The Central Bank of Kenya (CBK) has announced plans to set up a Deposit Guarantee Fund (DPF) worth KSh180 million to protect members of Savings and Credit Cooperative Societies (SACCOs) in case of future collapses.
According to a Cabinet-backed proposal, the fund will serve as a safety net similar to the Deposit Protection Fund used in the banking sector. The proposed DPF will compensate SACCO members who lose their deposits when their societies go under. Parliament is now expected to amend SACCO laws to give legal backing to the initiative.
The fund will be supervised by the SACCO Societies Regulatory Authority (SASRA) and will be managed by a board of trustees. CBK is expected to provide the initial KSh180 million to run the fund for the first four years.
Commenting on the development, the outgoing Chief Executive Officer of Solution DT SACCO, Mr. Marete, said the DPF would greatly boost public trust in SACCOs. He explained that the comfort level for depositors would improve just like how passengers feel safer in matatus with insurance coverage.
Marete noted that currently, members who lose their money in failed SACCOs often wait for years for compensation through long court-led liquidation processes. He believes the introduction of the DPF will end that suffering.
The creation of the fund comes at a time when many SACCOs are still reeling from the collapse of the Kenya Union of Savings and Credit Cooperatives (KUSCCO), where large amounts of money were lost. Many affected SACCOs have had to make huge provisions in their financial books to account for the losses.
Mr. David Mategwa, National Chairman of the Kenya National Police DT SACCO, welcomed the plan and said it will offer SACCO depositors the same protection that commercial bank customers currently enjoy.
“The DPF will raise confidence in the cooperative movement and offer a cushion against future shocks,” Mategwa said. He added that SACCOs have grown significantly in recent years, and the introduction of the fund is a timely response to the increasing risks.
However, some SACCO leaders have expressed concern over how the fund will be managed and the impact it could have on small SACCOs.
Ms. Evelyn Moraa, Chief Executive Officer of Sotico DT SACCO, said she supports the idea in principle but warned that mandatory contributions to the fund could strain the finances of smaller SACCOs that are already battling cash flow issues.
She also raised questions about whether SACCOs that do not collapse would still be forced to contribute indefinitely.
“There is a real fear that if one SACCO collapses, all the others will be paying the price,” Moraa said.
She called for more attention to be paid to fixing the root problems of SACCOs, especially poor governance and weak supervision.
“Some SACCO managers might even abuse the system knowing depositors will be bailed out by the fund,” she warned.
Moraa further stressed the importance of transparency in how the DPF is run. She said the board of trustees must have a strong oversight mandate and should not only focus on collecting contributions.
“The fund managers and regulators must be people of integrity. Otherwise, the DPF will just be another avenue for corruption,” she added.
The Deposit Guarantee Fund is expected to cover deposits — but not shares — of up to KSh100,000 per member in the event of a SACCO collapse. According to the SACCO Act, this amount will be calculated after deducting any liabilities a member owes to the SACCO, including loan guarantees.
If a SACCO collapses and a member owes it money, that debt will be settled using the protected deposit before any balance is refunded.
Despite concerns, the SACCO sector largely sees the move as a step in the right direction for protecting member savings and strengthening the credibility of cooperative societies across Kenya.
