Economic pressures, taxes threaten survival of private sector based Saccos

The prevailing tough economic environment is now threatening the survival of private sector-based Saccos, with the regulator calling for new business models to ensure their survival.

The Sacco Societies Regulatory Authority (Sasra) noted the small contribution of these Saccos to the industry’s full membership, which stands at 8.35 per cent.

This is compared to agriculture-based Saccos, which account for the highest proportion, 40.46 per cent, followed by government-based at 37.12 per cent, and community-based societies at 14.13 per cent.

This is out of 7.87 million members as at December 2025.

In its latest industry report, Sasra notes this stunted membership growth in the private sector space, citing diminished employment opportunities.

These findings indicate the tough business environment employers and employees are jointly going through owing to enhanced taxes.

For example, deductions such as enhanced contributions to the National Social Security Fund (NSSF)  grew exponentially by over 3,000 per cent in just two years as employers are expected to match what employees are paying.

This is from Sh200 to Sh6,480. Social Health Insurance Fund (SHIF), formerly National Hospital Insurance Fund (NHIF), also went up, further diminishing employees’ earnings, which forces employers to adjust pay.

Additionally, companies are also expected to pay the 1.5 per cent Affordable Housing Levy, which eats into their corporate funds.

Such taxes introduced under President William Ruto’s administration increased the cost of doing business, especially for the human resources. This explains the slowdown in employment and stunted growth in Sacco membership.

This explains why several employers opted to let go of some of their workforce in a bid to remain afloat, a factor that has been noted by Sasra.

For this reason, Sasra warns that Saccos in this space should find new ways to make money and move away from the tradition of depending on companies for employment.

The Sacco Supervision Annual Report, 2025, notes that membership in private-based Saccos increased from 610,000 in 2024 to 650,000 in 2025.

The report says despite the growth, this category of membership continued to account for a relatively smaller share of the total membership in the regulated Sacco industry, representing only 8.35 per cent of the total membership in 2025.

“This is attributed to the comparatively lower employment stability and higher staff turnover in the private sector companies compared to the public sector,” the report says.

Consequently, the report says, although membership in private sector-based Sacco exhibited growth, their overall share of total membership of the regulated Sacco Industry remained relatively low.

“The stagnation in the growth in membership of the private sector-based  regulated Saccos is directly attributable to the fact that this cluster of regulated Saccos are strictly dependent on new employees being recruited by the private companies from which they draw their membership,” the report says.

The report notes that due to the diminished new employment opportunities in private sector-based companies, coupled with staff restructuring by such employer companies, the membership of the private sector-based regulated Saccos will continue to experience stagnation over the short-term period.

“To mitigate against the risks likely to be brought about by a decreasing membership, the regulated Saccos in this cluster ought to explore new business models including expansion of their common bonds, to avoid overreliance on one or a few private sector employer companies,” the report says.

On the other hand, government-based Saccos, which are associated with a level of stability that private sector entities crave, maintained an upward membership trend consistent with the other three fields of membership.

The growth in proportion of government-based membership to the total membership in the regulated Sacco industry outpaced the other fields of membership as reflected by the increase recorded from 36.51 per cent in 2024 to 37.12 per cent in 2025.

“This higher growth rate in government-based Saccos membership may be attributed to the relatively higher employment stability within the public sector, lower staff turnover and stronger member confidence resulting in enhanced recruitment and retention of membership in these regulated Saccos,” the report says.

The private sector holds the highest number of non-withdrawable deposit taking (NWDT) Saccos, closing the 2025 period at 84, one less compared to 85 in 2024.

The sector closed the 2025 period with 21 deposit-taking Saccos  (DT-Saccos), up from 20 in 2024.

Despite the slowdown in the number of Saccos and membership of private sector-based Saccos, total assets improved from Sh124.97 billion in 2024 to Sh136.44 billion in 2025.

This is, however, a drop in the representation of total assets from 11.61 per cent in 2024 to 11.27 per cent in 2025.