Loans issued by savings and credit co-operative societies (saccos) to help households pay for medical expenses are now the fastest-growing credit segment for the sector, underscoring the growing burden of hospital bills.
Saccos issued medical loans worth Sh2.79 billion in the three months to March this year, being a 31 percent rise compared to Sh2.13 billion disbursed in a similar period in 2025, according to data from Sacco Societies Regulatory Authority (Sasra).
Medical loans offered by most saccos are designed to clear hospital bills, with the lenders stating they are processed within 24 hours of the borrower providing proforma invoices from the hospital.
The loans are repayable within 36 months at an interest rate of one percent per month on a reducing balance basis.
The size of the loan that a member qualifies for is pegged on their savings with the sacco, with most offering credit up to four times their savings.
Use of sacco loans to clear health-related bills points to inadequacies associated with the mandatory Social Health Authority (SHA) and low medical insurance uptake.
“The increase may reflect demand from sacco members for financing a range of health-related expenses, including medical treatment, medicines, health insurance contributions and other associated costs,” said Sasra chief executive David Sandagi.
“It may also include members, particularly those without regular payroll deductions, seeking credit to meet annual Social Health Authority contribution obligations and maintain their health coverage.”
Medical insurance coverage in Kenya is estimated at 2.4 percent, while SHA covers roughly 30 percent of the country’s population, leaving over 70 percent to pay for their medical bills out of pocket.
Households are also forced to step in when the medical bills exceed the insurance cover amount, a more prevalent scenario as prices of medicine and medical equipment rises in a tough economic environment.
On its website, Dimkes Sacco says its medical loan is capped at Sh1 million at an interest rate of one percent per month and a processing fee of 1.5 percent of the loan amount.
Medical loans are not an investment option but an expense that is not expected to generate new income streams, leaving households more strained than they were.
“The purpose of a loan does not, on its own, determine whether it will be repaid. The key considerations are whether the sacco conducted proper credit appraisal, assessed the member’s existing financial obligations and repayment capacity, and structured the facility within responsible lending limits,” said Mr Sandagi.
Health-related loans also include those issued to professionals in the medical sector who approach the saccos for a credit facility to buy hospital machines.
Education loans disbursed during the first quarter of the year by saccos were Sh24.8 billion, growing by 27.1 percent compared to the same period a year ago, recording the second-fastest growth.
Borrowing to pay fees has become a key credit driver in households as parents opt to educate children in private institutions amid falling standards in cheaper public schools.
When the government introduced free primary education in 2003, school enrolment tripled, without the facilities and resources expanding as fast.
This has enabled the growth of private schools as parents and guardians seek better quality, but the fees and other charges in private institutions have resulted in homes borrowing more.
Lack of clarity regarding the Competency-Based Education (CBE) curriculum has also seen some households turn to international schools, which are even more costly.
The rise of health and education-related loans as the fastest-growing categories in the sacco sector indicates a changing trend in an industry that has traditionally been used to support real estate investments.
Sacco members borrowed Sh18.4 billion in the three months to buy land while Sh15.2 billion was directed to housing development.
Saccos are crucial players in the country’s real estate sector as most households opt for phased development to construct their dream homes rather than taking mortgages, which are not accessible to most due to low salaries.
Total loans issued by saccos during the three months increased by 16.2 percent to Sh115.7 billion this year compared to Sh99.5 billion in a similar period last year.
The cumulative sacco loan book rose to Sh950.9 billion, up from Sh856.8 billion, with real estate being the largest recipient of credit.
