Kenya’s regulated savings and credit cooperatives (SACCOs) are facing renewed financial strain as non-remitted funds owed by employers jumped to KSh 3.49 billion in 2024, up from KSh 2.59 billion a year earlier, according to the Sacco Societies Regulatory Authority (SASRA).

“It is an oxymoron that employees of defaulting county governments and assemblies are paid, but the deducted funds never reach SACCOs. The plausible explanation is diversion for other purposes,” the regulator said in its 2024 supervision report.

County governments and assemblies were the biggest defaulters, holding back KSh1.61 billion (46 per cent of the total). Public universities and tertiary colleges followed with KSh762 million (22 per cent), while state corporations accounted for KSh165 million (5 per cent). Private firms owed nearly KSh434 million.

The backlog is eroding loan books and fuelling disputes between SACCOs and members. The authority has renewed calls for reforms to allow direct recovery of arrears from exchequer disbursements to government entities. It also flagged growing risks in private companies undergoing restructuring, where defaults and membership exits have worsened non-remittance cases.

Even so, the sector’s aggregate non-performing loan ratio eased slightly to 8.39% in 2024 from 8.45% in 2023, pointing to modest improvements in asset quality.

The sector has also continued its upward growth, crossing KSh 1 trillion in assets by the end of 2024. The value of the sector’s combined assets has tripled in the last nine years, from KSh 392.8bn in 2016 to KSh, 1.08 trillion at the end of December 2024. The sector’s gross income has increased from KSh. 80.2bn in 2019 to KSh 159.6bn in 2024. Its core capital has also almost doubled to stand at KSh 188.7bn in 2024.

SACCOs are accelerating a shift into digital delivery channels to strengthen access and reduce costs. Mobile money platforms were the most widely adopted, with 245 of 355 regulated SACCOs (69%) deploying USSD codes in 2024, up from 228 the previous year. Internet-based apps were also on the rise, adopted by 171 SACCOs (48.2%) compared with 140 in 2023.

ATM services remained essential for deposit-taking SACCOs, with about 65% connected, mostly through Cooperative Bank of Kenya, alongside ABC Bank, Family Bank and Interswitch. Cheque services continued for high-value transactions, dominated by Co-op Bank with 86 SACCO clients.

The sector also expanded links with Pesalink via Co-op Bank, Equity, DTB, KCB, Stanbic and Safaricom. Agency banking gained traction, with 40 SACCOs operating 4,247 agents who processed transactions worth KSh31.65 billion in 2024.

Digital credit emerged as the fastest-growing product line. SACCOs rolled out 345 digital and micro-loan products, up from 251 in 2023. Most were capped below KSh50,000 with two-month repayment periods, although some loans of up to KSh500,000 have entered the market. Average monthly interest rates ranged between 5.8 and 10%.

SASRA said while technology is deepening access and meeting members’ demand for real-time services, it also raises cyber security concerns and intensifies competition with banks and digital lenders.