Introduction
The Savings and Credit Co-operative Societies (SACCOs) sector forms an essential pillar of the Kenyan economy controlling over Kshs 1.5 trillion in assets and commanding a membership of over 14 million citizens. Over the years there has been significant growth of the co-operative sector given the advancement of technology and restructuring of the different co-operative bodies which has unfortunately led to its regulatory framework struggling to keep pace with the scale and complexity of the sector.
It is against this background that the Sacco Societies (Amendment) Bill, 2025 (National Assembly Bill No. 32 of 2025) was published on 30th June 2025 with the aim of introducing significant amendments to the Sacco Societies Act, Cap. 490B.
The Bill mainly seeks to modernize the regulatory framework by addressing long-standing gaps and challenges which have allowed entities handling substantial pooled Sacco funds to operate without an appropriate licensing and supervisory framework. The gaps have subsequently exposed member Saccos and their depositors to significant financial risk.
Key proposed amendments
Central liquidity and shared services
Clause 5 of the Bill introduces a new Part IIIA into the principal Act, comprising sections 28A to 28J.
Section 28A provides for formation of a secondary co-operative society by thirty or more licensed and authorized Sacco societies.
Section 28B provides for the functions of the secondary co-operative society thus;
hold and maintain a liquidity reserve account for each member Sacco society;
receive a prescribed minimum liquidity amount from member Sacco societies;
take deposits from member Sacco societies;
invest in Government securities;
offer short-term lending to member Sacco societies;
facilitate inter-Sacco lending among member Sacco societies;
subject to compliance with the requirements of the Central Bank of Kenya, participate in the inter-bank market;
subject to compliance with the requirements of the Central Bank of Kenya Act, observe the statutory liquidity reserve requirements at the Central Bank of Kenya;
provide shared services platform for member Sacco societies;
settle payment transactions for member Sacco societies;
issue payment instruments to member Sacco societies;
offer intermediary or agency services in domestic and international transfers on behalf of member Sacco societies;
facilitate trade finance including performance guarantees for member Sacco societies;
provide daily liquidity and other performance reports to the Authority; and undertake any other activity as may be prescribed by the Authority
Section 28C on the other hand expressly prohibits the Secondary Co-operative Society from transacting in deposit-taking with natural persons, lending to natural persons, undertaking wholesale or retail trade, investing in venture capital or undertaking such activity as may be prohibited by the Authority.
Practical implication– The concept of pooling liquidity and shared services has been there in practice and what the Bill seeks to introduce is a specific statutory and regulatory framework to guide the services.
Another key proposed function of the secondary co-operative society is the access to inter-bank market subject to CBK requirements. This will go beyond the conventional operations of a primary Sacco as it seeks to allow the co-operative society to manage liquidity at a sectoral/institutional level rather than each SACCO managing all of its liquidity needs independently which liquidity mechanism was previously only available to licensed banking institutions. This is expected to improve liquidity management, reduce reliance on more expensive sources of funding during periods of liquidity stress, and strengthen the resilience and stability of the Sacco sector.
Section 28F covers capital and liquidity requirements by providing that a licensed secondary co-operative society shall have and at all times maintain the prescribed capital adequacy requirements and liquidity adequacy requirements. It further provides that a licensed secondary co-operative society shall maintain a minimum holding of its member Saccos’ deposits in the Central Liquidity Fund as may be prescribed.
Section 28G provides for governance of the Secondary Co-operative Society whereby the secondary co-operative society shall be directed by a Board of non-executive directors elected by member SACCOs or appointed as prescribed in by-laws. Each society must have a CEO appointed by the Board, who is also an ex officio Board member. All persons appointed or elected as a Board member or senior officer will do so with prior SASRA approval.
Practical implication- This provision applies the fit-and-proper principle commonly found in financial-sector regulation which seeks to ensure those elected to leadership have the requisite competence, expertise and integrity.
Section 28H provides for enhanced regulatory oversight by SASRA. The provision equips the Authority with supervisory powers over the establishment and operation of secondary SACCOs, including oversight of their financial, governance and operational activities.
Operationalisation of the Deposit Guarantee Fund
The Bill addresses the issue of Deposit Guarantee Fund under clauses 6,7,8 and 9 subdivided into the following;
Clause 6 which principally proposes significant changes to the governance of the Deposit Guarantee Fund by amending Section 56 of the Sacco Societies Act and providing for the appointment by the President of a non-executive Chairperson of the Board of Trustees with substantial professional experience in areas including banking, financial regulation and supervision, insurance, commerce, law, accountancy or economics. It further revises the composition of the Board to include senior government officials and persons with relevant expertise or experience in co-operative or banking financial supervision, while introducing additional representation from the SACCO sector.
Clause 7 introduces a new section 57A to the Sacco Societies Act, providing protection from personal liability to members of the Board of Trustees, officers, employees, agents and servants of the Deposit Guarantee Fund for acts or omissions undertaken in good faith in the performance of their functions under the Act. It is important to note that the immunity is not absolute as the Fund still remains liable for harm or injury as a result of actions or inaction by its members.
Clause 8 proposes to amend section 58 of the Sacco Societies Act by establishing a clearer framework for claims against the Deposit Guarantee Fund. It stipulates that upon the revocation of a Sacco Society’s licence a member may lodge a claim with the Deposit Guarantee Fund in such form and time as the Fund may determine for payment of deposits that would have been paid if the revocation did not happen.
Clause 9 introduces new Section 59A which provides that no payments of claims shall be made from the Fund unless a date for the commencement of such payments has been appointed and published in the Gazette by the Cabinet Secretary in consultation with the Cabinet Secretary responsible for finance.
Practical implication- These clauses seek to transform the Deposit Guarantee Fund from a statutory safeguard into a more clearly structured and operational deposit-protection mechanism. The existing framework already establishes the Fund and provides for its administration, but the proposed amendments introduce greater specificity around its governance, accountability, claims and payment processes.
Impact of the proposed reforms on existing Saccos
The proposed amendments could result in a significant shift in the way the current Saccos run their day-to-day businesses. Boards and management ought to start assessing their existing policies and governing framework against the proposed framework on liquidity, deposit records and oversight regulations. Early preparation will go a long way in identifying compliance gaps, assessing costs and opportunities likely to arise from the proposed framework and also enable the Saccos play an active role in the legislative process of the bill.
Impact of the proposed reforms on Sacco members
The proposed reforms seek to provide stronger protection of members’ deposits and provide clear procedure in the event of a Sacco’s failure or revocation. In preparation for the proposed reforms, members should also maintain accurate records of their deposits and transactions, familiarise themselves with their Sacco’s terms and conditions and follow the legislative process so that they understand how the final framework may affect their rights.
Impact of the proposed reforms on businesses that work with Saccos
While the proposed amendment Bill is yet to assent into law, businesses that work with Saccos can ready themselves on the probable operational consequences of the new framework.
Banks and financial institutions- Institutions that provide correspondent services to Saccos ought to assess how the proposed inter-bank market framework may affect the current arrangements, particularly in an instance where a Secondary Sacco may become an intermediary for multiple primary Saccos.
Fintech and payment service providers– should review their Sacco products and contractual arrangements given the proposed expansion of shared payment platforms and payment-related services and ensure that their regulatory and data-governance frameworks can accommodate changes in the institutional structure of their Sacco clients.
Technology providers- The push for modernization and shared technological platforms should prompt the providers to ensure that their infrastructure will be able to supply core services such as banking, payment and settlement.
Auditing and compliance professionals– Should anticipate increased demand for advisory services and support with compliance, financial reporting, risk management and implementation of the new regulatory requirements.
Insurers and other risk management professionals- Should re-assess the products and risk-assessment products available to Sacco clients.
Conclusion
The Sacco Societies (Amendment) Bill, 2025 is a sound direction towards the evolution of the Kenya’s Sacco regulatory framework. In the light of the ongoing governance, liquidity and financial management difficulties by several Saccos in the country, the proposed amendments signal a move toward a more integrated and prudentially supervised Sacco society. While the reforms present significant benefits to the different stakeholders in the Sacco sector, there is still a whole load of regulations, institutional arrangements and supervisory practices that will need to be developed to implement them.
This is thus a clarion call to all the stakeholders in the Sacco sector to correctly position themselves and their operations in the incoming evolved Sacco sector.
