The Commissioner of Cooperatives David Obonyo has warned management of Saccos against diverting members’ deposits to non-core businesses.
He expressed concern over the rate at which some Saccos were investing members’ funds in projects such as land buying.
“Do not engage in non-core businesses at expense of members’ funds,” he cautioned.
The commissioner said stern action will be taken against Sacco officials who thrive on misappropriation of members’ savings.
“Sacco core business is mobilizing savings from members, and then providing them with credit at affordable interest rates”, he stressed.
He said the government will tighten regulations to ensure members’ funds are safe in Saccos.
The commissioner revealed that there are more than 5,000 Saccos in the country and that co-operatives in Kenya have accumulated savings and deposits of over Ksh850 billion into an asset base of over Ksh1.2 trillion and a loan portfolio exceeding Ksh800 billion, adding that the sector contributes about 30 percent of national savings.
Obonyo said proper management of Saccos could make them an efficient tool against poverty.
He noted that unlike other financial institutions, Saccos provide opportunities for the poor to access easy credit but regretted that most are dogged by poor quality services and are inefficient.
At the same time, the commissioner warned Sacco managements against falsifying financial statements to make business seem better than the reality.
He that there exists accounting rules and principles that all cooperatives must follow countrywide.
He explained that typically, ‘cooking the books’ involves manipulating data to inflate a Sacco’s revenue and deflate its expenses to pump up its earnings or profit.
The commissioner advised managements of cooperatives to review their operating structures and business focus in order to remain competitive in the ever dynamic and disruptive business environment.
He urged Saccos to embrace the latest technological innovations in order to catch up with market trends and safeguard their market share.
The commissioner also rallied Sacco members to join the digital lending space, especially with the coming of mobile money.
“Technology is reshaping the financial industry, forcing Saccos to match up with the trend or risk being left out. Let’s utilise mobile money for conducting business and embrace digital loans to provide quick cash to members. Entry into digital loan platforms will safeguard the market flooded by independent digital lenders such as commercial banks,” Obonyo noted.
He said investing in Information Communication Technology (ICT) will give Saccos a competitive edge in the competitive market.
The commissioner said innovation will make Saccos realize their stability and prosperity.
“We need innovative ways to bring the unbanked population into the formal financial system,” Obonyo said.
He also urged Sacco members to appoint knowledgeable leaders who can guide them on how to make the best use of their resources.
Many Saccos, he added, have invested heavily in technology and possibly training but hardly elect knowledgeable leaders to run their financial institutions.
“I will not attempt to draw on examples from the business literature to demonstrate the role of knowledge in successful business. Suffice it to say that the more successful cooperatives have educated leaders”, noted Obonyo.
The commissioner observed that as cooperatives attract more members to join the cooperative movement, let us ensure the kind of products and services we are developing are responsive and attractive depending on the socio-economic environment we are operating in.
He divulged that the government is in the process of operationalizing the Central Liquidity Facility and Sacco Shared Services.
“The platform will enable co-operatives to participate in the national payments system, and facilitate inter-borrowing among Saccos and sharing of ICT services,” said Obonyo.
By David Kipkorir
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