The government has moved to allay fears among small-tier cooperative societies regarding proposed mergers, urging members and management not to panic over ongoing industry reforms.
Speaking in Mombasa, Cooperatives Principal Secretary Patrick Kilemi emphasized that these reforms are designed to stabilize the sector, boost performance, and facilitate the adoption of shared technology for more efficient service delivery.
While the government maintains a non-compulsory stance, industry leaders suggest that market dynamics may eventually leave small Saccos with little choice.
Mr David Mategwa, Chairperson, Kenya Union of Savings and Credit Co-operatives (KUSCCO) and the Kenya National Police DT Sacco, noted that rising member expectations for sophisticated services will be the primary driver of consolidation. He observed that while no one will force these entities to merge, the evolving business environment will make it difficult for smaller Saccos to remain competitive if they cannot provide the high level of service modern members demand.
“Nobody will force small Saccos to merge, but circumstances will. They may find themselves merging almost imperceptibly because they will eventually struggle to provide the high level of service that modern members demand,” Mategwa stated.
Principal Secretary Kilemi reiterated that a core objective of the reforms is to elevate governance standards within the cooperative movement to match those of the mainstream banking sector. He noted that the government aims to ensure a shilling in a Sacco is as safe as a shilling in a bank by implementing rigorous controls.
“We want to ensure that a shilling in a Sacco is as safe as a shilling in a bank by implementing rigorous controls,” Kilemi said. “By bringing matters of governance and saver protection to par with banks, we ensure that the decisions made by Sacco Boards are as robust and reliable as those made by traditional financial institutions.”
The government’s assurance comes at a time when several societies have already begun the merger process voluntarily. Small Saccos, particularly those in rural areas, are increasingly struggling to navigate the dual challenge of meeting stringent regulatory requirements and competing with larger players for deposits. Some entities that have found the regulatory environment too demanding have chosen to exit the market rather than merge, such as Pesa Sacco Society, which opted not to apply for a license renewal.
Conversely, others are joining forces to survive. In Kirinyaga County, Nufaika Sacco recently merged its membership with Fortune Sacco. Following this move, the Sacco Societies Regulatory Authority (SASRA) confirmed that Nufaika has voluntarily ceased deposit-taking operations and is no longer authorized to operate as an individual entity since its license expired on December 31, 2025.
The regulator continues to encourage such amalgamations, noting that they enhance stability while ensuring members continue to receive services and their savings remain protected.
The push for consolidation is underscored by a stark disparity in the sector’s asset distribution. According to past SASRA Annual Supervision reports, a small group of large-tier Saccos—those with assets exceeding Ksh5 billion—control a staggering 73.34% of the industry’s total assets. This leaves more than 300 smaller Saccos to compete for the remaining 26.66% in an environment described as “cutthroat.” To combat this inequality, SASRA recommends mergers as a strategic move to achieve economies of scale and level the playing field.
The legal framework for these transitions is well-defined, with the Sacco Societies Act recognizing amalgamations and the Cooperative Societies Act outlining the procedures for voluntary mergers. Section 29 of the Cooperative Societies Act provides a comprehensive procedural roadmap, while SASRA guidelines even provide for involuntary mergers in cases of financial distress to protect member interests.
Experts note that for these transitions to be successful, they must address several critical operational and legal areas in a structured manner. This involves the establishment of transitional committees where boards maintain oversight and supervisory committees provide quality assurance as outlined in the merger policy. A joint technical committee is typically required to report to the board before proceedings begin, ensuring that the integration of human resources, regulatory compliance, and management information systems is handled professionally. Furthermore, protecting member rights remains paramount, requiring transparent access to financial information, clear voting protocols, and the fair identification of the interests of dissenting members. Through the accurate valuation of assets and liabilities, Saccos can use these mergers to transform into more stable and competitive financial institutions.
