Mwalimu National Sacco ramped up its write-off of bad loans for two consecutive years, pointing to growing stress on its loan book even as the teachers’ society posted a sharp rise in earnings in the year ended December 2025.
The sacco reported a net impairment charge on financial assets of Sh960.2 million in 2025, a 5.3 percent increase from Sh911.4 million in the prior year.
The institution, however delivered improved profitability, with its surplus in the review period rising by 76.7 percent to Sh1.27 billion from Sh718.9 million in 2024, reflecting strong growth in interest income from its lending operations.
Default rates among Saccos are generally lower than those of commercial banks, with the Sacco Societies Regulatory Authority (Sasra) putting the industry’s non-performing loans (NPLs) at 5.41 percent of gross loans as of December 2025, down from 6.15 percent in the same month in 2024.
Mwalimu Sacco’s chief executive Kenneth Odhiambo downplayed the significance of the assets impairment, noting that its ratio of bad loans to gross loans is lower than the industry level.
“Look at it from the perspective of percentage of loan book and how that compares with Sasra threshold,” said Mr Odhiambo.
“[Ours] should be 1.7 percent. Then what is the industry average for regulated saccos? Coz banks is 17 percent thereabouts (sic),” he added.
The saccos regulator considers a ratio below five percent as the desired threshold for the sector.
Data from the Central Bank of Kenya, which regulates commercial banks, put the NPL ratio for the banking industry at 15.43 percent in the same period, down from 16.4 percent in December 2024.
Unlike commercial banks, whose recourse against bad loans often includes collateral such as property or employees’ payslips in the case of salary-backed lending, most sacco loans are additionally guaranteed by fellow members.
Deposit-taking saccos have had mixed results in terms of impairments, with that of societies like Harambee Sacco dropping by 26.2 percent from Sh625.1 million in 2024 to Sh461.4 million last year, pointing to improved credit profiles for its members.
However, Stima Sacco, another large player in this space, also saw its impairment increase from Sh320.15 million to Sh410.22 million.
Mwalimu’s Sacco’s interest income —the sacco’s primary revenue stream — climbed to Sh8.76 billion in 2025, compared with Sh7.99 billion a year earlier.
After deducting interest expenses, the cooperative posted net interest income of Sh3.53 billion, up from Sh3.18 billion in 2024.
Total assets increased to Sh76.3 billion, up from Sh68.9 billion the previous year, underscoring its continued growth as one of the country’s largest deposit-taking saccos.
However, the steady rise in impairments points to underlying credit risks within its loan portfolio as members, mostly teachers, struggle to service their loans amid cash-flow pressures, including increased statutory deductions.
Loan impairments typically increase when borrowers struggle to meet repayment obligations, forcing financial institutions to make accounting provisions under IFRS 9 expected credit loss rules.
Under these rules, lenders must estimate potential loan losses earlier, even before borrowers default.
Loans in the Sacco sector have consistently exceeded member deposits since at least March 2024, highlighting strong credit demand but also pointing to rising liquidity and credit risks as lending outpaces deposit mobilisation.
Mr Odhiambo has stated previously that ideally lending or the loan portfolio should be equal to deposits, or lower, noting that the threshold is sometimes exceeded where there is external borrowing.
“My position would be that saccos must ensure that there’s that level of safety in the sense that you stick towards the funds that you can mobilise,” said Odhiambo.
