Kenya, Uganda in Race to Change Sacco Rules as Losses Hit Members

Why It Matters

The changes will tighten governance, reduce systemic risk, and safeguard the savings of over 8 million East Africans, preserving a key engine of financial inclusion.

Key Takeaways

• Kenya lost $103M from Kuscco misappropriation.
• Proposed minimum Sacco membership rises to 100 members.
• Tiered licensing ties assets >Ksh 50M to national regulator.
• Uganda extends licensing deadline to September, adds deposit protection.
• Over 7.3M Kenyans hold $5.8B in Sacco savings.

Pulse Analysis

Savings and credit cooperatives have become the backbone of informal finance across East Africa, channeling billions of shillings into low‑cost credit and disciplined savings for workers, teachers and small businesses. Their rapid expansion, however, has outpaced supervisory capacity, leaving many small‑scale entities vulnerable to mismanagement and fraud. High‑profile collapses such as the Kenya Union of Savings and Credit Cooperatives (Kuscco) and Uganda Liberal Teachers Union Sacco have exposed gaps in deposit‑taking rules and member protection. The fallout has shaken public trust and highlighted the need for a more robust regulatory architecture.

Kenyan policymakers responded by tasking an expert committee with redesigning the sector’s legal framework. The draft proposals raise the minimum membership threshold from ten to one hundred, introduce a four‑tier licensing regime, and shift oversight of assets above Ksh 50 million to the national Sacco Societies Regulatory Authority. Smaller cooperatives would fall under regional cooperative offices, with ultra‑small units required to merge to meet the new standards. In Uganda, regulators have postponed the licensing cut‑off to September, mandated Bank of Uganda supervision, and expanded the Deposit Protection Fund to insure Sacco deposits, creating a safety net for savers.

By bringing the majority of the estimated 30,000 Kenyan and 1,300 Ugandan cooperatives under formal supervision, the reforms aim to curb fraud, improve liquidity management, and restore confidence among members and potential investors. Enhanced oversight is also expected to align Saccos with international best practices, making them more attractive for partnership with banks and fintech platforms. If implemented effectively, the tighter regime could preserve the sector’s contribution to financial inclusion while mitigating systemic risk across East Africa’s rapidly growing informal credit market.