Kenya’s SACCO Bad Loans at 8.39%: Healthier Than Banks But Risks Lurk Within

Kenya’s cooperative lenders closed 2024 in a relatively strong credit position — but unremitted payroll deductions, agriculture-sector stress, and public-sector delays tell a more complicated story beneath the headline number.

The Headline: SACCOs Outperform Banks on Bad Loans

Kenya’s SACCO sector ended 2024 with a non-performing loan (NPL) ratio of 8.39% — a figure that, while not negligible, puts the cooperative lending sector in a markedly better position than Kenya’s commercial banks, which closed FY25 with an estimated NPL ratio of 15.5%, according to the FY25 Kenya Banking Sector Report by Wall Street Africa Group.

That gap — nearly double — matters. It positions SACCOs as a comparatively lower-risk segment of Kenya’s financial system, even as the broader credit environment remains under pressure.

The data comes from the SACCO Societies Regulatory Authority (SASRA), which oversees deposit-taking and non-deposit-taking SACCOs across the country.

Loan Book Growth: Strong But Outpacing Risk Buffers

Kenya’s SACCOs grew their gross loan book to KSh 845.11 billion in 2024, up from KSh 758.57 billion the previous year — an expansion of 11.41%. That is a healthy clip of growth for a sector that serves millions of Kenyans as their primary source of affordable credit.

However, provisions set aside to cover bad loans rose only to KSh 55.69 billion from KSh 52.35 billion — a more modest increase that suggests credit growth is outpacing risk provisioning. In other words, the sector is lending faster than it is building financial cushions against potential defaults.

On the positive side, 86.71% of all SACCO loans — worth KSh 732.84 billion — were classified as performing in 2024, a slight improvement from 86.52% in 2023. Watch-category loans (those between 1–30 days past due) also declined from 5.22% to 4.90%, pointing to improved early-stage loan recovery efforts.

Not All SACCOs Are Equal: The Risk Divide

The sector-wide 8.39% figure masks wide variation in credit quality across different types of SACCOs:

SACCO Category	NPL Ratio
Agriculture-based SACCOs	18.69%
Community-based (non-deposit-taking)	13.29%
Government-linked DT-SACCOs	10.13%
Private-sector DT-SACCOs	5.73%
Government-linked (non-deposit-taking)	4.75%
Public University SACCOs	0.19%

Agriculture-based SACCOs are the standout concern, with an NPL ratio of 18.69% — more than double the sector average and well above the levels seen in urban, payroll-linked institutions. This reflects the vulnerability of farm-dependent borrowers to weather shocks, commodity price swings, and delayed payments from off-takers.

At the institutional level, 68 DT-SACCOs reported NPL ratios below 5%, while 109 institutions remained above that threshold — including 68 with ratios exceeding 10%. That concentration of stress in a significant minority of institutions is a risk that regulators and members alike cannot ignore.

The Payroll Problem: A Structural Vulnerability

One of the most telling findings in the SASRA data is the rise in unremitted payroll deductions — money deducted from members’ salaries that employers failed to pass on to their SACCOs.

In 2024, unremitted deductions climbed to KSh 3.49 billion, up sharply from KSh 2.59 billion the previous year. This affected 85 institutions and 55,602 members, with 74.5% of the funds intended specifically for loan repayments.

The breakdown of where these arrears originate is damning:

• 🏛️ County governments and assemblies — KSh 1.61 billion (46.07% of total arrears)
• 🎓 Public universities and colleges — KSh 762.27 million (21.85%)

Together, public-sector employers account for nearly 68% of all unremitted deductions. This exposes a structural flaw: SACCOs operating as payroll-linked lenders are only as strong as the reliability of their employers — and Kenya’s public sector has repeatedly proven to be an unreliable remitter.

When a county government delays remittances, it is not just an accounting problem. It translates directly into liquidity pressure on the SACCO, potential loan defaults logged against members who actually made their payments, and cascading stress across institutions that had no part in the delay.

A KSh 1 Trillion Asset Base — But Heavily Concentrated in Loans

The SACCO sector crossed a significant milestone in 2024, with total assets rising to KSh 1.076 trillion. That is a sector of real macroeconomic scale — one that touches the financial lives of a large share of Kenya’s working population.

However, the asset composition raises questions about diversification and resilience. Loans account for 73% of total SACCO assets — an unusually high concentration that leaves the sector’s balance sheet heavily exposed to credit performance. By comparison, banks and other financial institutions typically hold a more diversified mix of assets including government securities, cash, and equity investments.

Investment in property, equipment, and other assets rose modestly to KSh 53.57 billion, including KSh 14.81 billion in investment property. On a positive note, the often-opaque “other assets” category shrank to KSh 7.84 billion, suggesting slightly improved balance sheet transparency.

The Bigger Picture: Stable, But Not Complacent

Kenya’s SACCO sector deserves credit for maintaining credit quality well below its banking peers. An 8.39% NPL ratio in an environment where commercial banks are sitting at 15.5% is a genuine competitive differentiator — and a testament to the cooperative model’s emphasis on member accountability and social trust.

But the data also draws a clear map of the sector’s fault lines:

• ⚠️ Agriculture-based SACCOs are under serious stress at 18.69% NPL
• ⚠️ Unremitted payroll deductions are rising, driven overwhelmingly by county governments and public universities
• ⚠️ Credit growth is outpacing provisioning — a gap that could widen quickly if economic conditions deteriorate
• ⚠️ 73% loan concentration in total assets leaves little buffer against a credit shock

For members, the message is straightforward: your SACCO matters — who runs it, who employs you, and what sector you work in all have a direct bearing on the safety of your savings and the reliability of your credit access.

For regulators, the challenge is ensuring that the strong aggregate number does not mask the 68 institutions sitting above 10% NPL — and that public-sector employers are held accountable for the growing pile of unremitted deductions eroding cooperative balance sheets.

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Data sourced from SASRA supervisory reports and the FY25 Kenya Banking Sector Report by Wall Street Africa Group. Analysis by the Nexrein Digital newsroom.