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Ten warning signs that a deposit-taking SACCO's governance needs an independent check, each tied to a duty in the Sacco Societies Act and SASRA's regulations: capital, liquidity, loan quality, insider lending and audit.
Reviewed 9 Nov 2026 · By Dr Remmy Nyongesa, CPA-K
Most SACCO crises are visible a year or more before they reach members: ratios drift, loan arrears are rolled over, committees stop meeting. A governance diagnostic is an independent review of how the board, management and controls work against the Sacco Societies Act and the regulations SASRA enforces. These ten signs, each linked to a specific duty in the Sacco Societies (Deposit-Taking Sacco Business) Regulations, 2010, suggest it is time for one (SASRA).
The regulations below are as published on SASRA's website. Check SASRA's acts and regulations page for later amendments before relying on a specific figure.
1. Capital ratios close to the minimum. Regulation 9 requires a deposit-taking SACCO to hold, at all times, core capital of at least KES 10 million, core capital of at least 10% of total assets, institutional capital of at least 8% of total assets, and core capital of at least 8% of total deposits. If any ratio is within a point or two of its floor, the board should already have a written capital plan. A shortfall can lead SASRA to suspend lending and investment, stop the SACCO buying land and buildings, or stop it accepting deposits.
2. Liquidity below 15%. Regulation 13 requires 15% of savings deposits and short-term liabilities to be held in liquid assets, such as cash and bank balances. Frequent use of overdrafts to pay loans or refunds is an early symptom.
3. Loan arrears hidden by reclassification. The regulations set five loan classes by days in arrears: performing; watch (1–30 days, or one instalment outstanding); substandard (31–180 days); doubtful (181–360 days); and loss (over 360 days). A restructured loan may only move to a better class after six months or six instalments of sustained performance. If restructured loans jump straight back to "performing", the loan book is overstated.
4. Growing loans to insiders. Lending policies must set the terms for insider lending, and insider loans to directors and employees are disclosed separately in the returns to SASRA. A rising share of loans to officials, or insider loans on softer terms than members get, is a classic red flag.
5. The liquidity policy is out of date. The board must formulate, review and adjust the SACCO's liquidity policy every year. A policy last approved several years ago means the board is not doing this.
6. The audit committee rarely meets. Regulation 57 requires an audit committee of not more than three board members, one of whom understands finance, to review the SACCO's financial condition, internal controls and internal audit findings at least once every three months.
7. Internal audit reports to management. The head of internal audit must be a qualified accountant under the Accountants Act and must report to the board's audit committee, not to the chief executive.
8. External auditor changes mid-year. The AGM selects the external auditor from three names, and SASRA must receive the appointment within 30 days. An auditor cannot be removed during the year without SASRA's written approval. A sudden change of auditor deserves questions.
9. Repeat findings. The same issues appear in successive SASRA inspection reports, management letters or internal audit reports without being closed.
10. Members' complaints go unanswered. Complaints about delayed refunds, unexplained charges or loan decisions are often the first outside sign of liquidity or control problems.
A useful diagnostic is short and evidence-based. For illustration, a four-week review might cover:
| Area | What is tested | Output |
|---|---|---|
| Prudential ratios | Capital and liquidity, recomputed from the trial balance | Ratio trend and headroom |
| Loan book | A sample of loans re-classified by arrears; insider loans | Adjusted arrears and provisions |
| Board and committees | Minutes, attendance, policy review dates | Governance gaps |
| Controls and audit | Internal audit plan, open findings, AML/CFT procedures | Prioritised action plan |
Renol Consulting runs SACCO governance diagnostics and board training on governance and AML/CFT. We report to the board, so findings reach the people responsible for acting on them.
General information, not professional advice. Rules change; check the sources above or ask us before acting. Last reviewed 9 Nov 2026.
Founder of Renol Consulting. Researcher in Mineral Economics and Valuation at the University of the Witwatersrand and Lecturer in Finance and Accounting. About Remmy
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