Being a SACCO loan guarantor: your risks and how to protect yourself

Updated 26 September 2026

When you guarantee a SACCO loan, your own deposits stand behind it. If the borrower stops paying, the SACCO can recover from you, and you cannot leave the SACCO until the guarantee is released.

Guaranteeing a colleague's SACCO loan feels like a small favour: a signature on a form. In reality you are pledging your own savings. Most loans are repaid without trouble, but when one is not, the guarantor is the one left explaining to their family why their deposits have shrunk. This guide explains what you are signing up for and how to limit the risk.

What a guarantee actually is

SACCO loans are mostly secured by the deposits of the borrower and their guarantors rather than by land or logbooks. The Sacco Societies Act (section 33(4)) allows a SACCO to accept as security "an endorsement by a guarantor or co-guarantor", an interest in property, deposits or wages of the borrower, or other collateral the regulator prescribes. The regulations add protections for you:

All loans must be fully secured, and no member may be allowed to over-guarantee (regulation 32(1) and (2), Deposit-Taking Sacco Business Regulations, 2010).
"A guarantor shall be adequately informed of the nature of the liability prior to signing" (regulation 32(3)).
Every SACCO's written credit policy must state its guaranteeing requirements (regulation 28(2)).

Most SACCOs cap how much each member can guarantee. Kencream Sacco, for example, states that the maximum you can guarantee is three times your total savings.

What happens if the borrower defaults

Section 36 of the Sacco Societies Act gives a SACCO a first charge over a member's deposits, share capital, dividends and interest "for any debt due to the society from the member, either as a guarantor or endorser of a loan." The same section lets the SACCO refuse withdrawals from a deposit account while the member is in arrears on a debt. In practice, when a borrower stops paying, SACCOs typically:

Try to recover from the borrower: salary check-off, the borrower's own deposits, and other security.
Recover the balance from guarantors, often by offsetting it against their deposits or by deducting from their pay, in line with the guarantee they signed and the SACCO's by-laws.

The order and method depend on your SACCO's by-laws and the guarantee form. Read both before you sign. Many SACCOs also share credit information with licensed credit reference bureaus; SASRA's 2024 report says they do so largely as a deterrent against loan default.

The hidden cost: you are tied to the SACCO

Even if the borrower is paying perfectly, a guarantee limits you. Deposits are refunded on exit only if the member "is free from guarantee" (regulation 22(1)). Mhasibu Sacco, for example, states that a member cannot withdraw from the SACCO while guaranteeing another member's loan. If you plan to leave your job or your SACCO in the next few years, a long-term guarantee can hold up your exit and your share sale.

Before you sign: questions to ask

How much is the loan, and for how long? A five-year development loan is a much bigger commitment than a three-month emergency loan.
How much of it am I guaranteeing? Ask the SACCO for the amount attached to your deposits, in shillings.
Who else is guaranteeing? More guarantors means each carries a smaller share.
Can the borrower actually repay? Is the loan deducted from their salary? Are they close to retirement or on a short contract?
What else have I guaranteed? Ask for a list of all loans you currently guarantee. Many members are surprised.
Do I need these deposits myself soon? Guaranteed deposits cannot be withdrawn on exit until the loan is cleared or you are replaced.

How to protect yourself

Only guarantee people whose repayment you can follow. Colleagues on the same payroll are easier to track than a friend with irregular income.
Keep your own record. Note the borrower, loan number, amount you guaranteed and the date. Ask the SACCO for a statement of your guarantees at least once a year.
Watch for arrears early. The SACCO usually informs guarantors when a loan falls behind. Talk to the borrower as soon as that happens; restructuring is easier before the arrears grow.
Ask for substitution if your situation changes. Many SACCOs let a borrower replace a guarantor with another member acceptable to the SACCO. The borrower normally has to arrange this.
Do not guarantee beyond your own comfort level, even if the SACCO's limit would allow more.

Getting released from a guarantee

You are released when:

The loan is fully repaid, or
The SACCO accepts a replacement guarantor, or
The borrower provides other security the SACCO accepts.

Ask for written confirmation of the release. Guarantor disputes are not rare: SASRA's 2024 report lists complaints about "guarantors and guarantee for loans" as one of the categories it handles each year.

If you are the borrower

Respect your guarantors. If you are struggling, tell the SACCO and your guarantors before you miss payments. If you need new guarantors, SaccoLink's guarantor finder can help you reach members of your SACCO who are open to guaranteeing, and our guide on finding a guarantor covers other options.

Sources

This guide is general information, not financial advice. SACCO rules differ, so confirm details with your SACCO.