Kenya’s regulated SACCO sector recorded a rise in non-performing loans in the second quarter of 2026, even as the value of credit advanced by the industry climbed to nearly Sh972 billion, pointing to continued pressure on borrowers’ ability to service loans.
The latest Quarterly Statistical and Soundness Report by the SACCO Societies Regulatory Authority (SASRA) shows that the sector’s gross loan book stood at Sh971.59 billion in June, up from Sh950.93 billion in March.
This was 10.21 per cent higher than the Sh881.62 billion recorded in June 2025.
However, the expansion in lending has been accompanied by deterioration in asset quality among deposit-taking Saccos (DT-Saccos), which account for the bulk of the sector’s loan portfolio.
“The ratio of non-performing loans (NPLs) to gross loans among DT-Saccos increased from 6.42 per cent in March to 6.56 per cent in June,” the report shows
Estimate is derived from the NPL ratios reported for both deposit-taking and non-withdrawable deposit-taking SACCOs and their respective loan books put the NPLs at Sh65.3 billion by June.
For deposit-taking SACCOs (DT-SACCOs), which held gross loans of Sh862.94 billion in June 2026, NPLs stood at 6.56 per cent of the loan book.
Applying the reported ratio to the loan balance gives an estimated Sh56.63 billion in bad loans.
Among non-withdrawable deposit-taking SACCOs (NWDT-SACCOs), gross loans stood at Sh108.65 billion, while the NPL ratio was 7.99 per cent, translating to an estimated Sh8.68 billion in non-performing loans.
This was also above the 6.36 per cent recorded at the end of 2025 and remained above SASRA’s prescribed benchmark of less than five per cent.
The increase means that the proportion of loans that had fallen into non-performing status continued to exceed the regulator’s preferred threshold, despite the sector recording growth in assets, deposits and income.
SASRA’s data shows DT-Saccos’ total assets rose from Sh1.071 trillion in March to Sh1.106 trillion in June, while deposits increased from Sh763.52 billion to Sh774.83 billion over the same period. Their reserves also grew from Sh226.01 billion to Sh239.33 billion.
The deterioration in loan quality comes as Saccos continue to play a key role in providing credit to members and financing economic activity.
SASRA says regulated Saccos are key enablers of credit access, with lending spread across sectors including land and housing, education, agriculture, trade, consumption and social services, finance and insurance, manufacturing and health.
During the quarter, Saccos disbursed Sh132.09 billion across the tracked economic sectors, representing a 16.08 per cent increase from Sh113.79 billion in June 2025.
Trade received Sh19.03 billion, while education attracted Sh27.83 billion and agriculture Sh25.04 billion. Land and housing accounted for Sh32.10 billion.
The lending data shows a particularly strong increase in credit to trade, which rose 26.68 per cent year-on-year, while education lending increased 26.53 per cent and agriculture grew 19.79 per cent.
Human health recorded the fastest growth among the listed sectors, with lending rising 36.15 per cent year-on-year to Sh3.62 billion.
“For non-withdrawable deposit-taking Saccos (NWDT-Saccos), asset quality remained weaker than the regulatory threshold, although the NPL ratio improved slightly during the quarter,” says the report
The ratio fell from 8.18 per cent in March to 7.99 per cent in June, but remained well above the prescribed level of below five per cent. Non-earning assets also rose from 14.37 per cent of total assets to 15.26 per cent during the period, against a benchmark of below 10 per cent.
Despite the asset-quality concerns, the sector maintained relatively strong capital and liquidity positions.
DT-Saccos’ core capital-to-total-assets ratio stood at 18.82 per cent in June against a regulatory minimum of 10 per cent, while their regulatory liquidity ratio rose to 81.68 per cent from 75.95 per cent in March.
