Co-ops turn to IT to survive the effects of the COVID-19 pandemic.
By Staff Reporter
The economic meltdown after the first COVID-19 case was announced in Kenya in March 2020 has had a devastating effect on employment and businesses. As a result, many employees, including Savings and Credit Co-operative Societies (Saccos) members, went on unpaid leave or had pay cuts.
A growing number of firms and personal businesses have either recorded losses, scaled-down operations, or have completely shut down. This has resulted in many Sacco members withholding their contributions or withdrawing their savings to cater to personal financial needs.
Some Saccos have scaled up their IT platforms due to COVID-19, viewing the pandemic as a silver lining.
An example is Tai Sacco which had already rolled out agency banking solutions in March 2020 when the first COVID-19 case was reported in Kenya.
Tai Sacco, which has its head offices in Githunguri-Kiambu County- was already providing its members with mobile phone solutions, in partnership with Tangazoletu, way back in 2012.
“This platform enables members to make deposits, withdrawals, buy airtime or apply for loans using their mobile phones. In 2017, we introduced a paybill that now enables members to make deposits to their SACCO accounts,” said John Mwangi, Tai Sacco CEO. This pay bill number has boosted the deposit mobilization efforts of Tai Sacco, eliminating the need for members to make deposits at the banking hall.
“We have been doing quite well even with disruptive effects of the pandemic, especially with the full rollout of agency banking last year. Tai Sacco now has over 50 agency banking outlets,” said Mwangi.
With the introduction of a pay bill number, Tai Sacco had increased its members’ deposits from Ksh 38 Million in 2017 when the pay bill number was introduced to Ksh 500 Million in 2018 and Ksh 800 Million in 2019.
“With technology we are doing well and almost there. We are at the point of linking till numbers to accounts of individual members. This development will enable a member to go to a petrol station and pay for fuel through the till number that is linked to the society,” said Mwangi.
Like all IT users, Tai Sacco has been keen to have robust cybersecurity systems to protect members’ accounts.
“We have contracted an IT solution provider to provide surveillance round the clock, all week including weekends and public holidays as well as at night when normal business hours end. We receive reports of any intrusions and also use firewalls to protect accounts of members from hackers and crafty individuals,” said Mwangi.
Industry lobby groups such as Kenya Union of Savings and Credit Cooperatives (KUSCCO) and Co-operative Alliance of Kenya (CAK) have been pushing Saccos to consider suspending interest on the loans taken by their members due to the economic downturn. As a result, this has affected the liquidity of Saccos.
Many Saccos have moved their services to electronic platforms and are now leveraging on their IT investments to deliver financial products and services to members.
With adverse effects from coronavirus taking their toll, individual Saccos have been left alone to decline on the best approach to solving their challenges, given that each society has unique challenges.
“The board of each Sacco has had to decide on the best options when dealing with effects of COVID-19 including use of IT as well as extending the loan repayment period for members. There is no common approach on how to deal with COVID-19 effects,” said Daniel Marube, CAK Chief Executive.
For those Saccos that have been slow to upscale their IT platforms, the pandemic has presented them with the biggest hurdles ever.
Many such Saccos have been experiencing low deposits from members as well as a fall in demand for loans from members.
Others are experiencing problems after suspending field sales representatives from moving from place to place to collect cash from members.
Even after reluctantly shifting to digital platforms, this new format remains challenging because avenues for conducting member education have been shut for many Saccos due to social distancing and other public health protocols and restrictions.
