Sacco members could soon have a legal way to recover part of their savings if their institutions are shut down, under a new Bill that seeks to protect depositors, tighten oversight and strengthen confidence in the sacco sector.
But even as the proposed law promises new safeguards, lawmakers are questioning whether the compensation being proposed is enough for members who have saved hundreds of thousands of shillings.
The Sacco Societies (Amendment) Bill, 2025, now before the National Assembly, proposes far-reaching changes to the way saccos are regulated. One of its key proposals is to allow members to claim protected deposits from the Deposit Guarantee Fund once a sacco's licence or authorisation has been revoked.
The legislation also seeks to breathe life into the Deposit Guarantee Fund, which has existed in law for close to two decades but has never fully served its intended purpose of compensating members of collapsed saccos.
According to the Bill, members whose deposits qualify for protection will be allowed to submit claims to the fund after their sacco loses its licence.
“A member of a sacco society may, upon the sacco society’s licence or authorisation being revoked, lodge a claim with the Deposit Guarantee Fund, in such form and within such time as the Deposit Guarantee Fund may determine, for payment to him or her out of the Deposit Guarantee Fund of any protected deposits which he or she would, but for the revocation, have been paid had he or she demanded them from the sacco society,” reads the Bill.
The proposed law further states that once a licence has been revoked, all eligible claims for protected deposits will be processed through the Deposit Guarantee Fund, providing members with a clear avenue for compensation.
While appearing before the National Assembly's Trade and Industry Committee last week, SASRA chief executive David Sandagi said the proposed changes are aimed at improving accountability, strengthening supervision and helping smaller saccos access better technology.
“We are confronted with a situation where about 80 per cent of the market is constituted by small saccos that may not necessarily have adequate capital to mobilise and acquire best-in-class systems,” he said.
SASRA also defended the proposal to maintain compensation at Sh100,000 for members whose regulated saccos fail. The regulator said the figure is based on industry data showing that about 92 per cent of deposit accounts in regulated saccos hold balances of Sh100,000 or less, meaning most members would receive full compensation if their institutions collapsed.
The proposal, however, did not convince some lawmakers.
Vihiga Woman Representative Beatrice Adagala sought an explanation from SASRA on how the regulator arrived at the proposed compensation amount.
“What criteria did you use to arrive at the Sh100,000 compensation threshold?” she asked.
Starehe MP Amos Mwago also warned that the proposal could leave members with bigger savings exposed to heavy losses.
“What happens to those who have saved more than Sh100,000? Do you mean that if I have saved Sh500,000 or Sh1 million that I will lose my savings if this is passed into law?” Mwago asked.
“This means that Kenyans are actually going to lose their savings that they have saved all these years.”
Beyond compensation, the Bill seeks to deal with long-standing challenges facing the sacco sector. These include the growth of unregulated entities and pyramid schemes that have defrauded many Kenyans through illegal activities.
It also proposes stronger licensing requirements, tighter supervision, improved oversight and minimum capital standards to reduce the risks faced by saccos and their members.
Another proposal seeks to stop saccos from investing members' deposits in speculative, high-risk ventures and prohibited activities that have previously resulted in the loss of members' money.
The Bill further seeks to address the absence of a fully operational Deposit Guarantee Fund, a gap that has left many Kenyans without compensation after losing their lifetime savings through irregular actions by sacco management.
If approved, the Sacco Societies (Amendment) Bill, 2025, will amend the Sacco Societies Act, Cap. 490B, with the aim of closing regulatory gaps and strengthening oversight of institutions handling billions of shillings belonging to sacco members.