SACCOs in Kenya are expanding at a double-digit pace, but the growth is increasingly powered by borrowing rather than new savings, even as non-performing loans remain elevated.
- •By September 2025, regulated SACCOs held KSh 1.16 trillion in assets, up nearly 12% from a year earlier.
- •Meanwhile, gross loans rose 12.9% to KSh 923.7 billion, outpacing deposit growth of 11.4%, which reached KSh 814.6 billion.
- •The contrast also reveals that deposit-taking SACCOs are now lending out about KSh 115 for every KSh 100 in deposits, a level that leaves institutions more exposed to liquidity stress if member incomes weaken or withdrawals accelerate.
At the same time, non-performing loans stand at just over 7% of total lending, consistently breaching the 5% prudential benchmark, indicating that credit quality for many SACCOs has not improved alongside balance-sheet growth. The ratio has remained elevated throughout the past two years, suggesting the problem is structural rather than temporary.
More than half of all credit disbursed by SACCOs continues to flow into land, housing, and education; loans that support household stability but generate limited productivity gains for the broader economy. By September 2025, land and housing accounted for roughly 32% of total lending, while education made up another 31%.
Agriculture, a priority sector in national policy, absorbed about 22% of SACCO credit. Trade followed at nearly 17%, while manufacturing and servicing industries, by contrast, received just about 5% of total lending.
Despite these credit pressures, the sector remains well capitalized. Deposit-taking SACCOs hold core capital equal to about 18.5% of total assets, nearly double the regulatory minimum. Capital relative to deposits stands above 26%, and reserves have grown faster than assets over the past year.
This capital buffer provides protection against losses and gives regulators room to maneuver. It also explains why rising bad loans have not yet translated into broader financial instability. However, this can change if persistent loan defaults erode earnings and reserves over time.
Returns on assets for deposit-taking SACCOs reached just over 3% by September 2025, broadly unchanged from the previous year. Cost-to-income ratios hovered around 43%, indicating that efficiency gains have largely stalled.
Non-deposit-taking SACCOs, which operate on a smaller scale, present a more fragile picture. Their asset growth has lagged behind the rest of the sector, while non-performing loans exceed 8% of total lending. Non-earning assets account for more than 11% of total assets, weighing on income generation.
So long as employment, wages, and member confidence hold, the system is likely to remain resilient. However, bad loans persistently above prudential norms and credit expanding faster than savings, the margin for shock is narrowing.
