The future of Savings and Credit Cooperative Organizations (SACCOs) appears cautiously optimistic, according to the latest SACCO Supervision Annual Report released by the SACCO Societies Regulatory Authority (SASRA). However, the report highlights challenges that must be addressed through strategic reforms amidst structural, macroeconomic, and geopolitical uncertainties.
One prominent concern is the industry’s vulnerability to climate-induced shocks, which have been increasingly frequent as global climate change continues to affect weather patterns. Despite these challenges, the economic landscape has been relatively favorable for SACCOs, driven by a decrease in Kenya’s annual inflation rate—from 6.3% at the beginning of 2024 to 2.8% by year-end. This has fostered an environment conducive to savings mobilization and capital formation. Yet, SASRA warns that the rising cost of living could threaten households’ capacity to save, impacting overall liquidity and member contributions within the SACCO sector.
Liquidity pressures are further compounded by a significant loss in membership. The report indicates that 75 regulated SACCOs collectively lost 68,555 members in 2024, leading to increasing challenges in refunding exiting members. As they are legally obligated to settle these claims, failure to do so could result in reputational damage and regulatory sanctions. In response, some SACCOs have had to resort to asset liquidation and external borrowing to meet these obligations, prompting SASRA to recommend aggressive outreach to new members, particularly in underserved demographics and emerging economic sectors.
Geopolitical risks have also emerged as a growing concern for the industry. Changes in policies from the United States have adversely affected 16 regulated SACCOs, 14 Non-WDTs, and 2 Deposit-Taking institutions, many of which depend heavily on donor-funded projects and international development partnerships. SASRA emphasizes the need for these organizations to diversify their revenue streams to mitigate over-reliance on external funding.
The report also highlights potential interest rate and credit market risks. Throughout 2024, the Central Bank of Kenya (CBK) maintained a low Central Bank Rate (CBR), leading SACCOs to rely on commercial bank borrowing to meet liquidity needs and raising concerns over growing indebtedness.
The competition from alternative credit providers offering lower-interest loans also poses a threat to traditional SACCO loan products. SASRA advises SACCOs to consider restructuring their credit portfolios, exploring internal capital generation options, and enhancing the competitiveness of their financial products.
While foreign exchange volatility was relatively stable in 2024 due to the steadiness of the Kenyan Shilling, SASRA warns that it remains a persistent risk. SACCOs engaged in import-export activities, diaspora remittances, or foreign-currency-linked services are urged to implement robust foreign exchange risk management strategies to buffer against potential market shocks.
As SACCOs navigate these multifaceted challenges, strategic planning and adaptability will be crucial for their sustained growth and operational resilience in an evolving economic landscape.
