For decades, savings and credit cooperative societies (saccos) have been the cornerstone of Kenya’s financial narrative. They have fostered a culture of savings and offered affordable credit to millions of Kenyans, for funding housing, education and entrepreneurship. However, the emergence of digital finance and mobile lending apps has disrupted this conventional paradigm. With fintech companies changing the game in terms of access to instant credit, the big question remains whether saccos can remain relevant in the modern world. These companies have reshaped the financial landscape with instant credit, minimal paperwork and mobile first experience. Consequently, saccos are embarking on a digital leap to compete, adjust, and reclaim their place in the contemporary financial ecosystem.
The emergence digital startups
Kenyans are borrowing, saving and investing differently due to the emergence of digital startups. The Central Bank of Kenya reports that more than 67% of adults now use mobile lending platforms, frequently avoiding the traditional lenders. Even in this era of digitalization, some saccos are still paper-driven, hence slowing down their service delivery. Approval of a loan may take days or even weeks. In the same vein, fintechs have created a digital-first ecosystem that match the lifestyle of Kenyans increasing tech-savvy young population. The outcome? Saccos can no longer afford to overlook this challenge.
Saccos on the digital offense
Leading saccos have started shifting towards digital platforms after identifying this threat. These include Stima Sacco, Mwalimu National, and Kenya National Police DT Sacco, which have heavily invested in technology-driven systems that enable members to save, borrow, and check balances through mobile applications and USSD codes.
For instance, Stima Sacco’s M-Pawa platform helps members to apply for loans instantly from their phones, which reduces approval times from days to minutes. Mid-tier saccos are also catching up. Cloud-based management systems that digitize documents, automate accounting and enhance transparency have been implemented by county based saccos in Nakuru, Meru and Kisii.
Aggressive
A good number of fintechs face backlash from customers because of their aggressive loan recovery practice, their convenience notwithstanding. Saccos stand out because of offering friendly and innovative products to their members with long-term value . Therefore in order to effectively compete, saccos need to combine their customer friendly model with digital efficiency. According to SASRA’s 2024 annual supervisory report, more than 70% of licensed saccos have either adopted or are in the process of implementing digital services. In addition to increasing accessibility, this change also improves data integrity, lowers fraud and increases transparency.
Challenges to digitilization.
However, there are many obstacles in the digital transformation journey including :
- Limited ICT capacity: some saccos do not have enough IT professionals to securely manage their digital platforms.
- High implementation costs: It costs a lot to upgrade legacy and train employees.
- Cyber security risks.
- The management of some saccos fear embracing change.
.
Policy and Partnership Momentum.
The Kenyan government has realized the importance of digitalizing the cooperative sector. The Cooperative Policy (2023) points out that ICT adoption, transparency, and digital innovation are some of the important growth pillars. The Sacco Societies Regulatory Authority (SASRA) has implemented new compliance frameworks that demand real-time reporting, data protection and digital record keeping. Besides enhancing oversight, these actions motivate saccos to make investments in scalable and safe technology. In the same vein, SASRA has implemented new compliance frameworks that demand real-time reporting, data protection, and digital record-keeping. Fintech-sacco partnerships have become a mutually beneficial solution. With the incorporation of mobile lending platforms, saccos can provide quick loans while still maintaining their member-driven governance structure.
Hybrid finance for a Digital nation
At this pivotal moment, Kenya’s saccos must embrace digitalization while retaining the spirit of cooperatives that enables them to thrive. With its foundation in trust and transparency, hybrid finance powered by AI, blockchain and mobile platforms is the future. Success will depend on strong governance and visionary leadership after digitilization. Ultimately, saccos need to become technologically advanced organizations that link their rich history to a sustainable, digital future in the cashless age.
