Kenya's SACCO sector is grappling with a significant challenge as employers continue to withhold KSh 3.49 billion in member deductions, leading to calls for direct remittance mechanisms. The Sacco Societies Regulatory Authority (SASRA), in its 2024 Supervision Annual Report, highlighted that this non-remittance crisis threatens the financial stability of regulated SACCOs and adversely affects over 55,000 members.

Context of the Crisis

The unremitted funds, which increased from KSh 2.59 billion in 2023, comprise deductions for both loan repayments and savings contributions. The bulk of this debt, approximately KSh 1.69 billion, is owed by county governments, public universities, and state corporations. This failure to remit funds cripples SACCOs' ability to issue loans, their core business, and falsely portrays members as defaulters, straining their relationship with their SACCOs.

Proposed Solutions and Policy Reforms

In response, SACCOs are exploring strategies to acquire Front Office Service Activity (FOSA) licenses, which would enable them to directly deduct contributions and loan repayments from members. SASRA is actively advocating for legal and policy reforms that would empower the National Treasury to directly deduct owed amounts from exchequer allocations to defaulting government institutions. This proposed measure aims to circumvent lengthy legal proceedings and ensure timely recovery of funds.

Stakeholder Perspectives

The Federation of Kenya Employers (FKE), while not directly commenting on the proposed bypass, has previously urged the government to reconsider policies that increase the cost of doing business for employers, which could indirectly impact remittance capabilities. The Cooperative Bill 2023, approved by the Cabinet in November 2023, proposes penalties for employers who delay or fail to remit employee deductions to SACCOs within seven days, including compound interest of not less than 5% per month.

Evidence and Data

• Total Non-Remitted Funds: KSh 3.49 billion as of December 2024.
• Increase from 2023: Up from KSh 2.59 billion.
• Affected SACCOs: 85 regulated SACCOs.
• Affected Members: Over 55,000 Kenyans.
• Breakdown of Debtors:
  • County governments and assemblies: KSh 1.69 billion (46.7% of total).
  • Public universities and tertiary colleges: KSh 762.27 million (21.85%).
  • State corporations: KSh 164.76 million (4.72%).
  • Private firms: Nearly KSh 434 million.
• Purpose of Unremitted Funds: Approximately 74.5% (KSh 2.599 billion) was for loan repayments.
• SACCO Sector Growth: Total assets surpassed KSh 1 trillion by the end of 2024, with membership growing to 7.39 million.

Risks and Implications

The continued non-remittance poses significant risks, including reduced liquidity for SACCOs, hindering their ability to offer new loans and meet financial obligations. Members face the risk of being listed with Credit Reference Bureaus (CRBs) for defaults they are not responsible for, affecting their creditworthiness and ability to access future credit.

Timeline

• November 2023: Cabinet approved the Cooperative Bill 2023, proposing penalties for delayed remittances.
• March 2025: Kenya's Cabinet approved the SACCO Societies (Amendment) Bill, 2023, introducing the SACCO Shared Services Framework to operationalise SACCO Central, which aims to provide direct access to the national payments system and centralised remittance licensing.
• September 25, 2025: SASRA launched its 2024 SACCO Supervision Annual Report, detailing the KSh 3.49 billion non-remittance crisis.

What to Watch

The implementation of the Cooperative Bill 2023 and the SACCO Societies (Amendment) Bill, 2023, will be crucial in determining the future of employer-SACCO remittances. The effectiveness of SASRA's proposed direct deduction mechanism from exchequer grants will also be a key area to monitor. The uptake of FOSA licenses by SACCOs and their capacity to manage direct deductions will be important indicators of the sector's adaptation to these challenges.

Related

The non-remittance issue is part of broader discussions on financial inclusion and the stability of Kenya's cooperative sector, which contributes significantly to the national GDP. The World Council of Credit Unions (WOCCU) ranks Kenya 14th worldwide in total SACCO assets and as Africa's leader in cooperative finance.