By George Marenya
By some account, the first co-operative society in Kenya was formed somewhere in Kipkelion in the Rift Valley in 1908. It was to market dairy products mainly from white farmers. It was not until the 1950s that Africans were allowed to form their own co-operatives by the colonial government. When Kenya gained independence in 1963, the number of co-operative societies had risen to about one thousand.
Co-operatives are member driven with people joining as individuals with equal rights. There is no discrimination on the basis of volume of savings, status in the society or even educational background. Co-operatives exist to optimize the economic, cultural and social needs of their members. These groups once formed also result into economies of scale which would hitherto be impossible if members were acting individually.
National co-operatives
In light of the above, co-operatives strengthen the communities in which they operate. The 1960’s and 70’s saw the emergence of National Co-operative Organizations (NACOs) in Kenya. These included the Kenya National Federation of Co-operatives in 1964, the Co-operative Bank of Kenya (1968), Kenya Union of Savings and Credit Co-operatives (KUSCCO) in 1971, Co-operative Insurance Company (CIC) and National Co-operative Housing Union (NACHU) in 1978.
Some of these died in 1980s – notably Kenya Co-operative Creameries (KCC) which was later to emerge as the New KCC. It is again a very thriving organization. In fact it has played a very big role in stabilizing the farm gate milk prices. We now have active co-operatives in sectors like marketing, banking, insurance, savings and credi, housing, transport, agriculture among others. There are more than 30,000 registered co-operative societies in Kenya.
Quite apart from creating a sense of community among members, co-operatives have the capacity to tap into the economies of scale that reduces the cost of production. These societies and groups also create an enabling environment for a savings and investment culture. They also harness the technical, financial and other support from governments, NGOs and other relevant stakeholders.
The activities of co-operatives have the effect of reducing poverty. This is through the provision of food and creation of financial inclusion which can also be a means of addressing housing shortage. The co-operative movement has been acknowledged by the World Bank, International Labour Organization and other bodies for its role in the socio-economic well being of developing countries. Co-operatives play a pivotal role in creating the necessary capacity in fighting poverty and promoting equity. They also mobilise savings and investments through provision of affordable credit. This has resulted into a huge impact in financial deepening among Kenyans.
The World Bank estimates that nine out of ten housing units in Kenya are constructed through co-operatives. Indeed, the government has envisaged that co-operatives will provide 25% of housing stock in urban areas. This is according to a research done by Kenya Vision 2030 secretariat.
Co-operatives have been identified as one of the best models in enhancing agricultural and non-agricultural productivity through trade in large volumes of inputs due to their grass root distribution channels. In fact, it is possible to realize industrialization in the rural areas through the value addition of agricultural products and marketing. Some parts of rural Kenya are dotted with coffee production factories managed by various co-operative societies. Along with these come improved infrastructure and creation of jobs to boost the rural economy.
In any case, Equity Bank, Kenya’s biggest bank by customer count owes its creation to the co-operative movement. The founding chairman Mr Peter Munga was touched by the plight of old farmers, especially women, who could not cash their cheques because they had no bank accounts. This problem which he saw in Murang’a was true of all parts of Kenya
To open an account thirty years ago meant you had to be in possession of a sizeable sum and then you needed some godfather to introduce you to the bank. It was more difficult than getting a job! So Peter Munga came up with a building society to circumvent the strict rules of banking. It was not that hard to register a society after all.
Nearly 40 years later, the rest is history. Equity is Kenya’s most prominent indegineous brand and the largest bank by customer count.
Some savings and credit co-operatives ( Saccos) are bigger than a good number of tier two commercial banks. Take the example of Kenya Police Sacco. It has more than seventy thousand members with an asset base of Ksh 49 billion and loan book of Kshs. 41 billion. Member deposits stand at Kshs. 29 billion. In fact it is a source of information and bench marking for many others in the continent.
Prudent management of SACCOs is important as this is what improves the confidence of members in their organization. That is a fact that Mr David Mategwa, the National Chairman of Kenya Police Sacco only knows so well. Having worked as a police officer in various parts of Kenya, he knows the pain officers go through. Therefore as the keeper of his brothers and sisters, he cannot afford to fiddle with their savings. They must find the money when they need it.
Another important area involves the strengthening of co-operative societies through robust information technology ( IT) systems. Members should be able to access services without having to travel to their physical offices. The Kenya Police Sacco takes its IT infrastructure very seriously.
Many societies are losing their members’ contributions and savings to cyber fraud. There is need to strengthen systems in the face of increased cyber threats internationally. It is indeed necessary to strengthen apex co-operative societies who will in turn make member societies more effective.
There is also need for self-regulation and adherence to individual society by-laws is key. In this way, societies will operate with minimum supervision from government and regulatory bodies. The future of our co-operative societies is one we cannot give up on. The success of Co-operative Bank of Kenya is testimony to the fact that our co-operative sector is vibrant and healthy.
We need to provide more quality employment opportunities from where the cooperative movement will get its membership, resources and human capital. In the meantime, our institutions and schools must provide continuous education and research to enhance the growth of knowledge in the sector.
We cannot over emphasize the critical place of the Co-operative movement in rural Africa where the majority of the population resides. In Africa a sector that stems the tide of the rural to urban migration needs a lot of support.
