By Dr Nixon Bugo
The reported proposal to channel over KSh1 trillion held by Kenya’s Savings and Credit Cooperative Societies (SACCOs) into the National Infrastructure Fund through the proposed Cooperatives Bill deserves serious national debate. While the need to finance infrastructure is undisputed, the proposed mechanism raises fundamental economic and financial concerns that could undermine one of Kenya’s greatest development success stories.
For decades, SACCOs have been the engine of financial inclusion. They have succeeded where many formal financial institutions have struggled, providing affordable credit to millions of Kenyans, including teachers, civil servants, farmers, transport operators, small traders, and micro, small and medium enterprises (MSMEs). For many households and businesses, a SACCO is not simply a financial institution—it is the only reliable source of affordable credit.
The success of Kenya’s entrepreneurial economy has been built partly on this cooperative model. Thousands of businesses have been started, expanded, and sustained through SACCO financing. Unlike commercial banks, SACCOs understand their members, offer lower borrowing costs, and require fewer barriers to accessing credit.
Redirecting a substantial share of these members’ savings into long-term government infrastructure projects fundamentally changes the role of SACCOs.
Infrastructure investments are, by nature, long-term assets. Roads, railways, dams, housing projects, and energy investments often take years before generating returns. SACCO deposits, however, are largely short-term liabilities. Members expect to access their savings when emergencies arise or when they need loans for business expansion, school fees, medical expenses, or other urgent family obligations.
This creates a classic asset-liability mismatch. One must ask a simple economic question: what is the logic of taking relatively liquid funds that members may require at short notice and locking them into long-term infrastructure investments whose returns may take decades to materialise?
The consequences could be severe.
Reduced liquidity means SACCOs would have less money available for lending. As loanable funds decline, borrowing costs are likely to increase, loan approvals may slow, and access to affordable credit could become more difficult. The people most affected will not be large corporations; they will be ordinary Kenyans operating small businesses, farmers financing seasonal production, and households relying on SACCO loans to meet essential expenses.
This would effectively reverse decades of progress in financial inclusion.
At a time when Kenya is encouraging entrepreneurship, youth employment, and private sector-led growth, weakening the country’s most successful grassroots financial institutions sends contradictory policy signals. Many micro-enterprises cannot satisfy commercial bank lending requirements because of collateral constraints or higher borrowing costs. SACCOs remain their only practical source of finance.
The proposal also raises important questions about members’ rights over their own savings. SACCO deposits belong to members, not the Government. They represent personal savings accumulated over many years to provide financial security during life’s uncertainties. Kenyans save with the expectation that their money will remain available when needed—not that it will be committed to projects over which they have little control and from which they may derive no direct or immediate benefit.
Infrastructure development remains essential for national growth. However, infrastructure financing should be matched with appropriate sources of long-term capital. Governments around the world finance infrastructure through instruments specifically designed for that purpose, including infrastructure bonds, public-private partnerships, development finance institutions, pension funds operating under clear investment mandates, sovereign wealth funds, blended finance, and innovative capital market products.
The National Infrastructure Fund should therefore be strengthened through innovative financing mechanisms that attract voluntary long-term investment, rather than relying on compulsory or indirect access to SACCO members’ savings.
Most importantly, confidence is the foundation upon which every financial institution operates. Once members begin to doubt whether their savings will remain readily available or whether their SACCO can continue meeting their borrowing needs, that confidence can quickly erode. Restoring it is often far more difficult than preserving it.
Kenya’s SACCO movement is internationally recognised as one of the strongest cooperative sectors in Africa. It has empowered millions, supported enterprise development, expanded financial inclusion, and strengthened household resilience. Public policy should build upon this success—not weaken it.
Without robust safeguards, voluntary participation, adequate liquidity protections, and full transparency, the proposed framework risks becoming the final blow to affordable credit for low-income households and micro-enterprises. The ultimate cost would not merely be reduced SACCO lending; it would be slower enterprise growth, fewer employment opportunities, increased borrowing costs, and diminished economic resilience among the very citizens who have carried Kenya’s economy through difficult times.
National development should never come at the expense of the institutions that have enabled millions of Kenyans to participate in it. The challenge is not whether Kenya should finance infrastructure—it must—but whether it should do so by compromising the country’s most successful model of grassroots finance. On both economic and public policy grounds, there are better options.
The writer is an International Innovative Finance Expert.
