Cooperative movement in the country have been challenged to optimize their potentials by tapping into new and lucrative avenues to double their resources in the sector
Despite controlling close to Ksh 1 trillion worth of assets, the movement is yet to fully exploit endowed new economic avenues such as real estate, retail and wholesale ventures which largely remains unexploited
Cooperative Alliance of Kenya (CAK) chairman Macloud Malonza however expressed optimism that the cooperative movement continued to register impressive milestone that contributed to the larger economic growth of the country.
“The cooperative societies have continued to mobilize more resources and disbursed them to investors in loans posting very progressive records as a leading financial cornerstone for business startups but had more room to tap into other and lucrative economic sectors to register more growth,” said Malonza.
Speaking during a two day workshop organized by the CAK on how the cooperative leaders can align with current tools to overcome emerging risks facing businesses, the chairman however expressed fears that the cooperatives had primarily concentrated their resources bases from traditional economic sector like coffee, dairy and tea but have not gone beyond to the new avenues.
According to the Sacco supervision annual Report, 2023, released this week by the Sacco societies authority (SASRA), Savings and Credit Cooperative Societies harbours the largest proportion of the sector’s assets which amounted to Sh971.96 billion representing 6.43 per cent of the national nominal gross Domestic product (GDP).
During the year 2023, 357 regulated SACCOs gross loans grew by 11.50per cent to reach Sh758.57 billion from Sh680.35 billion in 2022, depicting increased demand for their credit services. These loans were mainly funded by savings and deposits mobilized from the membership which increased by 9.95 per cent to reach Sh682.19 billion in 2023, thereby cementing the place of regulated SACCOs as critical mobilizers of domestic savings.
Malonza said the cooperative movement is on course saying the Cooperative new bill that is at its second reading and almost being finalized hopefully by October will be able to change the business model of the SACCOs.
Director in charge of the Cooperatives Banking Division at Cooperative Bank of Kenya Vincent Marangu noted that cooperatives are model and contribute in a big way in enhancing financial inclusion.
He said by July this year asset bases under the control of all cooperatives have reached close to Sh1.7 trillion demonstrating the sector endowment.
“There are more opportunities the cooperative movement can pursue to grow their businesses, for example, property development, retail and wholesale sectors, hospitality industry, transport and health sector,” said Mr. Marangu.
In the developed world credit unions are controlling a huge sector of the economies as well as the national savings and according to the state department of Cooperatives, close to 35 per cent of the national savings is under the cooperative societies.
Marangu explained that the cooperatives can grow their credit business by expanding beyond the usual sources such as salaries and other proceeds and fast track other businesses associated with institution members.
“This however requires a high level of business innovation, mind and interaction. For example, as Sacco credit officer go further and ask the teacher, banker, transport officer, manufacturer, worker, what else do you do? If the farmer undertakes dairy farming or poultry farming where are their proceeds deposited to,” Marangu added.
He gave an example of cooperatives that have been risking on investing in housing projects saying its important that they know at what level to scale it up and also pick up on the project
What we are seeing, he added, is the appetite for large, mega projects. But we have seen that the most successful investment cooperatives or housing cooperatives are the ones that are able to take smaller projects, that they are sure they are able to offload to their members.
“Work on a project of 1000 houses, where you have an assurance that 80 percent of your members will take up the project, and you go out there to market 20”., he said
The Director encouraged SACCOs who normally make good money at the end of the year to think critically on their reserves, how they are a building on their capital so that they prepare themselves for difficult times in future.
“ If there could be such a time, this is the time now that SACCOs are now empowered to know that they are not competing on dividend payment or interest on deposits but on creating reserves and building their capital for any day in future”, he added
Marangu noted that SACCOs and corporates in general have remained resilient and that is the sustainability in the sector. “Supporting the members, giving them loans at fairly priced rates, giving them back in terms of sharing what they remain with in a very sustainable manner, which is what will take our cooperatives forward.
The theme for the two day workshop is –“Integrating continuous improvement in audit, financial reporting and risk management strategies for co-operatives of tomorrow.
By Wangari Ndirangu
