Kenya has lifted a year-long freeze on the registration of savings and credit cooperatives (SACCOs) but tightened entry requirements in a bid to restore confidence in a sector shaken by governance failures.
- •New rules require prospective SACCOs to show at least KSh 1.2 million in operational capital before licensing, alongside proof of physical offices, staff, and formal management structures.
- •They must also demonstrate the ability to mobilize KSh 10 million within their first year of their operation, with such vaulted conditions to curb undercapitalized entities that rely on member deposits to cover basic administrative costs.
- •The resumption follows a suspension imposed in May last year after a string of operational and governance problems at several high-profile cooperatives exposed regulatory gaps.
“We want SACCOs that can sustain themselves and protect members’ savings. Every SACCO must also have a physical office, staff, and proper operational structures,” said the Commissioner for Co-operative Development, David Obonyo.
State authorities utilized the pause period to review the existing legal framework governing the sector, culminating in stricter thresholds designed to filter out weak entrants.
The overhaul comes as regulators confront a system that is large but unevenly compliant. Of roughly 14,000 registered SACCOs, only about 4,000 consistently file annual returns, raising concerns about transparency, solvency, and oversight.
Corporate Governance
In parallel, the government is pushing structural changes to governance. SACCOs with more than 5,000 members will be required to adopt a delegate system for annual general meetings, replacing mass gatherings that have proven unwieldy and ineffective for decision-making at scale.
Legislative reforms remain in flux, with a new Co-operative Bill still under mediation between the National Assembly and the Senate over unresolved issues including term limits for officials. Authorities are aiming to finalize the process before the sector marks International Co-operative Day in early July.
The changes target a sector that underpins a significant share of Kenya’s financial ecosystem. Cooperatives serve tens of millions of members, channeling savings into credit for small businesses, housing, and agriculture. But their reach has also made them vulnerable to mismanagement, political interference, and weak internal controls.
While SACCO deposits rose to KSh 749.4 billion across 16 million accounts in 2024, the funding base is highly concentrated, with roughly KSh 566 billion (more than three-quarters of total deposits) held in just over 4% of accounts.
Officials are betting that higher entry barriers and tighter governance will consolidate the industry, potentially forcing smaller or struggling SACCOs to merge or exit. The result, if the enforcement holds, would be fewer but more stable institutions in a system long defined by its breadth rather than its resilience.
