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Kenya is one of the most diversified and fastest growing economies in Africa, with an average growth rate of 5.7%, inching closer by the day to its ambitious vision of becoming a middle-income country in the next decade. Central to this robust growth has been the invaluable contribution made by co-operatives, popularly known as Savings and Credit Co-operative Societies (SACCOS); which not only play a pivotal role towards the country’s Gross Domestic Product (GDP), but also leave an ineffaceable mark in the lives of millions of members, so much so that the country was recently selected in a series of country studies by the renowned international co-operative research group, the U.S Overseas Co-operative Development Council (OCDC).  

‘What difference do co-operatives make in Kenya?’was the title of the study, which sought to establish if and how co-operatives make a social or economic difference in the lives of their members and communities. Kenya was selected as the second country for the study, the first being Poland, in recognition of the co-operatives’ significance as an economic engine in the country which still boasts of the largest movement in Africa and ranks in the seventh position globally. Indeed, a ‘co-operative difference’ was detected in Kenya from the research study, with co-operative members reporting higher annual incomes and economic well-being than the average Kenyan, which they attribute to their co-operative membership. The results further indicated that co-operatives are valued for their potential to attract investors, create jobs and provide support during emergencies. 78% of rural and 80% of urban respondents affirmed the co-operatives’ positive influence in their lives and their communities, in terms of quality and life improvements. Nearly all (97%) attest that membership positively affects their households’ financial situation. 

In reiteration, the Nationwide Co-operative Sector Baseline Survey, released in Q4 of 2020 by the State Department of Co-operatives (SDC) further illuminated the fundamental significance of co-operatives in the country. The principal objective of the survey was to establish the economic and socio-cultural significance of co-operatives to the Kenyan economy determining their contribution to various economic sectors, which included those that engage in raw materials, manufacturing, financial and service sector, housing, health, education and food security. Additionally, the study was carried out to highlight the contribution of co-operatives to national savings and tax revenue. The results indicated that in 2018, co-operatives injected Kshs173.26 billion to the GDP, accounting for 31% of national savings. In the same period, the Survey revealed that foreign exchange earnings contributed by co-operatives amounted to Kshs20.839 billion in exports. The results depicted that there were 23,275 co-operatives in the SDC register as at 31st December 2018, cutting across all sectors of the economy with a total membership of 6.35 million people. The report established that co-operatives controlled assets worth approximately Kshs1 trillion, had mobilized savings to the tune of Kshs730 billion, with loans and advances amounting to over Kshs700 billion. Furthermore, co-operatives have been identified as an integral conduit to the achievement of the President’s Big 4 Agenda, Vision 2030, the UN Sustainable Development Goals (SDGs) and Africa’s Agenda 2063 for a shared prosperity. Moreover, co-operatives will, for the first time engage in the 2021 G-20 Summit deliberations slated for October in Rome, Italy. 

Key New Developments to Boost the Sector 

In cognizance of the indispensable role of co-operatives, the government through the Ministry of Co-operatives and the pertinent industry regulators has been injecting a great deal of support to the lucrative sector. In tandem the government has been seeking to seal all existing loopholes to strengthen the co-operative fabric. For instance, the long-awaited Sacco Societies Fraud Investigation Unit (SSIFU) became fully operational in January 2021, domiciled under the Sacco Societies Regulatory Authority (SASRA). The Unit was specifically commissioned to address issues of governance and mismanagement in the sector, which has been marred by fraudulent activities and pyramid schemes. Consequently, this has swindled members out of their hard-earned savings plunging them into financial distress. Similarly, in a bid to curb the unbridled unethical and unprofessionalism in the movement the Kenya Society of Professional Co-operators (KSPC) is also currently operational. Its core mandate is to promote professionalism, thereby taming mismanagement by unscrupulous officials possessing leadership roles in co-operatives. The formulation of the Central Liquidity Fund (CLF) is ongoing; an inter-Sacco lending market initiative, whereby Saccos will have the ability to lend and borrow from each other. Eventually the Fund seeks to integrate Saccos into the National Payments and Clearing system, eliminating external borrowing especially from commercial banks whose loans are deemed costly. Mergers and acquisitions of small Saccos as recommended by the Regulator has further bolstered the sector. Large Deposit-Taking Saccos (DT-Saccos) have been urged to absorb these smaller entities, to save them from imminent insolvency, should the planned consolidation and amalgamation initiatives in the co-operative movement come to pass. Under new regulations launched in January, all Non-Deposit-Taking Saccos with non-withdrawable deposits worth Kshs100 million and above will henceforth be under the regulatory oversight of SASRA.  June 30th was set as deadline for them to comply with the new rules. This will see an extension of benefits of regulated savings and loan services to more Kenyans, consequently boosting the stability and resilience in the sub-sector. The 2020 CRB regulations published by the Central Bank of Kenya (CBK), has greatly aided the sector in dealing with perennial loan defaulters, with co-operatives’ inclusion into the credit sharing system enabling them to easily gauge the creditworthiness of members before disbursing loans. 

Co-operatives Bridging the Housing Deficit in Kenya 

In line with the Big 4 Agenda on affordable housing, co-operatives are addressing the gaping housing deficit through the Kenya Mortgage and Refinance Company (KMRC). Co-operatives such as the Kenya National Police, HarambeeStimaUkulimaSafaricomImarika, Tower, Mwalimu National, Bingwa are among the few Saccos that qualified to become shareholders of the company. The state-backed KMRC was established two years ago, as an initiative of the National Treasury and World Bank to support the affordable housing agenda, by providing secure long-term funding to selected mortgage lenders. The sole aim of the initiative is to increase the availability and affordability of mortgage loans to Kenyans. In September 2020, KMRC was issued with a license by the CBK, unlocking the disbursement of funds by the World Bank and continental Development Finance Institution, and African Development Bank to the tune of Kshs35 billion in form of debt financing through the National Treasury. The key objective is to address the shortage of long-term finance in the Kenyan financial market which has made accessibility of home loans to many Kenyans almost impossible. This refinancing will go a long way in making affordable housing a reality for many Kenyans, actualizing the provision of secure, long term finance to primary mortgage lenders, who are then supposed to advance the same to members, in the case of co-operative shareholders. The lending which is currently provided at a fixed rate of 5% per annum will help lenders create new mortgages in the market on long term tenure within single digits rates. The company already commenced disbursing funds to the co-operative shareholders such as Stima Sacco which received Kshs69 million and Tower Sacco Kshs29 million respectively. 

Co-operatives Edging Out Competitors 

More Kenyans are jumping onto the co-operative bandwagon as their preferred choice of financial institutions to save, invest and grow in. Numerous viable reasons have led to this shift such as ease of accessing loans, dividends, lower interest rates and flexible payment terms. According to the OCDC report, the two most valued benefits for co-operative members are financial in nature, with survey results further confirming that “economic advantages” and “access to credit and loans” are the primary motivations for Kenyans to join the movement. Since the onset of the pandemic, co-operatives across the board restructured and revamped some of their loan products introducing new ones to better cater to the needs of their members who had been adversely affected by the pandemic. Additionally, in line with the 7th co-operative principle on ‘concern for the community’ co-operatives came together and formed the Co-operatives Coronavirus Response Committee, which offered relief to over 500,000 vulnerable households. Such strategies won the loyalty of many Kenyans who were already members, simultaneously attracting non-members to join the movement.  

Existential Hiccups 

The burgeoning of the co-operative movement has necessitated the formulation of solutions, to deal with the major issues that have been crippling the sector. However, the major challenge that co-operatives are facing is the non-remittance of employee statutory dues, which was vehemently discussed at the 6th annual Sacco leaders convention held in February. This has destabilized the financial base of Saccos, greatly contributing to the liquidity crisis which was exacerbated by the Covid-19 pandemic. Close to Kshs4 billion is owed to Saccos by the government, state agencies, universities, county governments and parastatals who are among the top defaulters of employee deductions. The outstanding amount in Sacco remittances recovered in the financial year 2020/2021 was Kshs900 million. Another challenge is the appalling gender disparity in Sacco governance, as revealed in latest Supervision report by SASRA. Co-operative governance is largely dominated by men who take up 96.4% of the chairpersons post, which translates to 165 positions out of the 171 deposit-taking Saccos, with only a paltry six (4%) being women. Men take up all coveted key positions at the helm of Sacco governance including the vice chairpersons, treasurer and secretary posts. Notwithstanding, the Kenyan Chapter of the Global Women Leadership Network set by the World Council of Credit Unions is on a mission to change this narrative. The Network seeks to empower women in Kenya to seize leadership positions in the co-operative movement.  It serves to narrow the inequality gaps for women, growing the pipeline of leaders in co-operatives, with a firm belief that co-operatives can only realize their full potential and maintain their competitive advantage by bringing the distinctive vision that women leaders offer to transformative outcomes. Co-operatives have also become susceptible to cyber-attacks which have come with the digital shift in operations. In response, co-operatives are heavily investing in cybersecurity armour to guarantee the safety of members’ data and funds. 

Inarguably, the co-operative ecosystem should be nurtured and supported to maximize on all potential benefits. According to a recent report by the World Bank, Kenya’s economy is estimated to have contracted by 0.3% in 2020, due to the Covid-19 pandemic. In light of this, the OCDC report indicated that co-operatives in Kenya provide an excellent baseline for economic recovery from the pandemic, as they are well poised to play the role. With concrete structures in place, together with their networks which are deeply integrated into the Society, co-operatives were found to be instrumental in ensuring that recovery is broad-based and inclusive. 

By June Njoroge

Source of original article: Investing – The Exchange (
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