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The Sacco Societies Regulatory Authority (SASRA) has launched an investigation into the escalating number of dormant Sacco accounts, which now approach two million, raising questions about member retention and the sector's long-term stability.
The Sacco Societies Regulatory Authority (SASRA) has initiated an investigation into the significant increase in dormant Sacco accounts across Kenya. This move follows concerns over the rapid growth of inactive memberships, which are nearing the two million mark. According to SASRA's 2024 Sacco Societies Supervision Report, the number of dormant members is growing at nearly three times the rate of active members, indicating that for every new member joining a Sacco, three become inactive.
This trend poses a challenge to the Sacco sector, despite an overall increase in total membership and assets. In 2024, the total membership of regulated Saccos reached 7.4 million, with 5.7 million active members and 1.7 million dormant members. The year-on-year growth for active membership was 6.02 percent, while dormant membership surged by 15.09 percent.
SASRA, established under the Sacco Societies Act No. 14 of 2008, is the principal government agency responsible for licensing, regulating, and supervising Sacco societies in Kenya. Its mandate expanded in 2020 to include Non-Deposit-Taking Sacco Societies (NWDT-Saccos) in addition to Deposit-Taking Saccos (DT-Saccos).
The Sacco sector plays a crucial role in Kenya's financial inclusion, providing affordable credit and encouraging a culture of saving. Over the past decade, the sector has shown robust growth, with total assets rising from KSh 301.54 billion in 2014 to KSh 1.08 trillion by December 2024. Total deposits and savings also increased by 9.9 percent to KSh 749.4 billion in 2024.
The 2024 SASRA report highlights that the proportion of active members slightly declined from 78.85 percent in 2023 to 77.44 percent in 2024. Conversely, dormant membership rose to 22.56 percent of the total Sacco population. This increase in dormant accounts suggests that Saccos are struggling to retain active members, with recruitment and reactivation efforts lagging behind the rate at which members become inactive.
For DT-Saccos, the year-on-year growth of dormant members was 12.16 percent, while for NWDT-Saccos, this growth was a significant 41.36 percent. As of December 2024, DT-Saccos accounted for 1.46 million dormant members, and NWDT-Saccos had 205,386.
SASRA Acting Chief Executive David Sandagi noted that the methodologies Saccos use to entice membership sometimes do not automatically lead to retention. He suggested that these methods might attract individuals to specific products or services, requiring them to be members for a certain period, often three months.
Challenges faced by Saccos in retaining active members include a lack of entrepreneurial vision, members not fully understanding Sacco principles, and insufficient focus on youth and gender equality. Additionally, many Saccos face difficulties in meeting capital adequacy and liquidity ratios, weak governance, and inadequate risk management systems.
The high proportion of dormant members calls for concerted efforts to reactivate them, including developing and rolling out suitable financial products and services. The government has also moved to bar Saccos from investing in non-core business activities until proper regulations are in place, following concerns over financial mismanagement and instability.
The State Department for Co-operatives, led by PS Patrick Kilemi, has emphasized the importance of sound governance, particularly in the election of competent Sacco boards, stating that "There is no safety in the SACCO sector without strong leadership."
The ongoing investigation by SASRA is expected to provide further clarity on the root causes of increasing dormant memberships. Stakeholders will be watching for new policy directives and strategies aimed at enhancing member engagement, improving governance, and ensuring the long-term sustainability of the Sacco sector in Kenya.
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