Savings and Credit Cooperative Societies (Saccos) have increasingly turned to third-party entities to scale up their operations and meet the demands of their members. As customers demand real-time financial transactions, Saccos, which do not have direct access to the national payment system, have partnered with third-party service providers to connect with the national payment infrastructure and provide more efficient services. These collaborations include partnerships with mobile money service providers, ATM connectivity, cheque partnerships, and Pesalink transfers. Additionally, Saccos have expanded into digital credit offerings and agency banking, further modernizing their operations.
A 2023 report by the Sacco Societies Regulatory Authority (SASRA) revealed that mobile money services have become a cornerstone of Sacco operations. By 2023, 228 regulated Saccos had mobile money connectivity, a number that includes 156 Deposit-Taking Saccos (DT-Saccos) and 72 Non-Withdrawable Deposit-Taking Saccos (NWDT-Saccos). These Saccos offer mobile money services to their members via USSD code platforms, enabling those in areas with poor internet connectivity or lacking smartphones to access financial services.
The number of Saccos utilizing mobile money services grew from 209 in 2022 to 228 in 2023, highlighting the increasing popularity of this service. The most significant growth occurred within the NWDT-Sacco category, which saw a rise from 53 NWDT-Saccos offering mobile money services in 2022 to 72 in 2023. Meanwhile, the number of DT-Saccos using USSD mobile money services remained constant at 156.
USSD platforms have become indispensable for Saccos, particularly because a significant portion of their membership does not have access to smartphones or reliable internet. The availability of mobile money through USSD codes has allowed Sacco members in remote areas with limited internet connectivity to engage in financial transactions without significant challenges.
In addition to USSD services, internet-based applications for mobile money transfer are also on the rise. The SASRA report shows that the number of regulated Saccos offering internet-based mobile money services increased from 103 in 2022 to 140 in 2023. This includes a rise in DT-Saccos utilizing internet-based applications from 75 in 2022 to 91 in 2023. Similarly, the NWDT-Saccos adopting internet-based mobile money services grew from 28 in 2022 to 49 in 2023, with the NWDT segment demonstrating the largest growth in this area.
The growing adoption of internet-based mobile money services is a testament to Saccos’ efforts to keep pace with the technological advancements in the financial sector. The convenience of mobile transactions is gradually being embraced across all segments of Saccos, driven by the demand for more accessible and efficient financial services.
Beyond mobile money services, Saccos have also embraced ATM and cheque partnerships. Many Saccos have partnered with third-party commercial banks to offer cheque financial services to their members. In 2023, 57.47% of all DT-Saccos offered cheque services, up from 50.57% in 2022. The Cooperative Bank of Kenya plays a significant role in this area, with 81 DT-Saccos relying on its cheque issuance, clearing, and settlement services in 2023, compared to 68 DT-Saccos in 2022.
Another notable area of collaboration between Saccos and third-party entities is the use of Pesalink, an electronic fund transfer system offered by Kenyan commercial banks. Pesalink has become popular among DT-Saccos due to its ability to facilitate the transfer of large sums of money between Sacco members’ FOSA savings accounts and other accounts within the Sacco or banking system. Similar to ATM and cheque transactions, Saccos rely on the commercial banking system for the settlement and clearance of Pesalink fund transfers.
Saccos have also embraced agency banking as a cost-effective alternative to opening new physical branches. Through the use of agents, Saccos can expand their reach and offer services such as card transactions and mobile money services in more convenient locations for their members. This approach has proven particularly beneficial for Saccos looking to reduce operational costs while maintaining service delivery.
As the financial report sector continues to evolve, the report observed, Saccos must keep embracing technological advancements and strategic partnerships to remain competitive and relevant.
