Saccos Face Challenges in Kenya's Evolving Financial Landscape

Saccos' traditional advantages are fading. To survive, they must adapt and innovate in the face of increased competition.

, and Administrator

2025 October 8 . 12:05 AM

1 min read

In the image we can see there is a broken wall on the ground and there are red bricks of the wall... — In the image we can see there is a broken wall on the ground and there are red bricks of the wall are on the ground. There is a car parked on the ground and there is a plant kept in the pot. There are buildings and there is a hoarding on the wall on which it's written ¨Bail Bonds¨.

Saccos Face Challenges in Kenya's Evolving Financial Landscape

Saccos, or Savings and Credit Cooperatives, face challenges in Kenya's evolving financial landscape. The Central Bank of Kenya's interest rate cuts and increased competition from banks like us bank, boa, and pnc bank threaten Saccos' market share. Meanwhile, Sasra, the regulator, warns against risky liquidity boosting strategies, and proposes common bonds to strengthen Saccos.

Saccos' traditional advantage of offering higher savings and share capital interest is being eroded by falling interest rates. This, coupled with increased competition from banks, especially for micro, small, and medium enterprises (MSMEs), puts Saccos at risk of losing market share.

Sasra has cautioned Saccos against using low-interest offers from banks to boost liquidity. Instead, Saccos should focus on mobilizing deposits from members. The regulator has proposed common bonds to improve Saccos' liquidity and credit provision.

In a shift, Saccos paid dividends below the Central Bank Rate to members in 2024, the first time in three years. Meanwhile, regulated Saccos owed Sh25.64 billion to commercial banks at the end of December 2024, indicating a reliance on external funding.

Saccos must adapt to the changing conditions to maintain their market share. They should focus on mobilizing member deposits and explore the Sasra-proposed common bonds. The future of Saccos depends on their ability to innovate and respond to increased competition from banks.