Digital revolution in Saccos: Safeguarding member’s financial information
Saccos are increasingly embracing new digital banking channels, improving service delivery while bolstering growth. The latest Sacco Societies Regulatory Authority Supervision Annual report indicates that Saccos are becoming more competitive through technology optimization.
“It is also encouraging to report that the Regulated Sacco industry is largely adopting the application of alternative financial service delivery channels for the products and services through the deployment of ICT,” said Jack Ranguma, SASRA Board Chairman.
Sacco managers are establishing agencies, mobile money and providing members with ATMs as they gradually replace brick-and-mortar physical branch expansion, which is usually capital-intensive to establish and expensive to maintain.
“The application of these alternative financial delivery channels also brings with them convenience and ease of accessibility to members of Saccos being served and is critical if Saccos are to attract and retain into their membership the mostly techno-savvy generation who are currently in the country’s productive economy,” noted Mr Ranguma.
The Authority said Saccos has also availed digital credit products, repositioning themselves as a one-stop shop for all credit products and discouraging its membership from straying away from other digital credit providers.
Sacco has progressively adopted and launched digital credit products tailor-made and delivered to their clients using digital devices. A total of 44.57% of all regulated Saccos reported offering one form or another of digital credit and loan offerings.
Although using ICT in the many alternative financial delivery channels being adopted by regulated Saccos is fraught with cyber-security risks, the Authority expressed its satisfaction with the cyber-security mitigation measures implemented at the industry levels and at the individual Sacco’s level.
“The periodic regulatory alerts; the adoption of multi-faceted cyber-security solutions; the stringent terms and conditions for usage of third-party integrators and vendor systems which were discussed and adopted during by the industry at the Annual Regulatory Roundtable 2022, ensured that cyber-attacks on regulated Saccos Management Information Systems (MIS) and operations was largely contained during the year 2022,” said SASRA in the report.
SASRA urged Saccos not to rest on their laurels on the containment, noting that “cyber-criminals remain active and are always devising new ways to breach the applicable security solutions.”
Under its new Strategic Plan (2023-2027), SASRA has highlighted key flagship institutional infrastructures aimed at deepening the digitization of the regulated Saccos’ businesses and operations through shared technological services platforms, which aligns with the government’s digital economy agenda.
“To deepen the ease of access to their financial services; ward-off the stiff competition from the many credit financial services institutions; and access the national payment systems infrastructures, regulated Saccos have continued to partner with commercial banks, payment service providers and other third-party fintechs to deploy alternative financial services delivery channels,” said Peter Njuguna SASRA CEO.
According to him, the main channels deployed in these partnerships include–
- Financial services provision through the USSD Code mobile connectivity, which 209 regulated SACCOs have deployed.
- Financial services provision through internet and app-based connectivity, which has been deployed by 103-Regulated SACCOs
- ATM financial services, which has been deployed by 34.09% of all the DT-SACCOs
- Pesalink Integration, which has been deployed by 13.64% of the DT-SACCOs
- SACCO agencies, which had been deployed by 36-DT-SACCOs with over 3340 agents spread throughout the country, and which undertook 1.89 Million transactions valued at Kshs 26.50 Billion in 2022.
He noted that the Saccos’ progressive transition heralded the sub-sector maturity stage at a time when infrastructure necessary for deposit-taking financial institutions, such as deposit guarantee scheme, central liquidity facility, and lender of last resort mechanism, is a prerequisite.
Last year, Saccos transacted over Ksh 26 Billion through agencies. The country has always been referred to as Silicon Savannah in Africa. The adoption and extensive use of fintech for financial transactions in the economy is robustly fuelled by, among other players, the successes of mobile money.
About 209 regulated Saccos had adopted the use of the USSD code, while 109 Saccos had adopted internet-based financial services as alternative delivery channels last year. SASRA noted that some Saccos leveraging technology are revaluating their expansion strategies through agents. It was observed that 36 Saccos adopted this strategy, and it is expected that this trend will likely accelerate in the near future, driven by the incentive for ease of access, efficiency, and cost reduction.
Early this year, the Co-operative Alliance of Kenya(CAK) unveiled a Co-op Tech financial technology firm platform to facilitate inter-lending and reduce electronic fraud to protect people’s money in Saccos.
Co-op Tech is also expected to facilitate Saccos’ share core banking services to help them expand market reach and save cash by cushioning struggling co-operatives to acquire the best ICT tools to deepen productivity by sharing.
Co-operatives Cabinet Secretary Simon Chelugui said the platform accessible to all co-operatives is expected to enhance competition in the sector. “A good number of Saccos owing to lack of strong financial muscle are unable to install current ICT models but through the new platform they will be able to access crucial services and more so expand their market share,” said Chelugui. “The new facility seeks to make affordable core banking services for many co-operatives that have been struggling to raise a huge budget to procure and maintain versatile transaction systems to deter cybercrime.”
