Kenya’s savings and credit cooperative (Sacco) sector is grappling with a a huge crisis as unremitted member contributions reach Sh2.6 billion. Public institutions in the country, emerge as the largest defaulters in a trend that threatens the stability of the cooperative financial system.
According to the Sacco Societies
Regulatory Authority (Sasra), public universities lead with Sh958.1 million in unremitted funds, followed by county governments (Sh865.1 million), state corporations (Sh162.9 million), and public utilities companies (Sh79.9 million).
Despite legal provisions empowering the Commissioner of Co-operative
Development to impose penalties of 5% compound interest per month on defaulting employers and initiate debt recovery proceedings, enforcement against government institutions has proven particularly challenging due to what Cooperatives Principal Secretary Patrick Kilemi describes as the “symbiotic relationship between the National Treasury and public institutions.”
This crisis has partly contributed to the collapse of Kenya Union of Savings and Credit Co-operatives Ltd (Kuscco), which accumulated Sh5.3 billion in bad loans, with Saccos themselves holding Sh1.1 billion in unpaid loans extended by Kuscco.
The ripple effect is evident in university-based Saccos, which report high non-performing loan ratios compared to other government-based cooperative clusters.
While acknowledging legitimate business challenges that sometimes affect employers’ ability to remit funds-such as the advertising revenue decline media houses experienced during the COVID-19 pandemic-the government’s reluctance to strictly enforce the law against public institutions creates a persistent structural problem.
“We keep using soft power, reminding them that we have this law that we can apply’ Kilemi noted, highlighting the delicate balance between regulatory enforcement and practical constraints when dealing with institutions dependent on exchequer disbursements, creating what he describes as “an interlinked ecosystem” where accountability becomes diffused.
