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Sacco loans default rate falls to 5.9pc on improved payment
Sasra data shows DT-saccos had the best NPL ratio at 5.41 percent in December last year, compared with 7.17 percent in September of the same year and 6.15 percent in December 2024.
The share of bad loans among saccos supervised by the Sacco Societies Regulatory Authority (Sasra) has dropped to near the recommended maximum threshold of five percent, pointing to improved repayment among customers.
Latest data showed that the ratio of non-performing loans (NPL) among deposit-taking (DT) saccos and non-withdrawable DT saccos improved to an average of 5.88 percent in December 2025, marking the first time in over two years for the rate to fall below six percent.
The NPL ratio in December 2025 was an improvement from 7.79 percent in September of the same year and 6.79 percent in December 2024, sustaining an improved trend in loan repayments in the race to comply with the recommended maximum default rate of five percent.
The five percent is the global benchmark that the World Council of Credit Unions adopted from the Basel framework, a set of international financial sector regulations.
Sasra data shows DT-saccos had the best NPL ratio at 5.41 percent in December last year, compared with 7.17 percent in September of the same year and 6.15 percent in December 2024.
Non-withdrawable DT-saccos saw their NPL ratio improve to 6.36 percent at the end of December last year from 8.41 percent in September of the same year and 7.44 percent in December 2024.
“Improved repayment performance reflects stronger member education around their role in building institutional stability, alongside the introduction of a more robust regulatory framework that emphasizes risk-based loan portfolio reviews starting at the appraisal stage,” said CEO David Sandagi, acting CEO at Sasra.
“As a result, non-performing loans have declined from double-digit levels six years ago, and we are now working to bring them down further to an acceptable threshold of no more than five percent as we continue to address legacy issues in some of the saccos.”
Analysis of the sector stability indicators shows that the Sasra-regulated saccos stepped up their loan book by Sh105.51 billion to Sh948.31 billion at the end of December, but cut the amount of defaulted loans by about Sh800 million to Sh52.32 billion.
The performance implies that there was improved repayment among borrowers, defying the pressures on disposable income.
Most sacco loans are secured by members’ deposits, and in cases of default, guarantors are required to repay the loans on behalf of the borrowers.
This lowers the default rates compared with the banking sector, where the NPL ratio stood at 15.4 percent as of the end of December 2025.
The Sacco Societies (Non-Deposit Taking Business) Regulations, 2020 require saccos to assess and provide for a loan loss allowance at one percent for loans classified as performing, five percent for those under watch, and 25 percent for those rated as substandard.
The regulations require loans classified as doubtful to be given a 50 percent provisioning, while those classified as loss are provisioned fully.
The saccos under review closed last December with Sh831.91 billion as deposits, marking a Sh81.28 billion rise from Sh750.63 billion.
However, the appetite for loans continued to soar, taking the loan book to Sh948.31 billion at the end of December last year, in what marked a Sh105.51 billion rise in the stock of loans.
The sector has been seeing a widening gap between deposits and loans, closing December at Sh116.4 billion compared with Sh92.17 billion in the previous year.
The reduced NPLs and increased lending saw saccos post an increased income to Sh172.44 billion in the year ended December 2025 from Sh154.31 billion in the prior year.
The higher income helped saccos boost reserves to Sh251.8 billion from Sh218.9 billion over the same period.
