In a move that underscores both determination and transformation, Harambee Deposit Taking Sacco has written off its entire investment of Ksh184 million (approximately $1.42 million) in the Kenya Union of Savings and Credit Co-operatives (Kuscco) as part of a broader strategy to strengthen its financial foundations. The decision, which comes amid the Sacco’s ambitious plans to mobilize up to Ksh4 billion (roughly $31 million) in additional share capital, marks a turning point in the institution’s journey from past mismanagement toward a more robust and resilient future.

Turning the Tide on a Rocky Past

Harambee Sacco’s recent financial reorganization is emblematic of a broader transformation that began in 2019—a period when the society confronted its tarnished legacy, haunted by years of mismanagement, embezzlement, and governance challenges under former leadership. These challenges not only eroded public confidence but also placed severe strain on the Sacco’s operations and its ability to mobilize resources effectively.

“The journey of transforming Harambee was never going to be easy,” said George Ochiri, the society’s Chief Executive. “We had to face the hard truth that we had lost our glory—our image, our financial performance, the confidence of our members, and the overall morale of our staff. The decision to write off the investment in Kuscco was part of a larger effort to clean our books and pave the way for sustainable growth.”

By writing off the Ksh184 million investment in Kuscco, Harambee Sacco is not only removing a non-performing asset from its balance sheet but also demonstrating a commitment to transparency and sound financial management. This decisive step is intended to bolster its core capital—the so-called “safe” cushion that stands in stark contrast to member deposits, which can be withdrawn at any time.

A Bold Plan for Capital Expansion

Harambee Sacco, the country’s fourth-largest sacco by assets with a current valuation of Ksh38 billion (approximately $294.57 million), has embarked on an aggressive capital-raising drive. The Sacco’s board has negotiated a deal with its members to inject an extra Ksh4 billion (around $31 million) over the next five years, from 2024 to 2028. In return, members will enjoy dividends on share capital at an annual rate of 15% during that period.

This non-refundable share capital injection is a strategic shift away from reliance on volatile deposit funding. Unlike member deposits—which can vanish overnight if members decide to withdraw their funds—the share capital, by law, remains in the institution as permanent financing. “With share capital, we have the stability that deposits simply cannot offer,” explained Ochiri. “This model not only ensures financial stability but also provides a cushion that supports our lending capacity.”

The goal is ambitious: Harambee Sacco plans to elevate its share capital to at least Ksh6 billion (approximately $46.51 million) by 2028, up from Ksh2.4 billion ($18.6 million) reported last year. In parallel, reserves are targeted to grow from Ksh4 billion ($31 million) to Ksh10 billion ($77.51 million) within the same timeframe. Such an increase would significantly improve the Sacco’s capital adequacy ratios, which, in turn, will boost its lending capacity and position it more favorably within Kenya’s competitive financial sector.

Financial Rebound and Future Potential

The transformation journey is already showing encouraging signs. Harambee Sacco’s financial performance has improved markedly over the last several years. In 2024, the Sacco’s net earnings surged by 21.66%, reaching Ksh1.46 billion, up from Ksh1.2 billion in 2023. Similarly, total revenue increased by 23%, climbing to Ksh7.01 billion (approximately $54.34 million) from Ksh5.7 billion (around $44.18 million). Total assets grew by 5%, reaching Ksh38.6 billion (close to $299.22 million) compared to Ksh36.7 billion ($284.49 million) the previous year, while the loan book expanded by 10%, from Ksh29.1 billion ($225.58 million) to Ksh32 billion ($248.06 million).

A particularly notable indicator is the significant increase in core capital—it jumped by 23.52% to reach Ksh6.3 billion (roughly $48.83 million) from Ksh5.1 billion ($39.53 million). These improvements signal not only a recovery from past financial bruises but also a strengthening foundation for future growth.

Underpinning this recovery has been a focused drive to enhance operational processes and technological infrastructure. In 2021, amid the global disruptions caused by the COVID-19 pandemic, Harambee Sacco invested heavily in digital transformation, moving most of its services onto mobile platforms. This forward-thinking approach not only improved efficiency but also increased accessibility for members, who now enjoy faster, more reliable services across the nation.

Overcoming Operational Challenges

Despite these gains, Harambee Sacco continues to face operational challenges that are common in Kenya’s dynamic—but at times unpredictable—financial landscape. The operating environment has grown more difficult due to increased statutory deductions such as those related to the National Social Security Fund (NSSF), Social Health Authority (SHA), and other tax-related obligations including PAYE and even taxes on allowances.

“This increased pressure on pay slips limits the funds that members can contribute, which in turn affects our ability to mobilize additional capital,” Ochiri explained. “Many of our members would have taken on more financial products or increased their investments if the take-home pay allowed it. However, strict deductions have moderated this uptake considerably.”

Such challenges underscore the importance of the Sacco’s move towards a stable source of funding in the form of share capital. With the promise of a consistent 15% dividend over five years, members have an attractive incentive to invest their funds permanently rather than relying on more transient deposit accounts. This shift in focus is expected to open up new avenues for growth, particularly as Harambee Sacco works to expand its lending portfolio and support the financial needs of a broader segment of its membership.

The Role of Regulatory Oversight

Harambee Sacco’s restructuring and capital-raising initiative has been closely monitored and approved by the Sacco Societies Regulatory Authority (SASRA). Regulatory oversight plays a crucial role in the cooperative sector in Kenya, ensuring that institutions adhere to high standards of accountability and financial management. SASRA’s endorsement of the capital-raising plan not only validates Harambee’s strategic direction but also boosts the confidence of both members and potential investors.

The regulatory framework has increasingly shifted focus towards ensuring financial stability within cooperatives—a necessity in a sector that has witnessed its share of governance issues. By complying with these enhanced regulations and implementing robust internal controls, Harambee Sacco is setting itself apart as a forward-looking institution that is committed to operational excellence and transparency.

A Look at Kenya’s Sacco Landscape

Kenya’s Sacco sector has traditionally played a pivotal role in financial inclusion, extending credit and financial services to communities that are often underserved by conventional banks. In recent years, however, the sector has been dogged by instances of mismanagement, embezzlement, and weak governance that have tarnished its reputation.

Harambee Sacco’s turnaround is, therefore, not just a financial success story—it is also an emblem of hope for the broader Sacco industry in Kenya. By taking decisive actions such as writing off non-performing investments and aggressively pursuing capital growth, Harambee is setting a benchmark that other sacco institutions may well aspire to emulate.

Innovative Solutions in a Constrained Environment

One of the key innovations in Harambee’s strategy is the focus on permanent financing through share capital. While traditional deposit-based funding is inherently unstable due to the liquidity risk posed by potential member withdrawals, share capital represents a more enduring and secure source of financing. This novel approach could potentially be replicated across other sacco institutions, particularly in a sector that is grappling with the double challenge of scaling operations and ensuring financial integrity.

Furthermore, the emphasis on digital transformation—investments made during the peak of the COVID-19 pandemic—has paid off handsomely. The shift to mobile platforms not only broadened the reach of Harambee’s services but also enabled the Sacco to collect and analyse data more efficiently, leading to better decision-making and improved customer service. This digital evolution is critical in the context of an increasingly mobile-driven economy in Kenya and across Africa.

Investor and Member Perspectives

For investors and members, the Sacco’s strategic overhaul offers tangible benefits. The promise of a 15% annual dividend on share capital over five years is a compelling proposition, particularly in a landscape where interest rates on deposits have been relatively modest. Members who commit to the share capital investment are assured a stable, high-yield return, which, in many ways, compensates for the lower liquidity relative to traditional deposits.

Many members view this initiative as not merely a financial transaction but as an investment in the future of their cooperative. The robust dividends, combined with a strengthened capital base, are expected to drive further growth in the Sacco’s lending capacity, ultimately leading to better financial products and services. As the Sacco grows its asset base and loan portfolio, every member stands to benefit from the improved overall health of the institution.

Local financial analysts have noted that Harambee Sacco’s transformation journey is a critical case study in institutional reform within the cooperative sector. By addressing the twin challenges of governance and sustainable financing head-on, Harambee is not only stabilizing its operations but also setting a path for long-term profitability. These efforts have already translated into improved credit ratings and a more confident market perception, bolstering the Sacco’s reputation amid stiff competition.

Building Resilience in Challenging Times

Harambee Sacco’s transformation is taking place against the backdrop of an increasingly challenging economic environment in Kenya. With rising taxes, tighter statutory deductions, and an unpredictable labour market affecting disposable incomes, many financial institutions have had to rethink their business models. Harambee’s decision to focus on share capital as a permanent source of funding is a clear response to these external pressures.

The Sacco’s leadership is acutely aware that sustainable growth cannot be achieved merely by increasing lending volumes. Instead, it requires building a resilient financial structure that can withstand economic headwinds while continuing to support members’ aspirations. The decision to write off the non-performing investment in Kuscco is one such example of course correction—a necessary step to eliminate dead weight from the balance sheet and redirect resources towards more promising ventures.

A Roadmap for Future Growth

Looking ahead, Harambee Sacco has outlined an ambitious growth strategy anchored on two key pillars: capital expansion and operational efficiency. The planned injection of Ksh4 billion in additional share capital is expected to raise the institution’s total share capital to Ksh6 billion by 2028, while its reserves are projected to grow concurrently to match this increased capital base. Together, these measures will reinforce the Sacco’s core capital, ensuring that it meets regulatory requirements and supports a steady expansion in its lending operations.

These strategic initiatives are designed not only to safeguard the Sacco against future financial shocks but also to empower it to seize emerging opportunities. As Kenya’s economy continues to evolve and as financial technology continues to disrupt traditional banking models, Harambee Sacco is positioning itself at the forefront of innovation. The Sacco’s active investment in technology and its forward-thinking capital-raising initiatives have already begun to yield dividends, setting the stage for a more dynamic, agile, and responsive financial institution.

The outlook from the executive leadership is optimistic yet pragmatic. “While challenges remain, our transformation is well underway,” George Ochiri remarked in a recent interview. “We are evolving our business model to ensure that we have the solid capital base needed to navigate uncertain times, and we are committed to delivering tangible benefits to every member of our community.”

Broader Implications for the Cooperative Sector

Harambee Sacco’s turnaround has broader implications for the cooperative financial sector in Kenya and potentially across East Africa. In a region where many sacco institutions are still grappling with legacy issues of mismanagement and inefficiency, Harambee’s success story serves as a beacon of what is possible with decisive reforms and a clear strategic vision.

Industry experts are closely watching the Sacco’s progress, noting that the lessons learned and best practices developed here may soon be adopted more widely. The deliberate shift towards stable, permanent financing through share capital—coupled with a robust digital infrastructure and enhanced regulatory compliance—could well signal a new era for cooperatives in the region. In this scenario, stronger financial institutions would translate into more significant lending, improved customer services, and ultimately, greater financial inclusion for communities that have historically been underbanked.

Moreover, by demonstrating that even institutions burdened by past financial missteps can reinvent themselves, Harambee Sacco is likely to inspire a wave of reforms across the sector. Other sacco institutions may follow suit, reexamining their own financial strategies, shedding non-performing assets, and exploring innovative ways to secure lasting capital. This collective evolution could usher in a new phase of growth and stability within Kenya’s cooperative banking landscape.

Conclusion: Embracing Change and Building a Resilient Future

Harambee Sacco’s decision to write off a Ksh184 million investment in Kuscco is more than just an accounting adjustment—it is a bold declaration of a new era. By acknowledging past missteps, taking decisive corrective actions, and rallying its members behind a promising capital expansion plan, the Sacco is charting a course toward long-term stability and growth. With its eyes firmly set on increasing share capital, improving reserves, and ultimately expanding its lending capacity, Harambee Sacco is positioning itself to overcome the challenges of a volatile economic landscape and emerge as a leader in Kenya’s cooperative sector.

In an environment where external pressures—from rising statutory deductions to fluctuating economic conditions—pose constant challenges, such strategic initiatives offer hope not only to Harambee members but also to the broader financial community. As stakeholders in the cooperative sector look on, Harambee Sacco’s journey serves as a powerful reminder of the transformative potential inherent in transparent governance, innovative financing solutions, and a commitment to rebuilding trust.

For Kenya’s sacco industry—and indeed for every community relying on such institutions—the promise of a resilient, well-capitalised, and forward-looking Harambee Sacco represents much more than improved financial metrics. It heralds a future where challenges are met head-on, where risks are managed strategically, and where every member can take pride in the collective progress toward a more prosperous, inclusive economic future.

In the coming years, as Harambee Sacco continues its transformation and capital expansion journey, the positive impacts are expected to ripple across the region, setting a new standard for financial resilience and cooperative success. With committed leadership, a clear vision, and robust support from its members, Harambee Sacco is not just cleaning its books—it is rewriting its destiny.

Ultimately, this is a story of reinvention, resilience, and the transformative power of strategic financial management. As the cooperative sector adapts to rapidly changing economic realities, Harambee Sacco’s bold steps today may well serve as the blueprint for sustained growth and renewed confidence in a pivotal pillar of Kenya’s financial landscape.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

8th April, 2025