Parents are increasingly turning to savings and credit cooperatives to finance their children’s education, making school fees the country’s second-largest reason for borrowing after land and housing.
Loans issued for education rose by 27.1 per cent during the first quarter of 2026 to Sh24.81 billion, overtaking lending to businesses involved in trade and other commercial activities.
The surge places education behind only land and housing, which attracted Sh33.74 billion in loans.
New data from the Sacco Societies Regulatory Authority shows that regulated SACCOs disbursed Sh115.73 billion in loans during the first three months of 2026, with property and development topping the charts.
Land and housing emerged as the largest recipient of SACCO credit, followed by education and agriculture, indicating that members continue to prioritise long-term wealth creation, family welfare and food production.
“Between January and March 2026, regulated SACCOs disbursed Sh24.81 billion towards education-related needs, including school fees, college education, professional training and other learning expenses,” said SASRA in its latest soundness report.
The data point to changing financial priorities as households grapple with the rising cost of education, healthcare and housing while remaining cautious about non-essential expenditure.
Unlike previous years when consumer borrowing accounted for a significant share of SACCO lending, the latest data shows loans for consumption and social services grew by only 0.56 per cent to Sh8.82 billion, making them among the slowest-growing lending categories.
Education’s rise to the second-largest borrowing category reflects mounting pressure on household budgets as school fees continue to consume a growing share of family income.
Parents have increasingly relied on SACCOs because they offer lower interest rates and more flexible repayment terms than commercial banks, allowing borrowers to spread education costs over longer periods without disrupting household cash flow.
Beyond education, another emerging pressure point within Kenyan households is loans to funds hospital bills.
Although healthcare accounted for a relatively small share of total lending at Sh2.79 billion in the first three months of the year, it recorded the fastest growth among all sectors, expanding by 31 per cent over the review period.
Education followed with 27.1 per cent growth, while land and housing expanded by 18 per cent.
An increase that suggests households are increasingly borrowing to meet rising medical expenses.
The rapid growth comes against a backdrop of increasing treatment costs and continued reforms in Kenya’s health financing system, forcing more families to seek affordable credit to cover hospital bills that would otherwise strain household incomes.
“Combined, land and housing, education, health and agriculture accounted for more than Sh79 billion in loans during the first quarter, dwarfing borrowing for consumption”, SASRA data shows.
The trend suggests families are increasingly reserving credit for investments and unavoidable expenses instead of lifestyle spending.
Land and housing remained the largest destination for SACCO loans, attracting Sh33.74 billion during the three months to March, underlining continued demand for home ownership, land purchases and property development despite elevated construction costs and high commercial bank lending rates.
Within the sector, loans for land acquisition accounted for Sh18.45 billion, while housing-related borrowing stood at Sh15.29 billion.
Agriculture ranked third among the leading recipients of SACCO credit, receiving Sh18.70 billion during the first quarter of 2026, up 6.6 per cent from Sh17.54 billion advanced during the corresponding period in 2025.
Although growth was slower compared to education and housing, the sector continues to absorb substantial financing.
Under the agriculture subsector, crop farming attracted the largest share of agricultural lending at Sh10.03 billion, followed by animal production at Sh6.57 billion.
Agricultural support services received Sh920 million while agribusiness activities accounted for Sh840 million. Forestry and logging received the smallest allocation at Sh340 million.
Beyond the top three sectors, SACCO lending also supported trade activities, which received Sh15.74 billion, while finance, investments and insurance attracted Sh6.63 billion.
Manufacturing and servicing industries absorbed Sh4.50 billion. Human health activities received Sh2.79 billion.
At the opposite end, consumption and social services emerged as the weakest-performing lending category. The sector received Sh8.82 billion, the lowest amount among the major economic sectors tracked by SASRA and recorded only 0.56 per cent growth compared to the previous year.
However, while lending continues to expand, the report also raises concerns over loan quality across the sector.
SASRA says the industry’s non-performing loan (NPL) ratio stood at 6.42 per cent at the end of March, remaining above the regulator’s recommended prudential ceiling of five per cent.
The elevated level of bad loans suggests that although demand for credit remains strong, some borrowers continue to experience repayment difficulties amid persistent economic pressures.
According to SASRA, Kenyans borrowed more than Sh123 billion from savings and credit cooperative societies (SACCOs) in the first three months of 2026.
The rise in loans to finance education comes at a time that around six million pupils in public primary and secondary schools are facing an uncertain future on capitation challenges.
In recent years, the Free Primary Education (FPE) and Free Day Secondary Education (FDSE) programmes have faced funding challenges that have seen schools accumulate debts and others turning to charging parents to cover deficits.
Kenya’s promise of free primary education has long been celebrated as a cornerstone of social progress.
Yet beneath this policy commitment data lies a parallel reality: families are quietly financing the survival of public schools.
The Usawa Agenda report 2026, the report exposes the financial strain placed on households, revealing that “free education” is far from free in practice.
One of the most alarming findings is dropout pressure driven by cost, “4 in 10 children drop out due to lack of fees,” the report reads.
