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Financial Inclusion Champions: A Deep Dive into Kenya’s SACCOs Sector – their Success, Challenges, and the Way Forward

Savings and Credit Cooperative Societies (SACCOs) have long been integral to Kenya’s financial landscape. These member-owned cooperatives play a vital role in fostering financial inclusion, promoting a culture of saving, and providing accessible credit facilities to their members.ย 

Here’s how Saccos in Kenya typically work:

Membership: Anyone who meets the membership criteria can join a Sacco. Membership criteria may vary depending on the specific Sacco, but they generally include individuals who share a common bond, such as being employed by the same organization.

Savings: Members are encouraged to save regularly with the Sacco. These savings may take the form of shares, deposits, or contributions. The amount and frequency of savings may vary among members.

Shares: Members may be required to purchase shares of the Sacco as part of their membership. These shares represent ownership in the cooperative and give members certain voting rights during Sacco’s decision-making processes.

Credit Facilities: One of the primary functions of Saccos is to provide credit facilities to its members. They can apply for loans, and the Sacco evaluates their creditworthiness based on their savings history, shares, and other factors. Saccos often offer competitive interest rates compared to commercial banks, making them attractive sources of credit for their members.

Loan Repayment: Members who receive loans are expected to repay them over an agreed period. The repayment terms and interest rates are usually more favorable than traditional banks. Loan repayments made by members contribute to the pool of funds available for other members to borrow.

Investment: Saccos may also invest their members’ savings in various income-generating activities, such as providing loans to members or investing in profitable ventures.

Governance: Saccos are governed by elected officials who form the management committee. The committee members are chosen from among the Sacco members and are responsible for making decisions about the Sacco’s operations, financial management, and strategic direction. Members often have the opportunity to participate in the decision-making process through general meetings.

Regulatory Oversight: Saccos in Kenya are regulated by the Sacco Societies Regulatory Authority (SASRA), which ensures compliance with the relevant laws and regulations. This oversight helps protect the members’ interests and maintains the financial stability of the Saccos.

Registration Requirements: Most Saccos in the country require certain documentation to accept in new members. These include; Complete membership application forms, identification documents, copies of KRA PIN Certificates, and a prescribed registration fee.

With over 150 SACCOs in the country, each catering to various sectors and professions, let’s take a closer look at some of the best SACCOs that have stood the test of time and continue to empower Kenyans economically.

Stima SACCO: Established in 1974, Stima SACCO originally served the East African Power & Lighting Company employees. Over time, it has grown into one of the largest SACCOs in Kenya, attracting members from all walks of life. With a minimum share requirement of KES 25,000 and a monthly contribution of KES 1,000, Stima SACCO offers competitive credit facilities and encourages a strong savings culture.

Sheria SACCO: Formed in 1971 for members of the Judiciary, AG chambers, and various Government Ministries, Sheria SACCO has grown to serve over 10,000 members. A registration fee of KES 1,700, a minimum share capital of KES 20,000, and a monthly deposit of KES 2,200 make Sheria SACCO an attractive option for professionals in its sector.

Kenya Police SACCO: One of the oldest SACCOs in the country, founded in 1971, the Kenya Police SACCO serves members from the Kenya Police Service and affiliated organizations. Its affordable membership fee of KES 2,000 and a minimum monthly contribution of KES 1,000 or 12% of the basic salary make it accessible to its target audience.

Harambee SACCO: Established in 1969 for the staff in the president’s office, Harambee SACCO has expanded its reach to over 70,000 members from all over Kenya. With a registration fee of KES 1,000 and a minimum share capital of KES 30,000, it provides its members a secure and reliable financial platform.

Hazina SACCO: Founded in 1971 for Ministry of Finance and Planning employees, Hazina SACCO later opened its doors to the public in 1986. Presently, it boasts over 19,000 members. The SACCO requires a minimum share capital of KES 15,000 and a monthly contribution of KES 1,000 or 5% of basic salary. Hazina SACCO’s prudent financial management has led to attractive dividends for its members.

Safaricom SACCO: Established in 2001 to serve Safaricom and other tech company employees, Safaricom SACCO now has more than 18,000 members from various industries. With a minimum share capital of KES 40,000 and a monthly contribution of KES 3,000, the SACCO offers competitive financial products tailored to the needs of its members.

Bandari SACCO: Originally founded in 1975 by 20 East African Harbours and Railways Corporation members, Bandari SACCO now serves 16,000 members. With a minimum share capital of KES 10,500 and a monthly contribution of KES 1,500, it continues to empower workers in the harbors industry.

Kenya Bankers SACCO: Established in 1975, Kenya Bankers SACCO currently serves over 23,000 members. With a membership fee of KES 1,000, a minimum share capital of KES 30,000, and a minimum monthly contribution of KES 3,000, it caters to the banking community’s financial needs.

Nation SACCO: Founded in 1975 for Nation Media Staff, Nation SACCO has since opened its doors to people from all sectors of the economy. With a minimum monthly contribution of KES 2,000 and a minimum share capital of KES 25,000, it offers financial services tailored to its diverse membership.

Waumini Sacco: was established in 1980 with a one-time registration fee of KES 500. To become a member, individuals are required to maintain a Minimum Share Capital of KES. 15,000 and make a minimum monthly deposit contribution of KES. 500.

Kimisitu SACCO: Formed in 1985 by staff from the World Agroforestry Centre (ICRAF), Kimisitu SACCO has now opened its membership to staff from international organizations, NGOs, foreign missions, and embassies. Its Initial Minimum share capital is KES 5,000, making it accessible to professionals in these sectors.

Mhasibu SACCO: Registered in 1986 to provide affordable credit to finance industry professionals, Mhasibu SACCO later opened its membership to professionals from other sectors. With a registration fee of KES 1,000, a minimum share capital of KES 10,000, and a monthly contribution of KES 1,600, it continues to empower professionals through financial solutions.

Each of these SACCOs has significantly impacted their members’ lives by providing secure savings options, affordable credit facilities, and investment opportunities. Their cooperative model encourages a culture of saving and fosters a sense of community among their members. 

Despite their commendable strides in the economic landscape, SACCOs in Kenya are not without their share of challenges. As financial entities, they grapple with internal and external issues that directly impact their operations, growth, and service delivery to members.

One of the critical challenges that SACCOs face is loan default. This problem stems from the credit policy’s laxity, poor appraisal methods, lack of collateral security, and the overall economic situation. Loan defaults significantly impact a SACCO’s liquidity and ability to give out loans to other members, compromising the cooperative’s financial health.

Another challenge is governance issues. SACCOs are often managed by elected officials from within the membership, who may lack the necessary managerial or financial skills to manage a financial institution effectively. Cases of mismanagement, corruption, and fraud are common, leading to financial losses and erosion of member confidence.

SACCOs also grapple with the challenge of technological adoption. In the age of digital banking, SACCOs are expected to offer online and mobile banking services. However, many SACCOs lag in digital transformation due to limited resources, lack of technical skills, and the risk of cyber threats. This limitation affects their competitiveness in the market and convenience in service delivery.

Regulatory compliance is another hurdle. While the Sacco Societies Regulatory Authority (SASRA) oversees SACCOs, compliance with regulations often requires financial and technical resources, which many SACCOs may lack. Additionally, changes in regulations can pose challenges in adaptation and compliance.

Despite these challenges, strategic ways exist to strengthen and uphold the SACCO movement in Kenya. First, SACCOs should improve their credit management systems to reduce the risk of loan default. This can involve improving credit appraisal methods, strengthening collateral requirements, and promoting a culture of prompt loan repayment among members.

Improving governance in SACCOs is also crucial. This can be achieved by instituting mandatory training for elected officials on financial management, governance, and ethical practices. Implementing robust internal control systems and promoting transparency in operations can also help mitigate governance issues.

To address the challenge of technological adoption, SACCOs need to invest in digital solutions that enhance service delivery. This could involve partnering with Fintech providers, seeking technical assistance, or even pooling resources as a cooperative movement to develop common digital platforms.

Finally, to ease the burden of regulatory compliance, there is a need for continuous dialogue between the regulator (SASRA) and SACCOs. The regulator could offer training and technical assistance to SACCOs to ensure they understand and can effectively comply with the regulations.

SACCOs in Kenya have a monumental role in fostering financial inclusion and promoting economic growth. While they face significant challenges, strategic interventions can help mitigate them and strengthen the SACCO movement. The government, regulatory authorities, and SACCOs must work together to ensure these cooperative entities continue serving their members effectively and contributing to Kenya’s socio-economic development.

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