Why due diligence is necessary when dealing with Saccos

Several Saccos have collapsed while others could be on the verge of collapsing. FILE PHOTO | NMG 

Over the recent past, there has been some merited media attention on the governance of Sacco in Kenya. This is more so, where we have had Savings and Credit Co-operative Societies (Saccos) or entities affiliated to Saccos dealing in real estate transactions.

According to a survey that was carried out by the Financial Strength Deepening Kenya, Kenya National Bureau of Statistics and the Central Bank of Kenya it was established that Saccos performed better than banks when it came to financing land and building transactions. It is no wonder that Kenya’s co-operative movement is ranked highly in Africa and in the World by the World Council of Credit Unions.

Interestingly, Saccos are prohibited by the Sacco Societies Act from purchasing or acquiring land except as may be reasonably necessary for the purpose of conducting their deposit-taking business.

Even in such cases, the purchase has to be approved by the Sacco Societies Regulatory Authority (Sasra). This is one reason why Saccos set up separate legal entities to engage in real estate transactions.

The fact that a Sacco would be more than willing to give you a loan to purchase land or a house or that a Sacco is facilitating the transactions on behalf of its members does not take away the need to be careful before making a commitment.


Due diligence is paramount. It is important to first know whether the land actually belongs to the entity associated with the Sacco through a search at the local land registry.

Secondly, it is advisable to visit the land to confirm its location and condition (you may otherwise buy a swamp or a quarry which would not be suitable for putting up a house).

Thirdly, it is good to check the price of land around the area. If it’s too cheap, that should be a red flag.

Fourthly, it is important to find out about the reputation of the Sacco. Above all, it is advisable to seek the counsel of a reputable lawyer in the due diligence process.

It is unfortunate that some Saccos have collapsed while others could be on the verge of collapsing. However, we should not be quick to say that Saccos are the only ones in the financial sector that are facing challenges.

In the recent past we have seen banks, insurance companies and even stock brokerage firms collapse largely due to poor management and fraud.

There are various avenues that are available to members of Saccos to seek redress if they suspect that their Saccos are being mismanaged. Internally, members can complain to the management or the Board of the Sacco (if they are not at fault) and externally to the District Co-operative Officers, Sasra for deposit taking Saccos, the Co-operative Tribunal for non-deposit taking Saccos, the Ethics Commission for Co-operative Societies and the Ministry of Industry, Trade and Co-operatives.

At the apex of these external avenues is the Co-operatives Tribunal and Sasra. In the event that one is not satisfied with the decision of Sasra or the Co-operatives Tribunal, they can lodge a case at the High Court and this could go all the way to the Supreme Court.

The writer is Manager at KPMG Advisory Services Limited.