The Cabinet Secretary (CS), Ministry of Co-operatives, Micro, Small and Medium Enterprises, Simon Chelugui (2nd left), joined by The National Chairman Mr. David S. Mategwa (left) and PS Ministry of Co-operatives MSMEs Mr. Patrick Kilemi presents an award to Mr. Doughlas Kanja, DIG, Kenya National Police Service (2nd right) during the 51st ADM.

The Kenya Sacco Sub sector should be quick to adopt new strategies to capitalize their competitive edge

By Joseph Macharia

The savings and credit co-operative societies (Saccos) sub sector has continued to grow in popularity in Kenya.  Mainly,  this is  due  to their friendly cooperative model  combined with good returns that they have been dishing out to members annually in form of dividends and interest. So far, they have done a commendable job of deepening financial inclusion through mobilization of savings and disbursements of loans.

That notwithstanding, Saccos operate in a fiercely competitive sector where ground shifts rapidly. Technological, demographical, economical and regulatory factors keep on changing. Other players like commercial banks, micro finance banks  and  institutions as well as   digital credit service providers are aggressively scrambling for market share.

Saccos are faced with the perennial hurdle of balancing between members’ needs and enhancing returns on investments. In between, the issue of relevance gets blurred. Relevance embodies convenience, ease of use, seamless and paperless services. While Saccos have the upper hand in mobilizing savings from members, in our evolving digital world, relevance is becoming crucial for financial players to maintain competitive edge in the long run. Members want services instantly from their gadgets.

The younger generation  –  so called millennials and generation  Z-  seems to prefer digital way of doing things to tiresome manual processes. They constitute the bulk of the population.  In that regard, Saccos seeking to grow sustainably into the future have to find innovative ways to attract this dynamic target market. Generally, most Saccos comprise  middle aged   people.   In  order  to ensure a   smooth transition ,  Saccos must tap into our demographic dividend by recruiting young people who will continue to bring in deposits once the older generation leaves the scene. It should also be reflected in the board as well as the management.

Embrace technology

To remain relevant to their existing members as well as to attract new members, Saccos must rethink their operational models. What got them up to this point might not necessarily keep them going. There is  no option but to embrace technology and adopt new strategies. Fortunately, information and communication technology (ICT) can be used as an enabler to fuel growth, though it comes with some costs too, which should be taken as investments.

Technology is transforming peoples’ saving and spending habits. This extends to how people want to access their money right from their phones in the comfort of their homes. ICT is critical to the development of Saccos. Adoption of modern ICT systems will improve relevance and   enhance performance that will facilitate efficient delivery of services.

Furthermore, ICT also help  to minimize fraud cases and human errors of omission. Automated tasks such as member on boarding, loan processing and account management can eliminate human errors and accelerates service delivery. Granted, Saccos cannot afford to ignore technology  as  they  endeavour  to   enhance their relevance. Despite many benefits of digitizing  products   and  services,  most Saccos have not yet fully embraced high tech as a tool for growth.

Sacco agency, as an example is an alternative financial service delivery that does not require heavy capital outlay and recurrent maintenance costs. According to the Sacco Societies Regulatory Authority (SASRA) annual report, for the period ending December 2022 only  thirty six   deposit taking (DT) Saccos out of a hundred and seventy  six   were served by Sacco agents. Given the myriad services offered by Sacco agents like cash deposits, withdrawals, loan repayments and utility payments, Saccos that had not yet integrated agency services were not only missing out revenues in form of commissions, but they were  also losing relevance to their members. What is   more, Sacco agents act as grass root brand ambassadors.

Digital services

Digital credit services have progressively increased over the years due to high internet penetration in the country. Facing cut-throat competition from other players, Saccos have launched digital credit services for their clients. However, the market has not been fully exhausted by Saccos. From the SASRA’s 2022 report,  60.8 percent of DT Saccos  had already deployed digital credit and loan facility for their members.  This is  a  good percentage, but more needs to be done.

In the new age of digital banking, Saccos are expected to offer online and mobile banking services. In spite of these expectations, many Saccos lag in digital agility due to limited resources, lack of technical skills and the risk of cyber threats. This limitation affects their competitiveness in the market and relevance in service delivery.

Kenya has one of the most highly banked populace in the Sub Saharan region; still most Saccos have not capitalized on agency banking. Essentially, agency banking is where a Sacco provides banking services for and on behalf of other financial institutions especially commercial banks and earns commission on transactions. SASRA’s report of 2022 pointed out that 60.8 percent of DT Saccos were not undertaking agency banking. These numbers highlight the need for Saccos –  especially the  deposit taking ones – to adopt digital banking.

Road  ahead

Going forward, success in co-operative movement as a whole is hinged on the rapid adoption of technology and new innovations as well as enlightened governance that takes long term approach. Application of new technology will not only sharpen competitive edge of Saccos but also enable them to expand sustainably and profitably into the future. Robust technological systems are important in ensuring Saccos remain relevant.



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