NAIROBI, Kenya — The government has sought to allay fears among low-income and small cooperative societies, assuring them that proposed mergers with larger Savings and Credit Cooperative Organisations (SACCOs) will not threaten their stability or members’ savings.
Cooperatives Principal Secretary Patrick Kilemi said the reforms are intended to stabilise the SACCO sector, improve governance and enhance performance through shared technology and stronger oversight.
“We are looking to improve governance within the cooperatives. We are looking at a fit and proper test where top managers of SACCOs, the CEOs, are cleared,” Kilemi said.
He explained that any SACCO chief executive who fails the integrity and competence clearance will be barred from serving on any SACCO board, a move aimed at safeguarding members’ funds.
“If you are not cleared, you are not able to serve within any SACCO because of past mistakes. The point is we want to ensure that our shilling in a bank is as safe as a shilling in a SACCO by putting those controls in place,” he added.
Kenya National Police SACCO Chairperson David Mategwa said smaller SACCOs will not be compelled to merge, but warned that market realities may push them towards consolidation.
“Smaller SACCOs will not be forced to merge, but the market will decide,” Mategwa said.
He cautioned that SACCOs that fail to adopt modern systems risk losing members to better-equipped institutions, eventually becoming inactive.
“People will not accept paperwork anymore. They want convenience, and technology requires numbers. Technology is not cheap, but it is necessary,” he said.
According to sector leaders, mergers would allow SACCOs to pool resources, invest in digital platforms and improve service delivery, mirroring governance standards applied in the banking sector.
Oparanya’s Directive on SACCO Consolidation
The assurances follow a directive by Cooperatives Cabinet Secretary Wycliffe Oparanya, who ordered SACCOs with small membership bases to consider merging with larger institutions to enhance financial stability and sustainability.
Speaking during the launch of the Sacco Supervision Report 2024, Oparanya said many BOSA-only SACCOs remain inactive or exist largely on paper.
“We must come to the reality that there are so many BOSA-only SACCOs spread across the country, but which are inactive and only exist on paper. The few active ones are neither stable nor financially viable because they serve just a few members,” Oparanya said.
He said the ministry will issue guidelines to facilitate mergers, allowing smaller SACCOs to secure their financial future while strengthening governance structures.
New Governance Controls
As part of the reforms, the government is introducing tighter governance measures aimed at protecting members’ savings and improving oversight.
SACCOs with more than 5,000 members will be required to adopt a delegate system to make annual general meetings more efficient and representative.
In addition, SACCOs will be prohibited from borrowing external funds to pay dividends without written approval from the Commissioner for Cooperative Development, a move intended to curb unsustainable financial practices.
Oparanya also said the current SACCO registration threshold of 10 members will be reviewed, particularly for transport and smaller cooperatives, to ensure only viable entities operate within the sector.
