How the Sacco business model is changing
Today’s financial services provider is essentially digital and patronage is principally driven by convenience and ease of access.
In Kenya, the Sacco sub-sector is gradually abandoning the old ways of brick and mortar to embrace the usage of ICT and other technologically enabled mobile devices in their operations and service provision.
Following the governmental restrictions imposed on the national economy in response to the COVID-19 pandemic, the Sacco Societies Regulatory Authority (SASRA) in consultations with the Commissioner for Cooperative Development issued a raft of circulars to address the operations of the DT-Saccos under the COVID-19 restrictions.
Firstly, the Authority issued Circular No. 1 dated 17th March 2020 which among others allowed DT-Saccos to submit the audited Financial Statements to the Authority for approval electronically.
This was necessitated by the fact that the onset of the governmental COVID-19 Pandemic restrictions in mid-March 2020 coincided with the periods when DT-Saccos are required by the Sacco Societies Act and the Regulations, 2010 to submit to the Authority their respective audited Financial Statements for approval before presentations to the general meetings.
Consequently, the circular Societies submit, seek approval, and processing of their audited Financial Statements through email or other electronic means.
It also encouraged DT-Saccos to avoid physical contact transactions, and instead promote the usage of cashless transactions using digital payment channels such as ATMs, POS terminals, online, mobile/smartphones, and card networks.
After the pandemic outbreak, many Saccos have been forced to digitize the provision of services to their members through electronic channels.
Even with the pandemic, the use of technology to address the changing customer circumstances is crucial.
In these volatile times, it is critical for the Saccos to understand their members’ changing needs and provide innovative services that suit them.
This means that Saccos that focus on members’ touchpoints; have digitized customer experiences including cross-channel coherence and self-service portals, will emerge at the top of the pile.
Saccos are being advised to focus on improving operational efficiency by adopting new operational procedures and re-engineering processes, to ensure continued service delivery.
The Sacco leadership can no longer wait for physical board meetings and supervisory committee meetings in order to ratify decisions or to physically sign documents.
In terms of communication and collaboration embracing virtual meetings via various online platforms such as Microsoft Teams, Zoom, and adopting digital documents signing will enhance productivity and ensure Sacco operations do not grind to a halt.
Operational processes should also focus on enhanced staff enablement during these times.
This would mean Saccos equip employees to adopt working remotely while maintaining a sharp eye on performance management.
Most probably, after the COVID-19 era, some Saccos will revert to working at the office. However, this pandemic has demonstrated that working remotely is doable and if applied well, may even enhance the elusive work-life balance for many.
Could this pandemic have presented an opportunity for Saccos to re-engineer their business models?
The majority of Saccos in Kenya are yet to fully leverage technology offering digital channels that are becoming the key means of transaction.
From a Credit business point of view, Saccos will need to focus more on online lending and as a result, will have to review credit policies while efficiently managing credit risk and remaining compliant with the regulator.
There is no doubt that in the post-Covid-19 era, SACCOs will find themselves in the deep end of the digital sea and will have to adopt online lending for both short-term (mobile loans) and long-term (development loans).
In support of government intervention measures to cushion Kenyans from the effect of the pandemic, financial institutions are required to restructure existing loans on an a-need-basis and waive late repayment penalties.
It will be necessary to expose these and other credit services, such as top-ups through digital platforms, given that members will not visit a branch to negotiate or discuss a loan restructuring plan.
The brick-and-mortar model needs to be revisited with Saccos having to consider converting some branches into marketing satellite centres or training centres and member support.
