Dormant members in savings and credit co-operative societies (saccos) grew 14.1 percent to 1.9 million in the year ended December amid reduced disposable incomes that could have forced workers and traders to stop making contributions or borrow on their accounts.
Data from the regulator, the Sacco Societies Regulatory Authority (Sasra), shows 24.14 percent of the 7.87 million Sacco members did not transact on their accounts for more than six months last year.
This emerged in a period when analysts reckon workers’ purchasing power has declined over the past five years on the back of rising taxes, multiple statutory deductions and high cost of living.
Kenya Bankers Association (KBA), the bankers’ lobby, reckons that households’ purchasing power dropped by between 10.7 percent and 12 percent the past five years despite increased hiring and wages.
Owners of inactive accounts are often restricted from accessing their deposits and are required to pay a reactivation fee before retrieving their savings.
Sasra data shows 234, 603 members in deposit-taking (DT) and non-withdrawable deposit-taking (NWDT) saccos became dormant last year, up from 218,435 a year earlier.
Accounts that have remained idle for six months in DT-saccos are termed dormant, while those in NWDT-saccos have a longer period of a year.
Sasra CEO David Sandagi said the growth in overall membership amid deepening share of dormancy should be an “area of focus” for saccos if they are to sustain deposit mobilisation pace that can fund rising appetite for loans.
“One of the key observations we are making is the level of dormancy, albeit with an increase in overall membership. This must be an area of focus for saccos. It is one thing to leverage increasing membership, and it is another to ensure that economic activity of those members who have joined the sacco is stimulated,” said Mr Sandagi.
Many saccos restrict withdrawals from accounts classified as dormant, requiring account holders to reactivate them by presenting their identification cards at branches, completing reactivation forms and making a deposit into the account.
Some saccos charge a reactivation fee of up to Sh300 and require a deposit of Sh100 to Sh1,000 in the account to lift the dormancy status.
Total membership in the 357 saccos under Sasra supervision increased 6.6 percent to 7.87 million last year from 7.39 million in 2024.
However, active membership grew by only 4.42 percent to 5.97 million, while dormant membership jumped 14.08 percent to 1.90 million.
Their gross loans grew 12.98 percent, compared with an 11.89 percent increase in deposits.
The rise in inactive accounts emerged in the year when the economy grew at the slowest pace in five years at 4.6 percent while real wages—earnings adjusted for inflation—grew by 2.0 percent, marking the first time in six years for growth in workers’ earnings to surpass inflation.
The positive growth in real wages, however, masked the impact of increased statutory deductions — including the healthcare insurance levy, housing tax and higher National Social Security Fund (NSSF) contributions that ate into workers’ pay, keeping it below the 2020 levels.
The State uses gross income rather than take-home pay that hits workers’ accounts to compute real wages.
The increase in dormant membership in saccos came as loans grew faster than members’ deposits and savings, widening the gap between the funds saccos mobilise from members and the amount they lend to Sh115.93 billion at the end of December from Sh95.68 billion in the previous year.
Members’ deposits and savings remain the main source of funding for sacco lending, making the rising level of dormancy a concern for the industry.
Members’ deposits and savings increased to Sh832.74 billion from Sh749.43 billion recorded in the previous year, as gross loans and advances grew to Sh948.67 billion from Sh845.11 billion.
Sasra said the mismatch between the appetite for loans and deposits mobilisation has forced saccos to utilise reserves and external loans for lending.
“While deposits have continued to grow steadily, a notable gap remains between total deposits and gross loans, with loans exceeding deposits. This gap is primarily financed by retained earnings and institutional reserves, with a relatively small proportion funded through external borrowing,” said Sasra.
Part of the reason saccos’ loan book beats the deposit base is the use of the multiplier model in lending, where many sacco members are allowed to borrow up to three times their deposits using their fellow members as guarantors.
The regulator has asked saccos to develop suitable financial products and services to reactivate dormant members and conduct surveys to establish the reasons for their inactivity.
Across the sector, the gross loans-to-deposits ratio rose to 101.36 percent last year from 100.65 percent a year earlier. The ratio means gross lending was higher than members’ deposits and savings, with the difference being supported by other sources of internal funding.
However, Sasra said the faster growth in loans did not, on its own, signal weakening liquidity because deposits were increasing and new lending was being supported by repayments from existing borrowers.
“Regulated saccos are, however, challenged to devise strategies to spur the growth in deposits to cope up with the surging demand for loans,” the regulator said.
The 1.90 million dormant members provide a sizeable pool that saccos could seek to bring back into active participation.
Sasra said the saccos disbursed loans amounting to Sh596.54 billion towards eight key sectors of the economy.
Land and housing remained the largest beneficiary, receiving Sh157.2 billion, followed by education and agriculture (Sh124.51 billion and Sh110.74 billion, respectively). The human health sector received the least funding in loans disbursed during the year, amounting to Sh14.65 billion.
Saccos posted improved loan repayment among members, cutting the non-performing loans ratio for DT saccos to 6.36 percent from 8.56 percent, while that of NWDT saccos improved to 6.44 percent from 7.07 percent.
The regulator attributed this to stricter loan appraisal and approval processes, enhanced loan recovery efforts and improved loan repayment performance among members.
The asset base of the Sasra-regulated saccos grew to Sh1.21 trillion from Sh1.08 trillion, largely driven by DT saccos whose assets hit the trillion mark of Sh1.07 trillion during the review period.
