For decades, Savings and Credit Co-operative Organisations (Saccos) have invested in managing risk, liquidity and governance risks. Our regulatory frameworks have been developed around these threats.
However, sacco leaders and regulators must now recognise misinformation as a financial risk. They must act before rumours become runs.
A misleading message circulating through social media platforms can potentially reach more members in a single afternoon than a quarterly financial report reaches in several months.
The challenge facing the sector is, therefore, no longer entirely financial. It is also informational. As the Sacco movement continues to grow, so too must its capacity to communicate quickly, transparently and credibly. Financial literacy must extend beyond understanding savings and loans to grasping balance sheets, assets, deposits and liquidity.
The controversy that followed this year’s Ushirika Day celebrations offers a timely lesson on how misinformation works. It rarely begins with an outright lie. More often, it starts with a real number, strips away the context, and then builds a false conclusion around it.
That is what happened earlier this week after a claim that the government intends to tap into the over Sh1 trillion “held” by saccos to finance the new State-backed National Infrastructure Fund.
The claim rapidly spread online, gaining temporal credibility after sections of the mainstream media reported it. Public concern became intense. The government clarified its position.
Later, media houses that had amplified the narrative issued a correction and apologised.
Yet the episode should not be dismissed merely as another social media rumour. It revealed that misinformation is a risk to the sacco movement and in deed the financial sector.
Members who understand the sacco model are less vulnerable to misleading narratives about their institutions. Misinformation does its greatest damage not when it deceives institutions, but when it unsettles ordinary people.
Sacco members can all be left wondering whether their hard-earned savings are safe. Once that doubt takes root, facts struggle to catch up. But why do false or misleading narratives gain extraordinary traction? Behavioural economics attempts to offer an explanation.
About 50 years ago, psychologists Daniel Kahneman and Amos Tversky developed what is now known as the Prospect Theory. This theory rests on a simple concept: people feel the pain of possible losses much more intensely than the pleasure of similar gains.
In short, people are more likely to react more strongly to the possibility of losing Sh100,000 than to the opportunity of gaining Sh100,000. This helps explain why rumours concerning savings spread very fast. When it bleeds, it leads.
A statement about public financing structures attracts limited public interest. A suggestion that savings may be at risk triggers immediate attention. The prospect of loss commands attention. It generates anxiety and encourages sharing. Before facts catch up, the narrative has already spread. Information that provokes fear enjoys a natural advantage over information that merely explains. The digital age has mediated these advantages.
Going back to the Ushirika Day controversy, the irony is that the viral narrative was built around a statistic that is broadly accurate. Kenya’s sacco sector has indeed grown into a trillion-shilling financial ecosystem. This makes the sacco movement a large segment of our financial sector.
But assets are not cash. When many Kenyans heard that saccos had accumulated more than Sh1 trillion, they understandably interpreted this as a trillion-shilling pool of money sitting in accounts and available for deployment elsewhere.
In reality, that is not how saccos operate. A sacco’s balance sheet is not a warehouse of cash. It is a record of how members’ savings have been transformed into productive economic assets.
Saccos’ most valuable asset is trust. Their loan portfolio and other assets are secondary. Without trust from its members, a sacco easily collapses. In the digital economy, information has become a financial variable. And for institutions built on trust, misinformation has become a balance-sheet risk.
Saccos are built on shared ownership. Members are depositors, borrowers and owners. Confidence, therefore, occupies a central place in the cooperative model.
The sacco movement has spent decades mobilising trust alongside savings. Protecting that confidence will require vigilance against misinformation that can travel faster than facts and inflict damage long before correction measures arrive.
The writer is the Group managing director, KUSCCO Ltd.
