mathematics are stark. Kenya’s 355 Sasra-regulated saccos now have loans totaling Sh908.93 billion against deposits of just Sh808.16 billion. While some of this gap can be attributed to reserves and retained earnings, Sasra acting CEO David Sandagi acknowledges that external borrowing has become increasingly common, creating dangerous leverage ratios across the sector.
The cooperative model traditionally relies on the principle that members’ savings fund loans to other members, with the typical multiplier allowing borrowing up to three times one’s deposits. However, when influential individuals circumvent these ratios through pressure on elected officials, the fundamental risk management framework collapses.
Sandagi confirmed that his authority has been “handling cases of members borrowing huge sums without backing them with any collateral,” indicating that the problem extends beyond isolated incidents. The development suggests that some sacco officials are being systematically influenced to overlook regulatory and internal risk management rules to accommodate certain borrowers.
The vulnerability of the sector becomes more apparent when examining its membership dynamics. Sasra data reveals concerning trends in member engagement, with dormant members jumping 15.09 percent to 1.66 million last year from 1.44 million previously. Non-withdrawable deposit-taking saccos were particularly affected, with dormant membership surging 41.36 percent to 205,356 while active members declined 18.5 percent.
This erosion of the membership base occurs precisely when saccos face pressure to mobilize deposits faster than they issue loans. The economic headwinds that have pushed many members into dormancy have simultaneously created demand for credit among those who remain active, creating a dangerous liquidity squeeze that makes improper lending practices more tempting for hard-pressed officials.
The governance challenges run deeper than individual misconduct. Oparanya acknowledged that while democracy remains fundamental to cooperative principles, there’s an urgent need to “seriously look into the calibre of persons” being elected to sacco boards. He called for mandatory continuous professional development for key officers, recognizing that the sector’s rapid growth has outpaced the expertise of many in leadership positions.
The wider financial landscape compounds these challenges. A massive financial scandal has rocked Kenya’s cooperative union sector, with forensic audits revealing non-performing loans totaling Sh3.7 billion, overstated profits of nearly Sh798 million over six years, irregular commissions amounting to Sh2.7 billion, and mismanagement of funds totaling Sh1.3 billion. These revelations suggest systemic governance failures that extend beyond individual institutions.
The stakes could not be higher. Saccos serve as the primary financial lifeline for millions of Kenyans, particularly in rural areas where traditional banking infrastructure remains limited. The sector’s assets crossed the Sh1 trillion threshold for the first time in 2024, reflecting its critical role in Kenya’s financial ecosystem. Any significant disruption could have cascading effects on the broader economy.
The crisis carries eerie parallels to previous institutional failures, with Metropolitan National Sacco declared technically insolvent in February 2025, requiring an estimated Sh7 billion for financial stability. The pattern of financial irregularities, including unauthorized transactions and overstated loan facilities, mirrors problems that have plagued other institutions.
Sasra’s response has been reactive rather than proactive, handling cases individually rather than implementing systemic reforms. While the authority urges saccos to “stick to their lending limits, enforce savings-to-loan ratios, and protect members’ funds,” the regulatory framework appears insufficient to prevent well-connected borrowers from exploiting institutional weaknesses.
The human cost extends beyond financial statements. Metropolitan Sacco members have held demonstrations over unresolved grievances, including non-remittance of monthly repayments and irregular loan recoveries, highlighting how governance failures translate into real hardship for ordinary members who depend on these institutions.
The challenge for regulators and policymakers is stark. How do you maintain the democratic, member-driven ethos that defines the cooperative movement while implementing safeguards robust enough to prevent exploitation by those with disproportionate influence? The current crisis suggests that Kenya’s sacco sector has grown too large and systemically important to rely solely on traditional cooperative governance models.
As the sector grapples with a widening loan-deposit gap and mounting governance challenges, the warning from officials is clear: without immediate reform, more institutions risk following Metropolitan’s path toward collapse, potentially wiping out the savings of millions of Kenyans who can least afford such losses.
The time for incremental fixes has passed. Kenya’s sacco sector needs comprehensive governance reform that preserves its cooperative character while implementing the professional management standards and regulatory oversight that a trillion-shilling sector demands. The alternative is a cascade of institutional failures that could devastate the financial foundation of Kenya’s cooperative movement.
