By Zeytuin Sharamo
Savings and credit co-operatives (Saccos) are a major source of funding for households and organizations in Kenya. They provide credit for a wide range of purposes and on relatively very competitive terms. Significantly, this credit suits a category of borrowers ( including women and youth ) that is shunned by some mainstream financiers since they do not possess collateral securities .
Going down memory lane
Co-operatives were introduced in Africa as state projects in the 1950s and 60s. Respective governments viewed them as mass organizations and instruments for the economic emancipation of the rural population. Nevertheless, the 1990 market liberalization era saw the collapse of state-sponsored co-operatives in many developing countries since they could not compete with the private sector.
Recent research studies show that co-operatives in many developing countries are going through reincarnation. For instance, in 1995, there were only 554 registered co-operatives societies in Uganda. However, recent research estimates that there are more than 7500 registered co-operatives societies in that country. Typically, in Kenya, the cooperative movement has been a powerful engine for socio-economic development. It transcends almost all sectors of the Kenyan economy – both formal and informal. Studies estimate that more than 63% of the population in Kenya either directly or indirectly participates in cooperative-based enterprises. It also shows that co-operatives contribute 35% of the Gross National Savings, 46% of the total Gross Domestic Product (GDP) and directly employ more than 500,000 people.
Beginning
The first Sacco in Kenya was established by the Catholic Church through Father Joachim Getonga in 1964 in Mariira, in the then Murang’a district. Three years later, a committee was formed to promote the development of Saccos in the country. It led to the formation of two chapters: one in the pursuit of providing lobby, advocacy and advisory services that protect the interest of the members. It acted as the principal local and interpretational representative and mouthpiece of all SACCOs and promoted the organization and development of viable Saccos. The union was faced with enormous challenges, particularly lack of operational funds and understaffing which seriously limited its operational capacity to execute the mandate. Nevertheless, it was able to overcome the challenges and at the same time, set up an elaborate system with country-wide outreach, serving over 3500 affiliate Saccos and establishing a Kshs. 10 billion asset base backed by more than three hundred employees. These accomplishments can be attributed to different reasons. They include : unique ability in articulating issues at the core of cooperatives, combined with practical solutions in areas where the Saccos face daily challenges.
Going digital
The onset and aftermath of the Covid-19 pandemic has occasioned the digitization of service delivery and product development by many financial institutions – Saccos included. There are numerous reasons why SACCOs should be digitized. One of them is the ever changing customer needs and preferences. These days, the world has become dynamic due to technological advancement. Customers do not like wasting time while accessing various goods and services. They believe in convenience and efficiency.
It is essential to allow members of Saccos to access financial solutions through their mobile phones, especially with the increased penetration of smartphones. Additionally, small business owners are a significant portion of the Saccos’ clientele. They need financial partners that can provide quality services and products in order to enhance their growth. Digitization of Saccos is transforming the way they operate by providing enhanced efficiency and cost savings. By making use of technologies such as mobile banking, artificial intelligence (AI) and cloud computing, Saccos can increase their productivity by annihilating the need for paper transactions and manual processing.
Digitization will also enable Saccos to provide excellent customer experience and real-time access to accounts’ information. When Saccos become well-organized, it minimizes unnecessary costs for them. Digitization has helped Saccos to reduce their risks and operational costs and focus on providing better products and services to their customers. The tool that comes with digitization can enable Saccos to track transactions in real-time and reduce paperwork which contributes to reducing extra costs.
Digitization is also an efficient way to leverage data analysis and insights for Saccos. By digitizing their operations, they can access real-time data analytics which they can use to make the right decisions. This helps them to understand their customers better and enhance their customer experience. Typically, this also provides a wide range of data that they can use to identify trends and make predictions. The information can be used to develop strategies that assist organization to meet its goals. With digitization, transaction records are easily accessible and updated in real time. Every member of the Sacco would be able to view their accounts’ balances and the history of their transactions at any time.
Despite the fast growth of Saccos in Kenya, some of them are still operating using manual systems. Most of their transactions are done manually and customers have to physically visit their branches in order to access financial products and services. This has been a notable challenge, especially for members who live in the rural and far flung areas. Furthermore, manual systems can be costly for these institutions and their respective customers because of their limited efficiency.
Financial inclusion
By and large, the digitization of Saccos in Kenya has created many job opportunities as the said institutions bring on board more members. Adopting digital systems helps Saccos to reach new members in remote areas and expand their reach.
Advancement in financial technology has enabled Saccos to offer digital loans and repayment systems. Financial technology firms provide solutions that allow Saccos to instantly loan their members. The members can also repay their loans digitally abrogating the need to physically visit the organization.
The use of Financial technology has not only enhanced the transparency in loan repayment and disbursement, but it has also enhanced the efficiency of Saccos. By embracing technology, Saccos are able to offer their customers digital loans , money transfer services , deposits and balance enquiries among other services.
Many Saccos have also automated their loan underwriting and risk management processes, reducing the time taken in processing loan applications and increasing loan disbursement speed. This has come in handy as they endeavour to reach the under banked population . Members can also track their loan applications, check their loan repayment schedules and receive notifications on their phones.
Consolidating digitization has been essential in promoting financial inclusion in Kenya by allowing Saccos to offer digital financial services to their members. The more SACCOs embrace digital technology, the more Kenyans will have access to their innovative products and services, hence building their wealth and accelerating socio-economic development.
