SACCOs vs Banks: The Coming War That Will Redefine Who Owns Kenya’s Shilling

In Kenya today, more than 43 commercial banks, 175 SACCOs, 13 MFIs, and several telcos with financial licenses compete fiercely for a core base of about 25 million financially active adults. That means every institution is chasing essentially the same customer pool. And yet paradoxically, 8+ million Kenyans remain financially excluded— a signal that the battle is being waged poorly.

Let’s anchor this in hard data: as of December 2024, total deposits in the Kenyan banking sector stood at KES 5,739.6 billion, up 1.0 % from the prior quarter.  The system’s asset base was KES 7,645.8 billion in the same period.  Meanwhile, the gross non-performing loan (NPL) ratio was 16.4 %, slightly improving from 16.5 % in September 2024.

On a broader scale, in September 2024, gross NPLs (in absolute terms) amounted to KES 669.5 billion, up from KES 657.6 billion in June 2024.  That is a sharp reminder: default risk is not theoretical—it is a real, heavy drag on balance sheets.

Meanwhile, average lending rates among commercial banks in 2025 hover around 15.24 % (July) down slightly from earlier months.  Deposit rates, by contrast, average ~8.07 % in July 2025.  Overdraft rates hover closer to ~13.6–14.0 %.

On interest spreads: weighted-average lending minus deposit yields remain steep, sustaining margins for banks but also indicating cost to end borrowers.

In the micro and SME segment, banks have committed to lending KES 153 billion to MSMEs in 2025—exceeding their target of KES 150 billion by ~2 %.

Moreover, in April 2025, gross NPLs across the sector reportedly reached KES 724.2 billion, pushing the NPL ratio to 17.6 % in some analyses. These are not incidental numbers—they point to structural stress.

The most powerful institutions in this battlefield control deposits. Tier-1 banks (the largest) still hold the lion’s share—estimates put their share of deposits at 64 % of the total system. (This estimate echoes the original narrative, though official breakdowns are less frequently published.)

Yet, despite that dominance, these large banks serve only about 12 % of the population directly in everyday financial lives. The rest exist in fragmented relationships: many Kenyans maintain 3+ financial relationships.

If we accept that 67 % of banked Kenyans juggle 3 or more financial providers, we see the cost of fragmentation: overlapping credit, cross-institution liabilities, and a dangerous overextension of risk by providers.

In short, large banks dominate deposits and capital but fail to reach. Smaller providers respond by patchwork approaches—but the outcome is over-competition, margin compression, risk overlaps, and exclusion pockets.

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Now let’s forecast forward, with numbers:

 65 % chance that digitized SACCOs will rival Tier-2 banks in deposit mobilization, customer base, and loan portfolios

70 % chance that fintech disruption will relegate banks to infrastructure providers—credit, payments, liquidity plumbing 55 % chance that consolidation will produce hybrid SACCO-bank institutions

These percentages, while hypothetical, reflect market sentiment and the scale of structural pressure.

That said, these shifts require financial institutions to move from extraction to creation. The real competition becomes not “which institution gets the same client” but “which institution produces real customer wealth rather than debt dependency.”

Take the NPL dynamic: chasing the same overleveraged clients has already produced a 16–17 % NPL ratio. Any further push without product innovation or customer segmentation is to court collapse.

Likewise, interest rates matter. If lending remains at ~15 % and deposit rates at ~8 %, the 7-point spread can fund operations—but only so long as defaults don’t rise further.

What about auctions and capital constraints? The Business Laws (Amendment) Act, 2024 mandates phased increases in minimum core capital (from KES 1 billion → KES 10 billion by 2029) for banks and mortgage finance companies.  This ups the ante on efficiency and scale.

In periods of stress, auctions of distressed assets, collateral sales, and forced write-downs will become more common. Institutions unwilling to evolve will be forced into fire sales.

Even liquidity ratios are under stress: the Deposit-to-Liability Ratio (DLR) rose to 91.0 % in 2024, pointing to heavy reliance on deposit funding to service liabilities.

Additionally, market concentration remains acute: the top 10 banks command ~78.2 % of total industry assets.  The Herfindahl-Hirschman Index (HHI) for asset concentration is ~810.5, implying moderate concentration. All these numbers demand an institutional reckoning.

The future archetypes—Community Champions (digitized SACCOs), Ecosystem Orchestrators (platform banks), Invisible Financiers (embedded fintech)—must be anchored in numeric logic. The new SACCOs must reach deposit volumes of KES hundreds of billions, support loan books with NPLs kept <5 %, and scale membership into the millions.

Platform banks must orchestrate flows of KES trillions across value chains while maintaining risk capital ratios above 18–20 %.

Embedded fintech must lend in micro-increments, on real-time data, with default rates under 5 % or else the model fails.

If banks fail to retrofit their models, they risk being relegated to plumbing—settlement, clearing, capital corridors—while others capture customer front-end value.

SACCOs that digitize can convert their social capital into financial capital—if they build robust credit underwriting, risk pooling, and governance.

But here’s the catch: it’s not enough to predict. Institutions must transform now. Those that lag will be forced to auction assets or be acquired. This is not optional—this is survival.

To deliver inclusion, the sector must embed credit, savings, insurance, and payments into everyday life—especially for informal earners.

In 2030, we should stop measuring success by deposit growth alone. We should measure how many low-income customers moved from negative net worth to positive net worth, how many SMEs scaled from micro to small to medium, how many households built real wealth—not just managed debt.

So let me close with a revised, data-anchored proclamation: The Great Banking Battle is not won by size, but by substance. Institutions that embrace data, empathy, and precision will win. The rest will be relics sold at auction rooms.

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