Savings and Credit Co-operative Societies (SACCO) are busy redesigning their financial products, policies and strategies so as to compensate for low loan disbursements as a tough economy erodes household incomes and thrown many out of jobs.
For players like Mwalimu National SACCO, the plan is to generate Non-funded income, away from its core activity of collecting deposits and lending to members.
According to the sacco, introducing cheque books and a contact centre, it is seeking to expand its transaction fee earnings, and other charges for services provided to by the SACCO to its members.
“There are those who still believe that cheque books actually are more convenient in terms of driving their business but of course there are other generations that believe that the digital platforms are better in terms of transacting with the SACCO. So it’s a mixed bag and that’s what we are pursuing,” said Kenneth Odiambo, Mwalimu National SACCO Chief Executive.
The CEO alluded that Mwalimu SACCOs non-funded revenue currently stands at 11 per cent. With the new initiatives, the SACCO intends to push this to 18 per cent in the first year, 25 per cent in the second year and eventually hit 30 per cent within three years.
SACCOs typically generate non-funded income from sources such as transaction fees charged for ATM withdrawals, funds transfer or payments processing. Other sources include account maintenance charges, revenue from mobile banking services, online or digital payment services.
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While the 2024 Sacco Supervision Annual Report for 2024 is to be released next month, the latest edition shows that non-funded income for SACCOs in 2023 showed significant growth.
For instance, SACCOs saw a 66.32% jump in operating income to Ksh 13.73 billion from Ksh 8.26 billion in 2022. The main contributors to this income were transaction fees, premiums, membership fees and cared issuance.
SACCOs also earned huge non-funded income from their investment in Government securities, money market funds and placement with other financial institutions.
In 2023, SACCOs posted a 12.94% increase in total income, reaching Ksh 136.3 billion from Ksh 112.15 billion or 82.28% coming from loans while some 18% was from non-funded income.
Some top-performing SACCOs by total income in 2023 included Stima SACCO( Ksh 8.95 billion), Kenya National Police SACCO(8.86 billion), Mwalimu National( Ksh 8.38 billion), Harambee SACCO( Ksh 5.46 billion) and Imarisha SACCO( Ksh 3.74 billion).
While traditional SACCO models are designed to collect savings/deposits and lend to members, earnings from this revenue stream is now threatened by dwindling household incomes, job losses, high cost of living and the resultant huge non-performing loans due to poor loan repayments.
Odiambo said Mwalimu is seeking to cut dependence on member cash by seeking for alternative revenue streams.
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Mwalimu SACCO is also alive to the stiff competition posed by emerging digital lenders as well as banks and other micro-lenders.It is thus stepping up its digitization program to keep pace with fintechs and a rapidly changing credit market.
With its Cheques, Mwalimu SACCO targets to capture the needs of teachers, who form the bulk of its membership and businesses that engage in high volume transactions that requires huge cash outlays.
Mwalimu National Chairman Joel Gachari said the shift in customer dynamics is being driven by changing member demographics.
“Over 30 per cent of our members are now drawn from outside the teaching fraternity. Their incomes have grown, and they are seeking bigger and more convenient solutions. The checkbook gives them an additional option alongside our digital and cash withdrawal channels,” Mr Joel Gachari, Board Chairman, Mwalimu National SACCO.
Mwalimu National SACCO is also polishing its mobile banking offering, a platform that allows members to access upto Ksh 500,000. The SACCO intends to push this limit to Ksh 3 million by the close of 2025.
Given that SACCOs are still locked out of the National Payments System, Mwalimu SACCO has partnered with Family Bank, to provide the Cheque services.
The Mwalimu SACCO branded Cheque allows members to transact within banking timelines while maintaining the SACCO brand presence.
By Jackson Okoth
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