REGULATION | Kenya Savings and Credit Cooperative Organizations (SACCOs) Deposits to Get Insurance Cover as New Governance Rules Kick In

Kenya’s cooperative sector is set for a major shake-up as the government moves to enhance the safety of savings in SACCOs (Savings and Credit Cooperative Organizations) by introducing deposit insurance and tightening governance standards.

In sweeping regulatory reforms unveiled by the State Department for Cooperatives, deposit-taking SACCOs will soon be required to insure members’ deposits, similar to how banks are covered by the Kenya Deposit Insurance Corporation (KDIC). The reforms aim to boost public confidence and protect millions of Kenyans who rely on SACCOs for savings and credit.

“We are developing a deposit guarantee mechanism to protect members’ funds. This will work like what happens in the banking sector,” said Cooperatives Principal Secretary, Patrick Kilemi, during a stakeholder meeting in Nairobi.

The move comes amid growing concerns over mismanagement, fraud, and governance failures in some SACCOs, which have led to the loss of member funds and erosion of trust in the cooperative movement.

Alongside the insurance scheme, the government is rolling out new governance and compliance rules, including stricter audit requirements, the use of technology for transparency, and the vetting of top SACCO officials. Kilemi noted that SACCOs will need to meet higher thresholds on capital adequacy, risk management, and disclosure to operate.

KUSSCO Scandal

In early 2025, the Kenya Union of Savings & Credit Co-operatives (KUSCCO), the umbrella body overseeing these SACCOs, was implicated in a massive fraud amounting to approximately KES 13.3 billion (about USD $120 million).

A recent forensic audit conducted by PricewaterhouseCoopers (PwC) uncovered extensive financial mismanagement, including falsified financial statements, unauthorized withdrawals, and large-scale theft by senior executives. This malpractice has rendered KUSCCO insolvent by KES 12.5 billion ($97.2 million), placing deposits from 247 SACCOs, totaling KES 24.8 billion, at significant risk.

The audit revealed that top executives, including former Managing Director George Ototo, Finance Manager George Owino, and Chairman George Magutu, manipulated financial records to conceal losses and misappropriations. Notably, the 2022 financial report bore the forged signature of a deceased auditor, further highlighting the depth of the deception.

“The idea is to professionalize the sector,” said Kilemi, adding that all deposit-taking SACCOS must transition to new digital systems to enhance traceability and monitoring of funds.

Kenya’s cooperative sector is among the largest in Africa, with over 26,000 registered cooperatives and more than 14 million members. SACCOs alone control savings worth over KES 1 trillion (~$7.75 billion), underlining the importance of safeguarding the ecosystem.

According to a 2023 report by BitKE, SACCOs account for over 7% of the Kenyan GDP.

The proposed reforms are part of the broader Cooperative Bill, which is currently under review and expected to be tabled in Parliament later in 2025.

SACCOs are member-owned financial institutions prevalent in Kenya, providing savings and credit services to promote financial inclusion, especially in underserved communities. The SACCOs are a popular means for regular people to grow their finances, turning to the hundreds of SACCOS as investment avenues.

The institutions are highly popular attracting an average of KES 11.75 billion ($74 million) in new deposits each month. In 2023, deposits by Kenyans in Savings and Credit Co-operative Societies (SACCOs) crossed KES 1 trillion ($6.3 billion) mark for the first time.

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