188 SACCOs Flagged for Breaching Loan Rule; What It Means for Members

The Sacco Societies Regulatory Authority (SASRA) has flagged 188 SACCOs for exceeding the loan default rate rule of 5%.

In its annual report for 2024, SASRA noted that 109 Deposit Taking SACCOs had their defaults above the set 5% while 79 Non-Withdrawable Deposit Taking SACCOs (NWDT-SACCOs) were found to be in breach.

SASRA noted that the trend illustrates a worrying state of the quality of SACCO loan assets, even as some organizations had their limit exceed 10%.

Loan Defaults for DT SACCOS

"There were 109-DT-SACCOs whose NPL ratio was above 5% in 2024, which is the same as those that had a similar range of NPL ratio in 2023, with the deviation being occasioned by the increase in the number of DT-SACCOs following the conversion of three (3) previously authorized NWDTSACCOs to licensed DT-SACCOs," read the report in part.

Out of the 109-DT-SACCOs whose NPL ratios stood above 5%, a total of 68-DT-SACCOs had their NPL ratio above 10% implying a worrying state of the quality of their loan assets.

Loan Defaults for NWDT-SACCOs

There were a total of 79-NWDT-SACCOs whose NPL ratios were above 5%, out of which 44-NWDT-SACCOs had NPL ratios above 10% thus calling for urgent remedial measures in order to reverse the trend.

What It Means for Members

Due to the increased defaults, SASRA urged SACCOs to increase their loan recoveries to reduce their financial risks.

"These group of DT-SACCOs must thus put in more efforts towards their loan recovery initiatives in order to reduce the apparent risk of further deterioration of their loan assets," SASRA recommended.

SACCOs typically recover non-performing loans by deducting funds directly from members’ savings or guarantors’ deposits. They may also restructure repayment terms or pursue legal and asset recovery measures if the borrower defaults completely.

Kenyans take loans from SACCOs because they offer affordable, accessible, and member-friendly financing options compared to banks or digital lenders.

Most SACCOs charge 1% per month on a reducing balance (equivalent to about 12% per year), while banks often charge 14–18%.

Reasons Behind High Loan Defaults in SACCOs

The defaults have been attributed to tough economic times that are facing Kenyans and companies.

As highlighted in the report, private sector companies have been restructuring their workforce, including laying off staff, further making it difficult for those who belong to saccos to pay off their loans.

In other instances, companies delayed employee salaries, hence delays for the employees to pay off their debt.

Notably, many Kenyans rely on SACCOs for loans, which they use for their households and businesses.

According to the 2024 SASRA report, the gross loans of the credit organizations grew at an average of 11.41% in 2024 to reach Ksh845.11 billion. In 2023, gross loans by regulated SACCOs stood at Ksh758.57 billion.

"The non-performing loans (NPL) ratio, made up of the loans classified under the substandard, doubtful, and loss category to gross loans for the Regulated SACCO industry, registered a marginal improvement to 8.39% in 202,4 compared to an NPL ratio of 8.45% in 2023," read the report in part.