Kenya’s banking sector deposit insurer is open to supporting the creation of a deposit protection scheme for saccos to boost the confidence of savers in the sector that holds more than Sh1 trillion deposits.
The committee of experts (CoE) appointed by the Co-operative and MSMEs Development Cabinet Secretary Wycliffe Oparanya has revealed in its report that it held meetings with the leadership of Kenya Deposit Insurance Corporation (KDIC) which expressed readiness in incubating a deposit protection scheme for saccos.
The committee, which was tasked to review the saccos legislative and regulatory framework and propose reforms, says using KDIC to set up and operationalise a Deposit Guarantee Fund (DGF) will tap on the insurer’s expertise and save on time and costs when compared to developing such a scheme from scratch.
“The committee of experts held meetings with the leadership of KDIC and asked directly if it was possible for saccos to incubate a sacco DGF within the Kenyan Deposit Insurance Fund,” says the report.
“The CoE was advised that the current legislative framework would need to be reviewed to allow saccos access to the services of KDIC and its deposit insurance fund. However, the leadership advised that it should be possible for KDIC to incubate a DGF for the sacco sector.”
If implemented, the collaboration with KDIC will place saccos alongside banks and microfinance institutions that already benefit from formal deposit protection.
Kenya Union of Savings and Credit Co-operatives (Kuscco) centre in Nairobi on March 11, 2025.
Photo credit: Evans Habil | Nation Media Group
The committee has recommended that Mr Oparanya hold consultations with KDIC and saccos to decide on whether to make the KDIC role transitional or permanent by deciding on areas such as initial capital and contributions required.
Currently, KDIC protects depositors in banks against losses of up to Sh500,000 in the event of a bank failure. The committee said extending a similar safety net to saccos would help assure savers that funds held in cooperative institutions are as secure as those held in banks.
“A DGF needs to be operationalised as a matter of priority with the aim of matching the cover to the same as banks. This will create ideal public messaging that a shilling in the bank is safe as a shilling in a sacco,” it said.
Under the proposal, initial coverage would focus on savings held in front office service activity accounts, aligning protection with bank deposit products while containing costs during the early stages.
The committee has proposed formation of a joint technical working group and drafting amendments to the Kenya Deposit Insurance Act and the Sacco Societies Act to support the arrangement.
