KSh 137 Billion in SACCO Land-Secured Loans: Is Your Portfolio's Documentation Strong Enough?

Kenya's SACCO sector had a gross loan portfolio of KSh 845.11 billion as of the SASRA Annual Report 2024. Of this, KSh 137.1 billion, approximately 25.26% of the total, was classified under land and housing advances.

This is a significant exposure. And with the sector's overall NPL rate at 8.39%, and specific sub-sectors (agriculture-based SACCOs) at 18.69%, the question of what percentage of that KSh 137 billion is adequately secured with properly documented, current-valuation collateral is a strategic risk question every SACCO CEO and board needs to ask.

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The Three Documentation Questions

For any land-secured loan in a SACCO portfolio, three questions determine whether the security is actually protective:

1. Is the title clean?

Does the title have an undisclosed encumbrance? Is the root of title traceable? Has any subsequent registration (court order, competing claim, compulsory acquisition notice) appeared since the loan was made?

In the post-Sehmi environment, a title with an irregular root is not good collateral even if it is currently registered in the borrower's name. A court that cancels the title when it is challenged during enforcement will leave the SACCO with an unsecured loan.

2. Is the charge properly registered?

A signed charge instrument that was never registered at the Land Registry is not effective against third parties. If the borrower later grants a second charge or is involved in a dispute, the SACCO's unregistered charge has no priority.

Regulation 43 requires that collateral is "duly charged." That means the charge must be registered.

3. Is the valuation current?

A three-year-old valuation in a market that has changed does not accurately reflect current LTV ratios. Under Regulation 43, revaluation every three years is mandatory.

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The Self-Assessment Exercise

For a SACCO CEO or credit manager who wants to know where the portfolio stands, here is a simple three-question audit:

Pull the 20 largest land-secured loans.

For each, ask: When was the independent registered valuer's report last prepared? Is the charge confirmed as registered in the Land Registry (not just signed, but registered)? Has any external check (Litmus CVP or advocate's search) been done on the title in the past three years?

The likely finding: a significant number of loans, possibly the majority, have valuations that are more than three years old, and very few have had independent external title checks done since origination.

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What the Post-Sehmi Change Means for Existing Portfolios

The Sehmi ruling created a retroactive risk question for any land-secured portfolio.

For loans originated before April 2025, the SACCO may not have conducted root-of-title checks at origination. The question now is: if enforcement becomes necessary on any of these loans, will the title survive a root-of-title challenge?

This is not a hypothetical. Frank Logistics v Golden Lion [2025] KECA 1471 saw the Court of Appeal nullify a bank's charge because the title had an irregular root. That ruling came after the charge was registered. The bank had done everything it thought was correct.

For SACCOs with high-value land-secured loans, a proactive root-of-title review on the most significant collateral positions is now a reasonable risk management step.

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The Business Case for Proactive Portfolio Review

The cost of a Litmus Collateral Verification Pack is KSh 3,000 per parcel. The 90-day proof package is KSh 30,000 for 10 parcels.

The cost of discovering that a significant collateral position is compromised during enforcement is measured in:

Legal fees to pursue enforcement that may ultimately fail.

A potential loss of security on a loan that was booked as secured.

SASRA examination findings if the portfolio weakness is identified during an examination.

Reputational damage if NPL loans with inadequate collateral are publicly reported.

The arithmetic is straightforward. A SACCO with KSh 500 million in land-secured loans and a question mark over 10% of the portfolio has KSh 50 million of potentially unsecured exposure. Running CVPs on the 50 highest-risk parcels costs KSh 150,000. The review pays for itself many times over if it identifies even one significant collateral problem.

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Where to Start

Most SACCOs do not have the resources to immediately review their entire land-secured portfolio. The prioritisation logic:

Highest outstanding balance first.

Highest LTV ratio (loans closest to or above 100% coverage).

Loans with the oldest valuation dates.

Loans in geographic areas with known fraud activity (Ruiru, Juja, Mavoko, coastal Kwale).

Loans where the borrower relationship has deteriorated or where arrears are accumulating.

A targeted review of 10-20 loans in these categories will cover the highest-risk exposure efficiently.

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This article is for general information only. It does not constitute legal advice. For SACCO regulatory compliance and portfolio risk management advice, consult a Kenya advocate with SACCO sector experience.