Competition for payment of super dividends costs cooperative movement


Competition for payment of super dividends and interest on deposits among Saccos has topped the list of the major issues affecting the pace of growth of the cooperative movement in the country.

The Kenya Society of Professional Co-operators (KSPC) has raised concern over the current trend of offering super dividends and interest on members’ deposits among Saccos.

They raised concern that some Saccos issue out deposits up to 20 per cent. 

Speaking to the Sacco Review, KSPC acting Chief Executive Officer Symon Mburia said the trend has presented a problem to Saccos.

“To sustain these rates, Saccos have to raise the cost of services being offered to members,” observed Mr. Mburia.

The participants noted that this trend is self-defeating because the main reason why Saccos were formed was to provide credit services at an affordable cost, and the commercialization of co-operative services has drawn back the only comparative advantage that co-operatives had against other enterprises

“The focus of growth has now changed from the member personal growth to organisational profitability. Of more concern is that persons endowed with large amounts of money are now getting into Saccos as an investment avenue. These members are not in Saccos for loans but the huge returns. Overall, the effect of this is an escalation of cost of services which is born by the ordinary members,” added.

The participants were of the opinion that Saccos adopt a conservative dividend policy or that Sacco Society Regulatory Authority (SASRA) be requested to provide caps on dividends.

Other major concerns include no documentation of the early history and development of the co-operative movement in the country, lack of established knowledge management systems, collaborative learning and support amongst cooperatives and member education.

Mr. Mburia noted that it was time the co-operative movement looked at things differently since the identified issues threaten the growth of the movement.

No documented history on Co-operatives

During the retreat, members noted that a lot of information on the industry is scattered or lost hence making the establishment of knowledge management systems in the movement a challenge.

The practitioners also raised concern regarding the documentation of the early history and development of the co-operative movement in the country. Their major concern was the documentation of the history and registration of first co-operative in the country, and Co-operative institutions in the country missing a copy of the Cooperative Societies Act, No. 39 of 1966. 

“Many crucial documents on the sector are hard to get. These documents include old co-operative laws, policies and reports and circulars. This situation has created discontinuity in the management of co-operatives where the current managers can no longer relate with the important part of the co-operative movement or even the cooperative organisations they serve,” said Mr. Mburia.  “This was identified as the main reason why the co-operative identity is being eroded as time goes. This scenario also applies to the State Department responsible for cooperatives, county governments and national Co-operative Federations.”

Proposals to document the cooperative history have remained a mirage.

“Consequently, this deals a serious blow to scholars of cooperative legislation who may not know its evolution in the country. What I know is that the 1966 Act was a masterpiece having been enacted with the support the International Labour Organization (ILO) pursuant to (ILO) Recommendation No 193 on the promotion of cooperatives,” stated one of the practitioners in the platform.

A section of KSPC members pose for a group photo

The Co-operative practitioners recommended the establishment of libraries and document repositories in all cooperative organisations to preserve the knowledge in the movement and called upon all cooperatives to set aside some space either physical or virtual where all important documentation including annual reports is preserved for future reference.

Learning, Support in Co-operatives

The practitioners also expressed concern on Collaborative Learning and support amongst Cooperatives arguing that the co-operative   principles of “co-operation amongst cooperatives” and “Information Education” which advocate for collaborative learning amongst co-operatives is not being applied as assumed.

“There exists unnecessary competition among cooperatives to the extent that information sharing has become hard. Mentorship of young co-operatives by their big brothers is no more,” said Mr. Mburia.

He added that in the past, established cooperatives would assist upcoming ones with their accounting staff to assist them in maintaining their books until they got capacity to hire their own

“For instance, National Co-operative Organizations (NACOs) came together and assisted fellow Kenyans who earned their livelihoods by collecting empty plastic bottles for recycling to form the Mustard Seed Sacco. The initial capital was received from Kenya Union of Saving and Credit Co-operatives (KUSCCO), CIC, Cooperative Bank and others,” he said.

The participants noted that co-operatives are stronger together and whenever one is in trouble all get affected hence  the government should develop collaborative guidelines for co-operatives to improve collaboration especially amongst devolved units.

Members’ Education

Members noted that members’ education is very critical for a progressive co-operative movement.

“A knowledgeable member is able to make appropriate decisions during meetings, the opposite also applies. The responsibility for member education lies with the society and the government,” said Mr. Mburia.

It emerged that member education is no longer budgeted for by the government while co-operatives have turned member education forums into product marketing.

In essence, members no longer understand their bylaws, annual reports and balance sheets amongst other important elements of their co-operatives.

The participants therefore recommended that co-operative societies should provide adequate budgets for their members’ education and appropriate persons knowledgeable in co-operative philosophy should be targeted to train them.

The participants also talked on classification of members, the application of the democratic principle in cooperatives and their effect on the future growth of cooperatives.

KSPC, a professional body formed as required by the National Co-operative Policy, is meant to restore the image of the multi-billion sector which has been greatly affected by inadequate professionalism managing the sector, leading to great loss of members’ savings.

By Roy Hezron

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