Prevoius Post Faith, Finance, and the Future: Understanding Islamic Banking in Kenya
Savings and Credit Cooperative Organizations (SACCOs) have long been the heartbeat of Kenya’s cooperative movement, enabling communities to mobilize savings and access affordable credit. Rooted in principles of self help and mutual benefit, SACCOs bridge the gap between formal banking and the informal financial sector, making them one of the most significant drivers of financial inclusion in the country.
The regulation of SACCOs in Kenya is primarily governed by the Co-operative Societies Act (Cap 490) and the Sacco Societies Act (No. 14 of 2008). These statutes provide the legal structure for registration, licensing, supervision, and governance of SACCOs particularly deposit taking SACCOs (DT-SACCOs). The Sacco Societies Regulatory Authority (SASRA) oversees compliance and stability within the sector. In 2022, the total assets of regulated SACCOs stood at Kshs 890.3 billion, reflecting the continued trust Kenyans place in the cooperative system. Of this, Kshs 763.5 billion was held by deposit taking SACCOs and Kshs 126.8 billion by non-withdrawable deposit taking SACCOs (NWDT-SACCOs).
As Kenya’s financial landscape evolved, one gap remained clear; the need for inclusive financial products that align with Islamic law (Shariah). Traditionally, most SACCO operations were interest based, excluding many Muslim Kenyans who could not participate due to faith based prohibitions against riba (interest). Recognizing this, the Ministry of Industrialization and Enterprise Development developed the Shariah Compliant Cooperative Development Policy (2014) to foster inclusion for Muslim communities. This policy laid the groundwork for legislation that accommodates Shariah compliant cooperative products.
Today, the Sacco Societies Act defines “Sacco business” as financial intermediation and other cooperative activities conducted either under conventional law or in compliance with Islamic law. Similarly, “deposit taking business” includes activities financed in line with Shariah principles. This legal recognition formally legitimized Islamic SACCOs within Kenya’s cooperative framework.
The Constitution of Kenya, 2010 provides a strong foundation for religious inclusivity. Article 32(3) and (4) guarantee every individual the right to freedom of religion and protection from discrimination on the basis of belief.
Building on this constitutional ethos, Islamic SACCOs have been established under cooperative by-laws that emphasize voluntary and open membership regardless of religion. For example, By-law 5.1(a) of the model SACCO constitution expressly provides that membership shall be open to all without religious discrimination.
This legal and policy shift has created an enabling environment where Kenyan Muslims who make up approximately one-fifth of the population can now access financial services consistent with their faith, without compromising their beliefs.
Beyond fully fledged Islamic SACCOs, several conventional SACCOs have introduced Islamic “windows” dedicated departments or products designed to serve members seeking Shariah compliant services. This hybrid model allows institutions to broaden inclusivity while maintaining their existing structures. Through these windows, members can access financing models such as Murabaha (cost-plus financing), Mudaraba(profit-sharing), and Ijara (leasing), among others ensuring diversity, faith compliance and financial sustainability.
The rise of Islamic SACCOs is not just a story of religious accommodation, it’s a story of innovation and inclusivity. It demonstrates how Kenya’s cooperative movement continues to evolve to meet the diverse needs of its citizens, ensuring no one is left out of the financial ecosystem. As Islamic finance grows globally, the Kenyan SACCO sector stands as a regional model for balancing faith based values with modern financial regulation proving that ethics and enterprise can thrive side by side.
By Swaleh K.Yusuf
Advocate of the High Court and Islamic Investment Consultant
