The Cooperative Societies Act and SACCO Land Lending: The Legal Framework

Kenya's SACCOs operate under a dual legal framework: the Cooperative Societies Act (Cap 490) and the SACCO Societies Act 2008 (for deposit-taking SACCOs). Both have implications for how SACCOs conduct land-secured lending.

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The Cooperative Societies Act (Cap 490)

The Cooperative Societies Act is the parent legislation for all Kenya cooperative societies, including SACCOs. It establishes:

Governance requirements: How cooperative societies are governed, managed, and supervised.

Membership rights: Rights of cooperative members, including their rights in relation to the society's assets.

Lending powers: The general authority for cooperative societies to lend money to members.

Security requirements: The general requirement that loans be secured, and the power to accept property as security.

Under the Act, a SACCO can accept land as collateral for member loans. The charge must be registered at the Land Registry in accordance with the Land Act.

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The SACCO Societies Act 2008

The SACCO Societies Act specifically regulates deposit-taking SACCOs (DT-SACCOs) — those that mobilize deposits from members and the public.

Key provisions relevant to land lending:

SASRA licensing: DT-SACCOs must be licensed by SASRA.

Capital adequacy: SASRA sets minimum capital requirements. Non-performing land-secured loans affect capital calculations.

Prudential requirements: SASRA's prudential regulations include collateral requirements. Regulation 43 (three-year independent revaluation) is the most significant for land.

Supervision and examination: SASRA conducts regular examinations, including collateral quality reviews.

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Regulation 43 in Detail

SACCO Societies (Deposit-Taking SACCO Business) Regulations 2010, Regulation 43:

"the Sacco Society shall ensure that the collateral is duly charged and adequately insured based on an independent registered valuer's report and revaluation shall be done every three years."

The specific requirements from this regulation:

"Duly charged": The charge must be properly registered at the Land Registry. Not just signed — registered.

"Adequately insured": The collateral must have appropriate insurance cover. For land with buildings, fire insurance at minimum. The SACCO must confirm insurance is in place and current.

"Independent registered valuer's report": The valuation must come from a valuer registered under the Valuers Act (Cap 532). The valuer must be independent of both the SACCO and the member.

"Every three years": Revaluation is mandatory at 3-year intervals. This is not optional.

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The Post-Sehmi Layer

Sehmi v Tarabana [2025] KESC 21 added an obligation that is not in any statute but is clearly required by the Supreme Court's interpretation of Kenya property law: root-of-title verification before accepting land as collateral.

A SACCO that accepts a charge on land whose title later proves void (due to illegal original allocation) loses its security. The court cannot enforce a charge against a void title.

This means responsible SACCO lending now requires:

Regulation 43 compliance (independent valuation, 3-year revaluation, proper charge registration, insurance). Post-Sehmi root-of-title verification (physical registry file review, CVP). LCB consent documentation for agricultural land. Section 106B certificates for electronic collateral records.

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Litmus CVP addresses the post-Sehmi verification requirement: KSh 3,000 per parcel.

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