Inside Kenya's Cooperatives Bill and What It Means for SACCO Members

Government Proposes the Biggest Overhaul of Cooperative Law in Decades

The Bill replaces the existing Cooperative Societies Act with a broader legal framework intended to strengthen governance, accountability and competitiveness across Kenya’s cooperative movement.

Beyond updating governance rules, it formally recognises different tiers of cooperative societies, including primary, secondary, federation and apex cooperatives, while aligning the sector’s administration with Kenya’s devolved system of government.

According to the Deputy President, the reforms are intended to improve transparency, strengthen governance and make cooperative societies better equipped to operate in a digital economy.

The governance reforms also come at a time when several high-profile failures within the cooperative movement have exposed weaknesses in oversight, board accountability and internal controls. Cases involving large cooperative institutions have intensified calls for stronger regulation and more effective protection of members’ savings, making governance one of the central themes of the proposed legislation.

Secondary Cooperatives Take on a Bigger Role

Among the Bill’s most significant proposals is the creation of secondary cooperative societies, institutions that would bring together at least 30 member SACCOs under a common regulatory framework overseen by the SACCO Societies Regulatory Authority (SASRA).

These secondary cooperatives would pool mandatory liquidity reserves and surplus funds into ring-fenced liquidity reserve accounts dedicated to supporting participating SACCOs. They would provide short-term liquidity assistance, facilitate inter-SACCO lending and operate shared digital payment services that could improve how funds move across the cooperative sector.

The Bill also empowers SASRA to license and supervise these institutions while prescribing capital and liquidity requirements tailored to their operations. Existing prudential standards requiring deposit-taking SACCOs to maintain a minimum liquidity ratio of 15 percent would remain in place for primary SACCOs, with additional requirements introduced for the new secondary institutions through future regulations.

For consumers, the changes could eventually support faster payments, stronger liquidity management and more consistent digital services across participating SACCOs.

Why the reforms matter beyond SACCO governance

The cooperative sector manages more than KSh1 trillion in member deposits and remains one of Kenya’s largest domestic sources of savings and credit.

Unlike commercial investment funds, SACCOs primarily recycle member deposits into loans backed by members’ collective savings, making lending their core business. That model has enabled millions of households, farmers and micro, small and medium-sized enterprises (MSMEs) to access financing, particularly where conventional bank credit is limited or more difficult to obtain. For many members, access to affordable credit is as important as the annual dividends earned on their savings.

Viewed more broadly, the legislation comes as the government seeks stronger domestic sources of long-term capital for economic development. By creating regulated secondary cooperatives capable of investing surplus liquidity in approved assets, including government securities and eligible public projects, the Bill establishes a framework that could give cooperatives a larger role in future investment programmes while keeping dedicated liquidity reserves ring-fenced for member support.

The Debate Over Government-Backed Investments

The Bill also opens the door to a bigger role for SACCO capital in financing government-backed projects. Supporters view that as an opportunity to diversify investments for surplus liquidity and potentially improve returns, while critics worry it could gradually redirect resources away from member lending if safeguards are not maintained.

Participation in such investments would not be automatic. Individual SACCOs would continue making investment decisions through their governance structures, with boards—and where required by a society’s by-laws, members or elected delegates at annual or special general meetings—responsible for approving major investment decisions. The extent of participation will therefore depend on the policies and governance processes of each cooperative rather than a blanket requirement applying across the sector.

The proposal also highlights an economic balancing act. Surplus liquidity invested in approved assets could provide additional returns and strengthen sector-wide liquidity management, but SACCOs remain one of the country’s most important lenders to households and small businesses. Regulators and cooperative leaders will therefore face the task of ensuring new investment opportunities complement rather than reduce the cooperative movement’s traditional role of financing its members.

Supporters argue the reforms could strengthen financial resilience, improve liquidity management and diversify investment options for surplus funds. Others say the implementation framework will need to preserve member access to affordable credit while ensuring governance, transparency and member oversight keep pace with expanded investment powers.

Stronger Oversight and Member Protections

The Bill significantly expands SASRA’s supervisory role through mandatory licensing, risk-based supervision and enhanced enforcement powers covering governance, liquidity management, capital requirements, digital compliance and anti-money laundering obligations.

It also strengthens the Deposit Guarantee Fund by introducing clearer compensation procedures for depositors if a regulated SACCO fails, alongside governance reforms and liability protections for officials administering the fund.

For members, the debate therefore extends beyond new investment opportunities. It also centres on whether governance reforms, stronger regulatory oversight and active member participation in cooperative decision-making will provide sufficient safeguards as the sector takes on broader financial responsibilities.

Opportunities for Fintech and Digital Financial Services

The proposed reforms extend beyond traditional cooperative management.

A more integrated cooperative sector could create opportunities for technology providers offering core banking platforms, payment infrastructure, cybersecurity services, compliance software, digital identity solutions and shared financial technology platforms.

By reducing operational fragmentation between participating SACCOs, the framework for secondary cooperatives could also make it easier to deploy interoperable digital services across multiple institutions instead of each society building separate systems. Common payment infrastructure and standardised regulatory requirements may also lower integration barriers for fintech firms building products for the cooperative sector.

What Happens Next

The Bill is currently before Parliament. If enacted and signed into law as anticipated by the government, regulators will begin developing the operational rules needed to implement the new framework.

Those regulations are expected to define capital and liquidity thresholds for secondary cooperatives, operational standards for shared payment services, digital compliance requirements and other prudential measures under SASRA’s supervision. They will also shape how secondary cooperatives manage surplus liquidity, participate in approved investments and continue supporting the lending activities that underpin Kenya’s cooperative financial system.

For millions of SACCO members, the long-term impact will depend not only on the legislation itself but also on how regulators implement the rules, how governance standards are enforced and how individual cooperative societies exercise their investment powers. The Bill establishes the legal foundation, but its success will ultimately be measured by whether it delivers stronger governance, modern digital services, sustained access to affordable credit for members and greater confidence in a sector that plays a central role in Kenya’s financial system.