How SACCO Boards Should Govern Land Collateral Risk

SACCO boards bear ultimate responsibility for the quality of their institution's loan book. Land collateral represents KSh 137.1 billion of the Kenya SACCO sector's total lending. How well that collateral is documented, valued, and monitored determines what portion of it is genuinely recoverable when loans go bad.

This is a board governance question, not just a credit management question. Boards that understand their obligations and actively oversee collateral quality are materially better positioned than those that delegate entirely to credit officers and trust that the processes are working.

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What the Regulatory Framework Requires of Boards

SASRA's supervision framework holds SACCO boards accountable for the institution's credit risk management, including the quality of collateral.

Specifically, the SACCO Societies (Deposit-Taking SACCO Business) Regulations 2010 require that the SACCO maintain documented policies for all aspects of credit management. Regulation 43 specifically mandates independent registered valuation and three-year revaluation of land collateral.

These are not operational matters that boards can treat as entirely delegated. The board approves the credit policy. The board oversees its implementation through the credit committee. The board reviews the portfolio quality at each board meeting.

If a SASRA examination finds systematic collateral documentation failures, it is the board that is accountable.

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What Boards Should Be Seeing in Reports

A SACCO board overseeing land collateral risk should be receiving regular reports that address:

Portfolio size and composition. What percentage of the loan book is land-secured? How does this compare to the previous period? Is the proportion growing or shrinking?

LTV ratio distribution. What percentage of land-secured loans are above 70% LTV? Above 90%? Loans approaching or exceeding 100% LTV require immediate management attention.

Valuation currency. What percentage of land-secured loans have valuations older than three years? This is the Regulation 43 compliance metric. A board that does not track this cannot know whether it is compliant.

Title verification status. How many of the portfolio's land-secured loans were originated with a root-of-title check (post-Sehmi requirement)? For loans originated before April 2025, has a retrospective review been planned?

NPL concentration. Where are the NPLs concentrated? If land-secured NPLs are disproportionately high relative to the portfolio share, this is a collateral quality signal.

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The Post-Sehmi Board Responsibility

The Sehmi v Tarabana [2025] KESC 21 ruling established that a title with an irregular root is void regardless of subsequent registrations. For SACCOs, this creates a portfolio-level question: how many of the SACCO's existing land-secured loans were originated without a root-of-title check?

The answer for most SACCOs is: most of them, because root-of-title checking was not standard practice before April 2025.

The board cannot ignore this. A loan secured by a title that is later found to have an illegal root may be unsecured in practice. The court can void the title, the SACCO's charge falls away, and the SACCO has an unsecured exposure on what it believed was a secured loan.

A responsible board response is:

Commission a portfolio review to identify the highest-risk exposures. Require root-of-title checks for all new loans above a material threshold. Implement a programme to retrospectively check the highest-value existing collateral positions. Report the findings to the board quarterly.

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What the Board Credit Policy Should Cover

The SACCO's board-approved credit policy should specifically address land collateral with:

A requirement for independent registered valuation before disbursement. A mandatory three-year revaluation cycle with a tracking mechanism. A requirement for root-of-title check (post-Sehmi) for loans above a stated minimum. A requirement for LCB consent documentation for agricultural land collateral. A requirement for charge registration confirmation before final disbursement. Specific triggers for a collateral review (NPL event, member death, significant market movement).

Policies that were written before the Sehmi ruling may not include the root-of-title requirement. Boards should review and update their credit policies accordingly.

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Personal Liability for Board Members

SACCO board members are not merely figureheads. Under SASRA regulations and the SACCO Societies Act, board members bear individual responsibility for the governance failures of the institutions they lead.

A board that knowingly ignored collateral quality deterioration, approved policies that did not meet regulatory requirements, or failed to act on examination findings is potentially exposed to personal regulatory action.

This is not a theoretical risk. SASRA has taken action against individual SACCO officers and board members in cases of significant governance failure.

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Litmus offers a 90-day proof package: 10 Collateral Verification Packs for KSh 30,000. This is designed specifically for boards that want to see what their collateral quality actually looks like across a sample of their highest-risk positions before commissioning a full portfolio review.

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