Smaller SACCOs Still Riding On Analogue Delivery Channels

By Jackson Okoth

Most smaller Savings and Credit Cooperative Societies(SACCOs) in Kenya are still keen to open physical offices, especially those located in smaller towns and rural Kenya.

This is despite advances made in the use of digital platforms to access financial services by many Kenyans.

A glimpse at Annual Reports for the year ended 31st December 2024 and outlook for 2025, reveals that smaller SACCOs with less financial muscle are still planning for more physical branches and satellite offices.

Top on this list is Tower Sacco, which has been on an intense expansion spree since the beginning of this year, opening a branch each month. The Society has so far this year opened new outlets in Nyeri, Thika and Mwisho wa Lami-located along the Narok-Njoro Highway.

Interestingly, over 40 licensed commercial banks in Kenya- which are the closest competitors to SACCOs, have over 1,500 branches countrywide. This is compared to the more than 270 licensed deposit-taking SACCOs that have a total of less than 650 branches.

“What is the rationale of advising SACCOs not to open more physical branches and rely on technology instead while a bank is allowed to open even more than 3 branches in an urban centre,” said Mr. David Marete, Solution SACCO former Chief Executive Officer.

He said that asking SACCOs to deploy technology and other alternative delivery channels, while they lack resources comparable to their competitors, is ill advised and a bad strategy.

“After the pyramid schemes rip-off where thousands of Kenyans lost cash to outfits that were branchless and formless, ostensibly operating under the guise of SACCOs, the public is now sceptical of those outfits that insist that they are only using technology,” said Mr Marete.

He gives the analogy of a man who says he has a family but does not have a physical address or a fixed location known as home. Also, even those persons involved in long distance relationships need physical contact at some point.

“There is a direct correlation between the number of branches or outlets a SACCO or bank has and the amount of deposits that it can mobilize.

A physical branch has the effect of boosting confidence and trust among members of the public. When people get malicious rumours that a SACCO has problems but finds the physical office open, then any lost confidence is restored,” said Marete.

He said SACCOs have not yet reached the levels and the muscle to ride solely on technology platforms.

Qwetu DT SACCO, one of the leading savings and credit institutions in Taita Taveta County, is also in an expansion mode and has set its sights on setting up a new branch in Mombasa.

The SACCOs Board of Directors has already identified allocation for a new branch in Mombasa, which is expected to be officially launched by the end of 2025 or early next year. The SACCO already has branches in Voi, Mwatate and Taveta.

“We are planning to set up a new branch in Mombasa soon. We are also open to the idea of setting up more outlets as soon as this branch breaks-even,” said Evans Otieno, Marketing Manager, Qwetu DT SACCO.

Yetu DT SACCO, based in Meru County, is also on an expansion mode. Given that the SACCO is on the second phase of its development projects with completion and occupancy of the new HQ expected by May 2025, This could suggest that Yetu SACCO will be expanding their operations with new outlets soon.

Whether or not to open new branches ultimately rests with the SACCO itself and is based on several reasons.

For instance, many SACCOs start in a specific region or with a particular group, like a farmers’ cooperative.

As the SACCO opens up its membership and more to new areas, providing access to services becomes more complex. Therefore, opening branches in these new locations may be necessary to retain members and serve them better.

A SACCO that does provide access to its members in different locations might see a loss of membership as people seek alternatives closer to their new homes.

Expanding branches can help retain these members and ensure they can continue to access the SACCO’s products and services.

While SASRA sets standards, SACCOs have the flexibility to make decisions about their operational structure, including the location of their branches.

Opening new branches comes with costs, including rent, utilities, and staffing. SACCOs must assess the potential profitability of a new branch before opening it.

If the potential revenue from new members in a specific area outweighs the cost of opening a branch, it may be a financially viable decision.

Opinion is divided among SACCO top executives on whether to open up more physical branches or not.

For instance, the more techno-driven players such as deep pocketed Kenya National Police DT SACCO have a different view on the subject of brick and mortar outlets.

“We only have 8 branches at the moment, including the headquarters and have temporarily halted plans to open any more physical locations.

While i must admit that physical branches are necessary especially for those SACCO members who prefer to visit the banking hall, get services from the counter and have that conversation with a teller, but technology is the driver of today’s business,” said David Mategwa, National Chairman, Kenya National Police DT SACCO.

He added that investing in technology is the way to go, rather than opening a branch in every centre. He said opening up more branches may not be economical, because this involves recruiting more staff and infrastructure, leading to a rise in the SACCOs operating costs.