Kenya’s commercial banking sector has intensified competition in the financial market by aggressively developing new products and services aimed at attracting a wide range of depositors. In response, stakeholders in the cooperative movement are being urged to embrace innovation, increase investments in technology, and adopt modern governance structures to withstand the mounting pressure from commercial banks.
Cooperative Bank of Kenya Vice Chairman and Chairman of the Cooperative Alliance of Kenya (CAK), Macloud Malonza, issued a rallying call to Savings and Credit Cooperative Organizations (SACCOs) during a leaders’ meeting and the launch of Ushirika Day activities at Kenya Bankers Hall on Friday. The event was held under the theme “Cooperatives Driving Inclusive and Sustainable Solutions for a Better World.”
Malonza emphasized that the financial sector is witnessing cutthroat competition led by commercial banks, which are leveraging their deep liquidity, advanced expertise, and product innovation to target depositors—especially those in formal employment.
“We have witnessed thorough business rivalry from the big boys in the money market. This trend is putting increasing pressure on financial cooperatives. Owing to their high liquidity and modern expertise, commercial banks are able to penetrate more business segments,” Malonza said.
He pointed out that the rapid innovation and intense rivalry have led to the shrinking of the market share traditionally held by SACCOs and credit unions.
“To survive and grow in this competitive environment, the cooperative movement must fast-track the adoption of modern technology, enhance product development, and shift its customer engagement strategies,” he added.
SACCOs Encouraged to Embrace ICT and Product Innovation
Malonza further urged SACCOs to broaden their investment horizons, especially in Information and Communications Technology (ICT). He noted that enhancing digital infrastructure and integrating advanced fintech solutions can help SACCOs compete more effectively with commercial banks.
In addition to technological upgrades, he called for increased spending on research and development (R&D) to help SACCOs stay ahead of changing market dynamics. He also emphasized the importance of improving capacity building among SACCO staff and leadership to deepen their reach and appeal to untapped market segments.
“Investing in ICT and modern governance will not only boost efficiency but also enhance service delivery, particularly in the rural areas where SACCOs remain a vital pillar of financial inclusion,” Malonza said.
Strong Growth Amidst Market Pressure
Despite the stiff competition, Malonza acknowledged the resilience of the cooperative movement, which continues to register steady growth of between 10 and 15 percent annually. This trend, he noted, is evidence of a vast, untapped segment in Kenya’s financial landscape.
“There’s still a high rate of unbanked and underbanked populations in Kenya. This presents an opportunity for SACCOs to deepen their financial inclusion efforts and expand their market share,” he stated.
Commissioner for Cooperatives, David Obonyo, echoed similar sentiments. He praised the cooperative movement for its critical role in supporting Kenya’s economic growth, particularly in rural development and wealth creation.
“In 2024, the SACCO subsector recorded a solid 10 percent growth despite prevailing economic challenges. SACCOs mobilized deposits amounting to KSh1.2 trillion, assets reached KSh1.8 trillion, and the total loan book surpassed KSh1.1 trillion,” Obonyo reported.
Highlighting Kenya’s Leading Cooperative Institutions
Obonyo also highlighted several top-tier institutions within the Kenyan cooperative sector that have become benchmarks on the African continent. These include the Cooperative Bank of Kenya, the Kenya Union of Savings and Credit Cooperatives (KUSCCO), CIC Insurance, and the National Cooperative Housing Union (NACHU).
He revealed that the government is working on a strategy to enhance governance across the sector by restructuring it into a more efficient four-tier model. This proposed framework will consist of primary cooperatives, secondary cooperatives, unions, and apex bodies.
“We are committed to ensuring that members’ deposits in SACCOs are safe. The government and its partners are continuously identifying and addressing gaps that may result in governance challenges,” Obonyo assured.
Misconceptions About Governance Being Addressed
CAK Chief Executive Officer Daniel Marube also addressed ongoing perceptions about poor governance in the cooperative sector. He noted that recent government reforms and interventions have significantly improved oversight and accountability within SACCOs.
“Thanks to the establishment of regulatory bodies like the SACCO Societies Regulatory Authority (SASRA), we have witnessed a drastic reduction in cases of mismanagement,” Marube said.
He noted that the cooperative leadership is actively negotiating with the government to secure 100 acres of land in the Ngong Forest for environmental conservation and agricultural projects. The initiative aims to underscore the movement’s commitment to sustainable development and food security.
Cooperative Bill 2024: A Game-Changer
A key focus of the current cooperative leadership is pushing for the enactment of the Cooperative Bill 2024. The legislation is expected to streamline governance, improve transparency, and solidify the operational structures within the cooperative sector.
Marube urged members and stakeholders to increase pressure on Members of Parliament to fast-track the passing of the bill, noting that the legislation would be a significant milestone for SACCOs and other cooperative institutions across the country.
“The Cooperative Bill 2024 will empower SACCOs, improve governance frameworks, and facilitate better resource management. We must ensure it is passed without further delay,” he emphasized.
The Way Forward for Kenya’s Cooperative Sector
As SACCOs in Kenya navigate a competitive financial landscape dominated by technologically advanced commercial banks, sector leaders are calling for a proactive approach centered on innovation, technology adoption, and improved governance. With the right policies and investments, SACCOs can not only survive but thrive—especially in rural and underserved communities where they remain essential pillars of financial inclusion and economic development.
As the battle for depositors intensifies, SACCOs must rise to the occasion—adopting data-driven strategies, enhancing customer service, and leveraging ICT to remain relevant in Kenya’s evolving financial ecosystem.