PS Kilemi: The shilling saved in a SACCO is as safe as the shilling saved in a Bank

The government is rolling out a new economic blueprint anchored on the Bottom-Up Economic Transformation Agenda (BeTA) Framework.

The BeTA blueprint has Co-operatives and MSMEs as a critical pillars in the powering of the economic transformation, particularly those at the lower echelons of the pyramid. As a subset of the Co-operatives sector and probably the largest subset thereof, SACCOs are thus a critical enabler towards the realisation of the BeTA vision.

We expect that SACCOs will continue to deepen the mobilisation of savings (deposits) from their membership using their unique traditional BOSA and FOSA deposits mobilisation models.

The statistics at SASRA show that for the period ended March 2023, the 359 regulated SACCOs had mobilised Ksh 639 Billion in deposits, which is quite laudable. We can push these deposits to reach Ksh 700 Billion by next year with more effort.

The government has prioritised savings as an important element in funding national development initiatives. For SACCOs, savings form between 70% and 80% of the funding of their credit facilities. Therefore, without sufficient mobilisation of savings, SACCOs will find it very difficult to meet the members’ credit and loan needs.

This is especially so with the rising interest rates being pushed by external factors, which implies that external borrowing or loans will be quite expensive. Thus, many households and hustler economies will look forward to SACCOs and the recently launched Hustler’s Fund as their main source of credit facilities for household and enterprise financing.

It is about more than just the mobilisation of savings. SACCOs must also assure members of the public of the safety and accessibility of the savings entrusted to them. This calls for our individual and collective responsibilities. The shilling saved in a SACCO should just be as safe as the shilling saved in a Bank. This is the only way we shall endear SACCOs to the confidence and trust of the public, who will then be very ready to save SACCOs.

But to attain this vision, we must do several things. Firstly, we must instil integrity and good governance practices in the SACCO system. All SACCO officers, whether employed or elected, must be people of integrity. The government will apply the full force of the law on the few rotten apples who are bent on tarnishing the excellent work being undertaken by the majority of SACCOs.

I look forward to the rollout and implementation of a Guideline on Good Governance for SACCOs as the industry seeks to entrench the culture of integrity and good governance.

Secondly, SACCOs will only ensure the safety of members’ funds if we comply with the set prudential standards. The prudential standards set in the law on capital adequacy, liquidity, investments, and external borrowing, among others, are meant to ensure prudent management of the SACCOs and thus protect the members’ funds.

Dividends

For instance, do not insist on paying dividends or paying interest at higher rates, whereas the SACCO did not make any surplus or made very little surplus. If you do, then sooner than later, the SACCO will fail to meet its obligations to members.

Another area to keep watch on is investing members’ funds in land or buildings, or other non-earning assets. If you do this, ensure that such investments are fully funded with the SACCOs’ institutional capital; otherwise, if you use members’ funds, what will you do when the members return for their money – which you have tied in non-liquid assets. Please avoid these pitfalls as much as possible, which have brought down many former giant SACCOs.

Members’ complaints

SACCOs should strive to eradicate the culture of unnecessary and incessant complaints by members against services offered by SACCOs. Today, just too many individual complaints are being lodged in all governmental offices against SACCOs, the most common being failure to refund members’ savings, denial of loans or credit services, or denial of such basic things as members’ personal statements.

Why would a SACCO refuse to give a member a personal statement, whereas it is the members’ right? These complaints tarnish the image of the SACCO industry and push away those intending to save with them.

SACCOs must adapt and change with time. We must start treating our “members” as “kings” – the way the private sector does, because they are our customers and goodwill ambassadors.

Once the Draft Complaints Management Guidelines are validated, they should be rolled out as soon as possible, followed by strict implementation to reduce this menace of “complaints”, which only discourages people from joining SACCOs.

ICT

We all acknowledge that using ICT and digitising Sacco’s business operations is the way to go. But that notwithstanding, the SACCO industry, individually and collectively, must be on guard and conscious of the cyber threats and risks associated with using technology in service delivery.

SACCOs must strive to improve their ICT governance, eliminate third-party vendor risks and strengthen the criteria for vetting the staff within the ICT, Finance and Credit departments. The Chief Executive Officer of SACCOs must take their oversight role over staff seriously, including ensuring that internal control measures are put in place. There should be constant checks with SASRA on the suitability of people proposed to be employed by SACCOs as new staff or even when the existing staff are promoted or designated to serve in new positions under the law’s Fit and Proper Test framework.

This is an abridged speech of Mr Patrick Kilemi, Principal Secretary State Department for Co-operatives, during the opening of the Sacco Subsector Annual Policy Roundtable, 2023, at Naivasha town.