What a SACCO Credit Policy Must Say About Land Collateral in 2026

Many SACCO credit policies for land collateral were written before the Sehmi ruling (April 2025), before the KUSCCO governance crisis, and before SASRA's 2024 annual report revealed the depth of NPL concentration in agricultural-sector SACCOs.

Those policies need updating. Here is the specific policy language that addresses what 2026 requires.

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Section 1: Eligible Land Collateral

A model policy should specify which types of land collateral the SACCO will accept:

"The Society shall accept registered land with a valid and unencumbered title as collateral for credit facilities. The following conditions apply:

(a) The title must be registered under the Land Registration Act 2012 or its predecessors, with a clear chain of ownership from the original allocation to the current registered owner.

(b) The title must be free of undisclosed charges, cautions, caveats, or court orders. Any existing charges must be disclosed and the total indebtedness against the parcel must not cause the combined LTV ratio to exceed the maximum specified in Section 3.

(c) For agricultural land, the charge itself must be supported by Land Control Board consent in accordance with the Land Control Act (Cap 302).

(d) The Society shall not accept as primary collateral any title that: (i) is still in the name of a deceased person; (ii) has a remaining lease term of less than 20 years for leasehold properties; or (iii) has an irregular root of title as identified in the collateral verification process."

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Section 2: Required Pre-Disbursement Documentation

"Before any credit facility secured by land collateral is disbursed, the following documentation must be complete and retained in the member's file:

(a) Official title search or Ardhisasa search dated within 30 days of the application.

(b) A Collateral Verification Pack (CVP) from an independent land intelligence provider, covering: physical registry file review tracing title to its original allocation; court process search; gazette search; and named verifier attestation. This requirement applies to all facilities above [KES threshold to be determined by the Board].

(c) An independent registered valuation report from a valuer registered under the Valuers Act (Cap 532) through the Valuers Registration Board. The valuer must be independent of both the Society and the member.

(d) Land Control Board consent confirmation for agricultural land collateral.

(e) Confirmation that the charge instrument has been registered at the Land Registry before final disbursement.

(f) Certificate of insurance coverage on the property for the full loan period."

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Section 3: Loan-to-Value Ratios

"The Society shall maintain the following maximum LTV ratios for land-secured facilities:

(a) Urban residential and commercial land: 70% of the independent registered valuation.

(b) Agricultural land: 60% of the independent registered valuation.

(c) Vacant or undeveloped land: 50% of the independent registered valuation.

The LTV calculation must be based on a current independent valuation. For this purpose, 'current' means within 12 months of the application date."

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Section 4: Revaluation Schedule

"In accordance with Regulation 43 of the SACCO Societies (Deposit-Taking SACCO Business) Regulations 2010, all land collateral must be independently revalued every three years.

The Credit department shall maintain a revaluation calendar showing the date of original valuation and the scheduled revaluation date for each land-secured facility. The Credit Manager shall report to the Credit Committee quarterly on compliance with this requirement.

Any facility where the collateral revaluation is overdue by more than six months shall be flagged to the Credit Committee and, if the revised LTV exceeds the maximum in Section 3, appropriate remedial action shall be taken."

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Section 5: Post-Default Collateral Enforcement

"The Society's enforcement of land collateral on default shall comply with the following requirements:

(a) Statutory notice under Section 90 of the Land Act 2012 must be served on the defaulting member specifying the arrears and allowing a minimum of 90 days for redemption.

(b) Service of the statutory notice must be documented with proof of delivery.

(c) A current independent valuation must be obtained before any auction is advertised. For this purpose, 'current' means within six months of the auction date.

(d) Auction proceeds shall be applied in the statutory order as required by the Land Act.

(e) Any surplus remaining after full recovery of the debt, costs, and charges shall be remitted to the former chargor promptly."

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Reviewing and Updating Your Policy

If your SACCO's credit policy does not contain provisions equivalent to those above, it should be updated at the next board meeting.

The board approves the credit policy. The update requires a board resolution. The credit committee and credit manager can prepare the draft amendments for board consideration.

A Litmus CVP integrated into the pre-disbursement checklist (at KSh 3,000 per parcel) is the practical mechanism for the root-of-title and independent verification requirements in Section 2(b).

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