Members of the National Assembly have rejected a proposal to cap compensation for members of Savings and Credit Cooperative Organisations (SACCOs) at Ksh100,000 in the event that a SACCO collapses, arguing that the amount is too low to adequately protect depositors.
The concerns were raised during a meeting held on Tuesday, June 30, between the National Assembly’s Departmental Committee on Trade, Industry and Cooperatives and officials from the SACCO Societies Regulatory Authority (SASRA).
Lawmakers argued that the proposed compensation limit would expose thousands of SACCO members with larger savings to significant financial losses should their institutions become insolvent.
The proposal forms part of the proposed Sacco Societies (Amendment) Bill, 2025, which seeks to strengthen regulation within the cooperative sector while enhancing protection for members’ deposits.
Members of Parliament noted that SACCOs continue to play a critical role in Kenya’s financial system by providing affordable and accessible credit facilities to millions of Kenyans, especially during emergencies and periods of financial hardship.
They therefore argued that depositors deserve stronger financial protection that reflects the importance of SACCO savings in household and business finances.
The legislators urged SASRA to consider adopting a more equitable deposit insurance framework that provides compensation based on the amount saved by individual members rather than imposing a flat payout limit.
Under the proposed framework, compensation from the Deposit Insurance Fund would be calculated based on a member’s protected deposits.
The protected deposit amount would be determined by calculating the total credit balance held by a member across all SACCO accounts and subtracting any outstanding loans, liabilities and loan guarantee obligations owed to the SACCO.
After all obligations have been settled, members of collapsed or insolvent SACCOs would then be eligible to submit claims to SASRA for compensation from the Deposit Insurance Fund.
Lawmakers argued that increasing the proposed payout threshold would provide greater protection for members and strengthen confidence in Kenya’s cooperative movement.
A higher compensation limit would ensure that members with substantial savings are not left vulnerable to major financial losses in the event of a SACCO failure.
The proposed amendments also seek to improve supervision and oversight of SACCOs in an effort to enhance the security of members’ deposits and promote long-term sustainability within the sector.
Speaking during the meeting, David Sandagi, the Chief Executive Officer of the SACCO Societies Regulatory Authority, defended the proposed reforms, saying they are intended to strengthen the sector and boost public confidence in regulated SACCOs.
According to Sandagi, the establishment of a Deposit Insurance Fund would provide an additional layer of protection for depositors while improving regulatory oversight.
He further noted that the Bill proposes the adoption of shared technology infrastructure and digital platforms to support smaller SACCOs that often struggle with technical and operational challenges.
The use of shared digital systems is expected to help smaller institutions reduce operational costs, improve compliance and enhance service delivery to members.
Sandagi argued that harmonised technology platforms would also make supervision easier and improve transparency within the cooperative sector.
However, lawmakers cautioned the regulator against introducing excessive administrative requirements that could increase compliance costs and complicate operations for SACCOs.
The MPs urged SASRA to ensure that the new law remains flexible enough to adapt to the evolving needs of the cooperative movement and the wider financial sector.
Kenya’s SACCO sector remains one of the largest and most successful cooperative movements in Africa, mobilising billions of shillings in savings and providing credit facilities to millions of members.
As discussions on the Sacco Societies (Amendment) Bill, 2025 continue, the debate over the proposed compensation limit is expected to remain a key issue among lawmakers and stakeholders in the cooperative sector.
Should Parliament approve a higher compensation limit, SACCO members across the country could benefit from stronger protection of their savings and greater confidence in the stability of their financial institutions.