HOW CAN SACCOs COMPETE WITH OTHER FINANCIAL INSTITUTIONS?

By now, am sure we all know definition of a co-operative society and that a Sacco is a co-operative. Just to remind you of the definition; “a co-operative is an autonomous association of people who have gathered in a voluntary way in order to satisfy their economic needs as well as, social and cultural aspirations by means of a jointly owned and democratically-managed venture” International Co-operative Alliance. Therefore in short, co-operatives derive their advantage from their nature as seen in the definition.

Banks and micro-finance institutions are profit oriented/driven in every sense. They are doing well, when they make millions for the shareholders. We can say banks and micro-finance institutions are associations of capital. Co-operatives are not profit oriented, they are socio-economic ventures owned solely by the members. Co-operatives are association of people. The goal of a co-operative is “to promote thrift among its members by affording them an opportunity for accumulating their savings and deposits and create thereby a source of funds from which loans can be given to them exclusively for provident and productive purposes, at fair and reasonable rates of interest; thereby enabling them to use and control their money for their mutual benefit.”

So what are some of the main advantages that give Saccos competitive advantage?

1. Offering fair and reasonable interest rates. Saccos remain the source of cheapest credit to date in the country. No bank or micro-finance gives rate of interest like Saccos do. NONE! Therefore Saccos need to maintain these interest rates and use allowed procedures/structures to increase or reduce.
2. Saccos have ‘cost advantage’ meaning that the cost of undertaking Sacco ‘business’ and creating value in the business are less than that of its competitors. Look at what banks pay as interest on deposit/dividends and what Saccos pay given interest they charge loans!! Banks are miserly here! This cost advantage is difficult for other businesses to replicate. But can Saccos sustain these?
3. Saccos are democratically governed. The supreme authority is the general meeting. The interest rate, minimum shares, entrance/registration fees, etc. are proposed by management committee and discussed then approved or otherwise by membership in the general meetings. Banks and other financial institutions do not seek authority of all shareholders but this is done through a board of directors or such other body/interests. It is therefore very easy for Saccos to encourage and enhance member loyalty unlike banks.
4. The terms and conditions of Saccos loans/savings are in black and white, easily understandable. There are no ‘threats’ like interests rate is subject to change without ANY notice like with the banks! This can be a competitive edge since what you see is what you get, nobody will call or not call you when they want to reschedule/restructure your loan!

What do Saccos need to do to compete effectively?

Improve services. Some Saccos offer poor services to its members. Sometimes loan disbursement is delayed and a member is not communicated to. Staffs are usually rude and even some are outright abusive. Therefore co-operatives need a proactive management committee/board of directors of good standing who will put up measures that will ensure effectiveness and efficiency of the Sacco business. It never helps to hire a relative who is or not qualified. Professionalism must be maintained at all times and reprimanding someone hired on basis of tribe, nepotism, etc is difficult.

Service delivery is cornerstone of any business. Saccos cannot afford to lose business because of inefficiency and lack of structures and process that can effectively and efficiently address any of the anomalies. The fact that policy implementation can delay due to the requirement that the management committee/board of directors need approval from membership, is not sufficient to further deteriorate service delivery. Hiring, firing, promotion, etc of employees should be transparent and pre-understood. Getting the right persons on-board is as important as maintaining them as a knowledgeable workforce is a valuable commodity.

Saccos also need the ‘power to add, change, evolve, or self-organize system structure’ (Donella Meadows-Leverage Points-Places to intervene in a system). As I have noted earlier, the process of putting up policies and having them operational, sometimes delay and the advantages that could have been gained by having them in/on time, are lost. Saccos therefore are required to be pro-active and envisage situations or plan through strategic plans, business plans, etc. Information technology especially the internet has not been fully utilized by Saccos. I believe there is no single Sacco where a member can access his/her account online and transfer savings from one account to another or pay loans online through use of Visa Cards, etc. Is there? “Any system, biological, economic, or social, that becomes so encrusted that it cannot self-evolve, a system that systematically scorns experimentation and wipes out the raw material of innovation, is doomed over the long term on this highly variable planet” Donella Meadows.

Leadership is another area of great import for Saccos to effectively compete with other financial institutions. Leadership is a process of social influence, which maximizes the efforts of others, towards the achievement of a goal. It is said that leadership stems from social influence, not authority or power. Co-operatives elect their leadership from the membership. Sometimes elected leaders are not elected solely based on the quality of leadership they offer the society but other attributes like tribalism, nepotism, etc. Membership should be sensitize on importance of electing credible, accountable, honest, etc. leaders and be reminded of what is at stake when things go wrong because of the leadership they elected.

…………………………………………………….TO BE CONTINUED……………………………………………………..