Tens of billions of shillings in member deposits within Kenya's Savings and Credit Cooperative Societies (SACCOs) are now facing uncertainty as abrupt cuts in foreign aid ripple through the sector. Close to Sh40 billion worth of members’ deposits held in SACCOs linked to implementing agents of international development funds are potentially at risk, according to a recent media report citing regulatory warnings.

This precarious situation stems from major geopolitical realignments, most notably a shift in United States foreign policy, which has led to a freeze and reduction of funding for the U.S. Agency for International Development (USAID). For years, these funds have been a crucial pillar supporting capacity building, technological advancement, and financial product development within Kenya's cooperative movement, directly impacting the financial health of ordinary Kenyans.

The Domino Effect of Aid Withdrawal

The immediate impact is being felt by organizations that have served as the bridge between international aid and local SACCOs. The World Council of Credit Unions (WOCCU), a primary implementing partner for USAID-funded projects in Kenya, has been significantly affected. The termination of USAID awards has compelled WOCCU to launch its own emergency fundraising initiatives, such as the "Rally the Movement" campaign, to sustain crucial development programs.

These programs are not abstract concepts; they translate directly into the services and loans that help Kenyans build businesses and secure their futures. For instance, a WOCCU project to roll out a Small and Medium Enterprise (SME) Lending Toolkit is now proceeding with limited, privately raised funds for just three SACCOs, one of which is Unaitas Sacco Society Limited. Such initiatives, designed to help SACCOs safely lend to small businesses, are now facing a significant scale-back.

The Sacco Societies Regulatory Authority (SASRA) has officially acknowledged the threat. In its 2024 Annual Supervision Report, the regulator identified "Global geo-political policy shifts" and "foreign exchange risks" as key areas of focus to ensure the sector's stability. The entire SACCO sector, which held a total of KES 749 billion in deposits in 2024, is now bracing for the consequences.

How This Hits the Kenyan Wallet

The connection between a policy shift in Washington D.C. and a farmer's savings in a rural Kenyan SACCO is direct and concerning. The potential fallout includes:

• Stalled Innovation: Projects aimed at modernizing SACCOs, such as integrating them into the National Payment System to allow for direct diaspora remittances, are now in jeopardy due to the funding gap.
• Reduced Credit for Small Businesses: With capacity-building programs like WOCCU's SME lending project curtailed, SACCOs may become more risk-averse, making it harder for small entrepreneurs to secure loans.
• Impact on Member Livelihoods: The aid cuts have led to job losses in sectors like health and agriculture, where many of the affected workers are SACCO members. This directly impacts their ability to save and repay loans, increasing the rate of non-performing loans.

Charles Kaba, the Chief Executive Officer of Qwetu DT SACCO, warned of a "big setback in research and development projects" for the sector. He emphasized that the loss of sponsorship for programs designed to improve efficiency would be widely felt.

A Call for Self-Reliance

While the immediate outlook is challenging, the crisis has ignited a conversation about the sector's over-reliance on external funding. The abrupt nature of the aid withdrawal serves as a stark reminder of the vulnerabilities tied to foreign donor priorities. Analysts suggest that this moment could be a catalyst for the SACCO movement to accelerate its push towards greater self-reliance and the development of more resilient, locally-funded financial models.

As one development expert noted, while the short-term impact is tragic, this shift could offer an opportunity for Africa to deliver better, more predictable, and long-term financing for its own development choices. For the millions of Kenyans who place their trust and their savings in SACCOs, the hope is that the sector can navigate these turbulent geopolitical waters and emerge stronger and more independent.