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At Kshs. 210 million in total assets the Kenya Sacco sector has come of age ready to effectively play its role of financial provision to Kenyans.

The Sacco subsector is part of the massive Kenyan Co-operative movement comprising of both financial and non financial cooperatives. Saccos are the financial cooperatives while non financial cooperatives include Dairy, livestock, coffee, fishermen, housing, multipurpose and many others which have made their indelible mark to the lives of Kenyans.

Being the largest in Africa, Saccos control 67% of the total assets and 62% of the total deposits for the entire continent.

The uniqueness of the Sacco movement is its geographical distribution across Kenya. In all the 47 counties there are numerous Saccos providing financial access to hitherto financially excluded Kenyans.

As envisioned in Kenya’s development blueprint, Vision 2030, Saccos are already playing their critical role of savings mobilization for investments. Many rural and urban Kenyans now own homes and other business enterprises courtesy of funds through their Saccos.

How important is the Sacco movement as a force for social and economic transformation of Kenya?

Savings and Credit Co-operatives (Saccos) are associations of people who have come together with common goals geared at improving their livelihood economically. They are an important part of the financial sector in Kenya, providing savings, credit and insurance services to a large portion of the population.

Saccos have played an important role in the development of the Kenyan economy which has led to the uplifting of the standards of living of the people. Through their Saccos members are able to access quality education and medicare, funds for enterprise development, home purchase or construction and many other financial benefits.

Due to the rapid growth, the Government of Kenya’s commitment to established SACCO legislation, implement international financial performance standards and begun supervision of SACCOs with the sole aim of providing the incentive for improvement of SACCO management and performance.

The critical role of Saccos has been recognized under vision 2030 of mobilization of savings for investments. It is therefore expected under the new Sacco legislation and adoption of prudential regulations growth of Saccos will quickly improve. The Sacco movement has entrenched the culture of savings to Kenyans which is a pre-requisite for wealth creation. On retirement employees of various organizations walk home smiling with savings accumulated in their Saccos during their employment period.

What role does SASRA play in this whole mix?

SASRA immensely contributes to the national co-operative sector flagship projects and support initiatives by developing and implementing relevant programmes and activities in cooperative governance, safety and security of members’ deposits, business process automation in the Sacco sub-sector, research and development in the Sacco sub-sector, as well as carrying out education and training programmes for regulated Saccos.

By benchmarking Saccos with the best run credit union worldwide through implementation of internationally recognized prudential standards, SASRA seeks to build a top notch Sacco sub-sector able to meet ever changing member demands through prudential regulation.

Please discuss why SASRA was set up explaining the importance of the authority.

The setting up of SASRA was in response to the rapid growth of the Saccos without a corresponding legal framework to guide its growth and development. With this in mind the SACCO Societies Act in 2008 was enacted to provide for licensing, regulation and supervision of deposit taking Saccos through the adoption of prudential and non prudential regulations. Therefore the establishment of SASRA was in line with the Governments financial sector reform initiative. It should be remembered Kenya seeks to strengthen its position as a financial hub for the region and as a reference point for financial development.

The ongoing financial reform process in the financial sector seeks to first protect the interest of Sacco members and ensure public confidence towards the Sacco sector and secondly to spur Kenya’s economic growth through mobilization of domestic savings.

So how big is Kenya’s Sacco movement vis-a-vis other regions. Please explain giving figures.

Kenya has of the most vibrant and dynamic Sacco sectors in Africa. They range from agricultural and livestock co-operative societies in the rural areas to the savings and loan co-operatives in the urban centres.

Many countries in Africa have focused attention on the legislation of micro-finance and non banking financial institutions, some have adopted prudential standards specific to Saccos while others uses existing banking laws to regulate Saccos. Thus, in most of the African countries, regulation and supervision of Saccos are under the Banking supervisory Authority (central banks). Kenya and South Africa have independent regulators with specific regulations- Sacco Societies Act and Co-operative Banking Act respectively.

Kenya has the largest and the most vibrant Sacco sector in Africa commanding 67% and 62 % of the total assets and deposits/savings respectively in the African continent. The table below depicts Kenya’s position in the African Continent.

Many countries in Africa have focused attention on the legislation of micro-finance and non banking financial institutions, some have adopted prudential standards specific to Saccos while others uses existing banking laws to regulate Saccos. Thus, in most of the African countries, regulation and supervision of Saccos are under the Banking supervisory Authority (central banks). Kenya and South Africa have independent regulators with specific regulations- Sacco Societies Act and Co-operative Banking Act respectively.

Regionally, Kenya’s financial sector is ranked highly and so is the Sacco sub sector. SASRA aims to strictly enforce the Act and Regulations to entrench good governance practices, operational and financial management systems that promote sound financial and business practices in the Sacco subsector.

What is the capacity of the sector’s ability to mobilize funds and what is this in comparison to the national savings?

The total Sacco Sub-sector was worth Shs 210 billion in 2010 while deposit taking Saccos had about Shs. 171 billion of this amount.

The Kenya Sacco sub-sector comprises both deposit taking and non deposit taking Saccos. There were 5,544 registered Saccos in Kenya as at December 31st 2010. Out of the 3,983 active Saccos in Kenya 218 or 6% operate FOSAs that is they are deposit taking. The rest or 84% do not have FOSAs.

There is an effort to develop regulations to take care of the remaining Non Deposit Taking Saccos to ensure that the whole sector is prudentially regulated.

What role has the movement played in Kenya’s growth and development?

The Cooperative Movement has played a very big role in the development of our country by pooling resources for investments and wealth creation. The Movement remains the most important vehicle through which poor Kenyans can pull resources and eventually grown to cover various economic areas.

These include but not limited to Saccos, transport, housing, agricultural, manufacturing, warehousing, ICT amongst others. This way the movement controls 43% of our gross domestic product and contributes about Kshs.210b towards our national savings. At the same time, the co-operatives sector today employs over 300,000 Kenyans directly and many more indirectly.

Out of the 20 million adult population in Kenya what percentage is served by Saccos as opposed to banks and MFIs?

According to the Kenya economic report 2009, of the 20 million Kenyan adult population 22.5% are served by commercial banks and MFIs while 17.6% are served by Saccos. Due to this large coverage and focus on small income class it made it imperative for Saccos to be regulated.

It should be noted that Saccos are distributed widely across the counties in the country and therefore better positioned to bring more Kenyans under financial inclusion compared to other financial services providers. This position will be enhanced by the adoption of prudential and non prudential regulations as envisioned in the Sacco Societies act of 2008.

Please explain the above scenario and what can be done to enhance the uptake of SACCOs and inherent benefits.

SACCOs in Kenya are gradually responding to the fast changes in the financial environment and adopting new approaches to the SACCO model. SACCO membership is based on common bonds and knowledge about the borrower. These mechanisms, SACCOs argue, have proven their ability to manage risk, enforce lending contracts and reduce the transaction costs of delivering credit.

Until recently, SACCOs have been able to retain their membership and attract new members through natural affiliation, stemming from the common bond among members. With increased competition from other financial service providers and other factors such as retrenchment, Sacco membership was on the decline prompting the SACCOs to come up with strategies and products to assist them cope with these challenges. Some of these strategies include extending to alternative markets from what they had predominantly served and diversifying their product range.

Which are the main challenges facing SACCOs in Kenya right now? Solutions?

The current challenges facing the sector are similar to those of the cooperative movement which include weak governance, low uptake of information technology, and low level of professional skill development in management in both senior and junior staff. There is also a challenge of strong competition from the mainstream commercial banks and lack of institutional capacity development.

The current legal framework comprising of the Sacco act and regulations is meant to address this challenges. However a multi pronged approach to addressing these challenges encompassing the sector stakeholders and the authority would be more appropriate.

The new constitutional dispensation also places responsibility on the citizens through a devolved government system will also indirectly addresses the challenges facing the Sacco subsector. The county system will also require financial provider’s including Saccos to be competitive enough inorder to attract resources at the county level.


Vision 2030