When a monumental financial scandal rocked the Kenya Union of Savings and Credit Co-operatives (Kuscco), perhaps the hardest hit by the financial losses were Small-Tiered Regulated SACCOs that had looked upon Kuscco as the proverbial hen’s wing under which the small chicks could hide.
Most of the small Saccos had put up at least Ksh22 million with the union as a principal amount that was meant to avert their collapse. Sadly, most of these Saccos are now staring at an inevitable collapse.
The traditional route that most of the small saccos take is shouting themselves hoarse begging the government to help them recuperate the losses through some form of a grant. However, that doesn’t seem to work anymore.
In recent years, Transcom Sacco, Ufundi Sacco, Maono Daima Sacco, Greenhills Sacco, Nest Sacco among other small Saccos have faced insolvency proceedings while being denied FOSA licenses due to their weak balance sheets.
According to the Sacco Supervision Annual Report, 2024 at least 216 Small-Tiered Regulated SACCOs have total deposits that remain below the Ksh1 billion threshold.
“Some 216-Regulated SACCOs, have an aggregate total asset base of Ksh79.66 billion representing just about 7.4% of the Regulated SACCO industry’s total assets. This means that on average, these Regulated SACCOs have very small asset bases, which, coupled with competition from other financial institutions, brings to question their sustainability, viability and stability in the long-term,” the report asserts.
Eric Miyungu, an accountant and a former CEO of a small Sacco operating in the media industry, said in an interview that for small Saccos to survive, they must embrace strong financial management.
I have led one of these small Saccos and I know the interference that comes especially from some of the senior members who lead the various committees. Sound corporate governance is unheard of. Some well-connected members will press to be allowed to get access to huge loans that they do not qualify and there is nothing a manager can do about it,” Miyungu averred.
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Mayeka James, an economist who also does research on the cooperative movement in Kenya further stressed that small SACCOs can survive by focusing on innovating service delivery.
“The entire financial sector worldwide, not only Saccos, is concentrating on innovation. Saccos must come up with innovative products that can attract more members and strengthen their cashbooks,” he opines.
He further roots for the improvement of member engagement, cutting operational costs, and ensuring strong financial management and regulatory compliance as some of the robust concrete slab the small Saccos can stand on.
“Adopt technology to streamline processes, expanding the product range to attract and retain members, and maintaining transparent and secure operations to build trust and comply with regulators like the Sacco Societies Regulatory Authority,” He asserts.
Indeed, Cabinet Secretary for Co-operatives and Micro, Small and Medium Enterprises (MSMEs) Development Wycliffe Oparanya explained during the release of the Sacco Supervisory Report 2024 that for small Saccos to survive, they must explore market driven options.
“These small Saccos have common services that they can consolidate and share the returns. Of great importance is also sound corporate governance structures that members approve of,” CS Oparanya said.
The report on its part points out that Small-Tiered Regulated SACCOs need to embrace solutions such as mergers and consolidation in order to enjoy economies of scale, ward-off competition and ensure viability, sustainability and stability.
By Mwiti Munyua
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