The number of dormant members in savings and credit co-operative societies (saccos) in Kenya increased by 14.1 percent to 1.9 million in the year ended December. This growth in dormant membership is attributed to reduced disposable incomes, which may have forced workers and traders to stop making contributions or borrow on their accounts. According to the Sacco Societies Regulatory Authority (Sasra), 24.14 percent of the 7.87 million Sacco members did not transact on their accounts for more than six months last year.
The increase in dormant membership comes amid a decline in workers' purchasing power over the past five years due to rising taxes, multiple statutory deductions, and a high cost of living. The Kenya Bankers Association (KBA) estimates that households' purchasing power dropped by between 10.7 percent and 12 percent in the past five years, despite increased hiring and wages. As a result, many saccos restrict withdrawals from accounts classified as dormant, requiring account holders to reactivate them by presenting their identification cards at branches and making a deposit into the account.
Sasra data shows that 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 stated that 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.
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. The pressure is more pronounced among deposit-taking saccos, which accounted for the bulk of industry lending. 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 grew by 2.0 percent, marking the first time in six years for growth in workers' earnings to surpass inflation. However, the positive growth in real wages 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 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. 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 1.90 million dormant members provide a sizeable pool that saccos could seek to bring back into active participation.
Key points
- 1.9 million members of savings and credit co-operative societies in Kenya stopped making contributions or borrowing on their accounts.
- The increase in dormant membership is attributed to reduced disposable incomes due to rising taxes and a high cost of living.
- Saccos are required to develop strategies to reactivate dormant members and spur growth in deposits to cope with the surging demand for loans.
