Saccos are lending more money to members and businesses, but a growing share of the credit is falling behind on repayment, with non-performing loans estimated at Sh65.3 billion by June 2026.
The increase in bad debt came as the regulated Sacco sector expanded its gross loan book to Sh971.6 billion during the second quarter, according to the latest Quarterly Statistical and Soundness Report by the Sacco Societies Regulatory Authority (SASRA).
The loan book grew from Sh950.93 billion in March and was 10.21 per cent higher than the Sh881.62 billion recorded in June 2025.
The rise in lending was, however, accompanied by a further deterioration in the quality of loans held by deposit-taking Saccos (DT-Saccos), which account for the largest portion of credit issued by the sector.
SASRA reported that the ratio of non-performing loans to gross loans among DT-Saccos increased to 6.56 per cent in June, from 6.42 per cent three months earlier.
“The ratio of non-performing loans (NPLs) to gross loans among DT-Saccos increased from 6.42 per cent in March to 6.56 per cent in June,” the report shows.
DT-Saccos had loans worth Sh862.94 billion by June. Based on the 6.56 per cent NPL ratio, the value of loans that had fallen into non-performing status was estimated at Sh56.63 billion.
The other category, non-withdrawable deposit-taking Saccos (NWDT-Saccos), had a loan book of Sh108.65 billion and an NPL ratio of 7.99 per cent. This put their estimated non-performing loans at Sh8.68 billion.
Combined, the figures place the sector’s estimated bad loans at Sh65.3 billion.
The level of non-performing loans remained above SASRA’s preferred threshold of less than five per cent. It was also higher than the 6.36 per cent recorded at the close of 2025.
The worsening loan quality came despite continued expansion in the financial position of DT-Saccos.
Their total assets increased from Sh1.071 trillion in March to Sh1.106 trillion in June, while deposits rose from Sh763.52 billion to Sh774.83 billion.
Reserves also increased during the three months, moving from Sh226.01 billion to Sh239.33 billion.
At the same time, Saccos continued to channel large amounts of money into different areas of the economy, giving members access to financing for personal needs and business activities.
SASRA says regulated Saccos remain key providers of credit, with financing going into land and housing, education, agriculture, trade, consumption and social services, finance and insurance, manufacturing and health.
During the quarter, Sh132.09 billion was disbursed across the economic sectors covered by the regulator.
The amount represented a 16.08 per cent increase from the Sh113.79 billion issued in June 2025.
Land and housing took Sh32.10 billion, making it the largest recipient of the reported lending. Education followed with Sh27.83 billion, while agriculture received Sh25.04 billion.
Trade was allocated Sh19.03 billion.
Some sectors recorded sharp increases in credit compared with the same period a year earlier. Loans to trade grew by 26.68 per cent, while education financing increased by 26.53 per cent.
Agricultural lending also rose by 19.79 per cent.
Human health recorded the highest growth among the sectors listed, with credit increasing by 36.15 per cent year-on-year to Sh3.62 billion.
The report, however, shows that loan repayment remains a concern, particularly among NWDT-Saccos.
“For non-withdrawable deposit-taking Saccos (NWDT-Saccos), asset quality remained weaker than the regulatory threshold, although the NPL ratio improved slightly during the quarter,” the report says.
The latest figures therefore show a sector expanding its lending at a steady pace while at the same time dealing with a rising amount of credit that is not being repaid on time.