Saccos target low-end home buyers with new products

When Tai Sacco unveiled Makao in 2021, a mortgage product, the demand was exponential. In about three months of disbursing Sh100 million each, John Mwangi, the Sacco’s chief executive, says there were already liquidity challenges.

“We then thought of how we could resolve the liquidity issue because this is money which will be out there, not for two or three years, but for seven, eight, nine, or even more,” he says.

The institution then sought partnerships and linked with the Kenya Mortgage Refinance Company (KMRC).

KMRC offers loans to financial institutions at single-digit rates, which are then extended to customers seeking to own homes.

Such partnerships are one of the ways Saccos are devising to push mortgage products to the lower tier of the economy. These are largely individuals with undocumented or informal income who make up a larger percentage of Sacco membership.

Mwangi says when it comes to the informality and unpredictability of incomes, Tai Sacco, whose membership is largely made up of tea and coffee farmers, has found a solution to it.

“When you look at tea, for example, the incomes that come on a monthly basis are not very high. They are small, but in the course of the year, we get high bullet payments around April and October,” he says. It is these bullet payments that the Sacco banks on to offset the mortgage loans extended to members.

Mwangi says they are required to repay the loan from KMRC in equal monthly payments, yet the Sacco can only be able to get loan payments or repayments in two instalments in a given year – April and October.

“What we came up with was to customise a product for our farmers so that they (farmers) be able to get the amount of loan to construct a suitable home, and also we on our side be able to pay KMRC whatever we are required to on a monthly basis,” he said during this year’s Kenya Affordable Housing Conference organised by KMRC.

Stima Sacco Chief Executive Dr Gamaliel Hassan, who was also at the event, spoke of how the institution he heads crafted Shariah-compliant products to facilitate housing needs among the Muslim community, whom he described as a low-hanging fruit in the sector.

“We are the first Sacco in Kenya and Africa to open a Shariah window where we are able to lend to our members on the terms as far as Shariah law is concerned,” he said.“What is missing is giving affordable housing that is Shariah-compliant. For that, probably, there have to be a lot of discussions in the industry, specifically with KMRC.”

Hassan said Stima Sacco serves about 220,000 members, 70 per cent of them being from the informal sector.

He noted that the challenge when extending mortgage products to Sacco members is that land is not available, yet a lot of members are seeking not to purchase a house but to build one.

“It begs the question: where do you start from? What we have done as an institution is to avail various products to bridge the gap so that from the onset, you can purchase a piece of land. Land is the highest cost as far as building is concerned,” said Hassan.

“If you are able to purchase the cost, then the aspect of affordability just slides in. That is how we have managed to assist.” For Qona Sacco Chief Executive Joseph Njoroge says the institution seeks out credible unit suppliers to work with, owing to cases of fraud in off-plan models once deposits have been paid.

“What we have been trying to do is partner with credible suppliers. We will not commit any money, but we will assure them of a ready market and financing,” he says. 

The Sacco would then do the due diligence on the project, and once complete, finance members to buy. The Sacco Societies Regulatory Authority (Sasra) supervision report for 2024 shows regulated Saccos extended Sh137.1 billion in the period to members for housing and land purposes.

This amount, while a drop percentage-wise of the total credit by Saccos – from 27.39 per cent in 2023 to 25.26 per cent in 2024 – is still the leading reason behind members’ borrowing behaviour.

The Sh137.1 billion extended in 2024 is a growth from Sh126.1 billion advanced in 2023. “The increase in the funding by regulated Saccos towards land and housing sectors is consistent with the findings of the Kenya National Bureau of Statistics Economic Survey, 2025, which reported that Saccos made the highest financing arrangements towards the real estate market at 31.8 per cent.”

Co-operative Bank of Kenya Head of Mortgage Business Japhet Ponda pointed out that while the country is said to have an average of 30,000 mortgages, the number is actually higher if Saccos are included.

A majority of Saccos in the market are affiliated with the Co-operative Bank.