The Saccos sub-sector in Kenya is considered the fastest growing in the cooperative movement. Almost half of the 972 additional cooperative societies and unions registered in 2011 were Saccos.
As at December 31, 2011, there were 6,902 registered Saccos, up from 6,737 in 2010, but only 3,983 were active, with 227 of them, or six per cent, offering deposit-taking services, commonly referred to as Front Office Services Activity (Fosa), an quasi banking enterprise undertaken by licensed Saccos. These societies with Fosas and the other active Saccos operate Back Office Savings Activity (Bosa).
Saccos in Kenya have rapidly grown to be the largest in Africa, accounting for 60, 64, and 63 per cent of the continent’s savings, loan and assets, respectively.
Saccos provide retail services to large numbers of members and depositors. Of Kenya’s 20 million adult population, 22.5 per cent are served by commercial banks and micro finance institutions while 17.6 per cent are served by Saccos.
Saccos in Kenya are gradually responding to the fast changes in the financial environment and are adopting new approaches to the Sacco model. Membership has for long been based on common bonds and knowledge about the borrower. This mechanism, Saccos argue, has enabled them to manage risk, enforce lending contracts and reduce the transaction costs of delivering credit.
With changes that at some stage saw use of Saccos drop from 13.1 per cent in 2006 to 9.0 per cent in 2009 because of stiff competition from banks and other financial institutions, and other factors such as declining membership because of retrenchment and deaths, Saccos were forced to come up with strategies and products to assist them cope with these challenges. Some of these strategies included changing rules of membership and coming up with a new range of products.