Technological advancement has caused a lot of disruption and unprecedented dynamism all through our social lives.
Saccos are facing stiff competition from peers and banks providing similar products and services.
It is becoming more and more difficult by the day to retain members’ loyalty and patronage due to similar/alternative and generic products and services that are available in the market.
The unprecedented nature of the COVID-19 pandemic continues to disrupt and cause various challenges in a complex and fast-changing environment.
In addition to strictly complying with Government guidelines and measures stipulated to contain the spread of the virus across, Saccos are forced to carry out structured analysis of the business environment arising from the pandemic’s impacts to guide their strategic decision-making.
Saccos today are facing a number of challenges which include:
- The rise of mobile lending through Fintechs such as Branch, M-shwari, Tala, and many others, which are largely unregulated and offer loans to the public through mobile platforms
- Declining economic performance and increasing inflation rates, leading to loss of economic activities
- The withdrawal of tax holidays granted in March 2020 to cushion employees against COVID-19 impacts and reduction of the associated income tax bands
- The introduction of employee Contributory Pension in the Civil service
- The launch and registration of Unclaimed Financial Assets Authority (UFAA)
To mitigate and cushion members against the highlighted constraints, Saccos have to continually review their products and services besides analyzing the business environment and the impacts of COVID-19 to guide their strategic decision-making.
Commercial banks have continuously unleashed all manner of tactics to undermine Saccos business and growth as they have openly ventured into what traditionally has been regarded as the Saccos preserve and territory. Again, it’s certainly the banks that have disrupted the conventional Sacco business which members had grown with and accustomed to.
Commercial Banks today have forced Saccos to look elsewhere for customers as they promise to approve loans within the shortest time, capitalizing on the fact that most Saccos utilize deposits, unlike banks to grant loans to members in a multiplier of times three (3) or four (4) times based on the Sacco financing model works.
Competition from the banks has impacted negatively on Saccos business by way of reduced membership and loss of income. We have witnessed Commercial Banks’ tendency to lure members of Savings and Credit Cooperatives with deceptively attractive offers. This is a dangerous trend that we all must guard against as most banks are driven primarily by the profit motive hence the numerous hidden charges on their loans.
However, in the current market dynamics and changing environment, competition is welcome so that Saccos and their members can benchmark on their strengths and weaknesses. Indeed the dynamic challenge requires continuous innovativeness and strategic response for a renewed hope for the future.
Written by Ukulima Sacco National Chairman Dr Philip Cherono
