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……………………………………………………..

I AM A SACCO MEMBER AND I CAN’T GET GUARANTORS

The issue of members who qualify for loans and not being able to get guarantors within the society membership is emerging as one of the most challenging issue faced by Sacco Societies. It follows that such members are frustrated and withdraw their membership from the society as they cannot get loans when they apply for them. Membership withdrawal affects society’s cash flow and other operations and consequently profitability.

This problem is now being faced by Saccos with check-off-systems as it was/is mostly reported in Saccos that do not have check-off-system. Saccos with check-off-systems are Saccos that receive the members’ monthly contributions/loan repayments/interest/savings from the employer(s) through a single cheque paid to the Sacco Society’s account. Saccos without check-off-systems, are Saccos that do not have a common bond as a single employer or more than one employer and these Saccos are mainly formed by business people, farmers, matatu operators, church members, women groups and youth groups. They are sometimes referred to as Rural Saccos and those with check-off-systems are called Urban Saccos.

The rural Saccos and some Urban Saccos have circumvented this challenge through the formation of “cells” within the society. These cells are groups of between 10-30 members. The members in a cell guarantee one another and are all responsible for loans advanced by the society to individual members within the cells. This means that, if there are 20 members in a cell, then an individual taking a loan has to be guaranteed by 20 guarantors! It also means that if one or more members in a cell defaults on his/her obligations, then the whole cell is taken to account.

How are these cells formed, managed and grown?

If a society has each cell with minimum of 15 members, the cell is allowed to recruit new members until the cell membership reaches 30 where it is split into two. The split cells now will have 15 members each and allowed to recruit more members and the cycle continues. Cells are formed and given names like Nairobi, Nakuru, Pamoja, Tumaini, etc. Each cell has a cell coordinator and a cell secretary where all issues are discussed, recorded and some solved within the cell and those that need the attention of management committee are presented to them by the various coordinators. All members of the society must belong to a cell for them to qualify for a loan. The normal loan application process applies.

Another important aspect of these cells is that of membership recruitment. All new members of the society, must be endorsed by the cells for them to be accepted by the society. New members are introduced into the cells by a member and supported by two witnesses who attest that they know him/her. The person is interviewed by the cell and if by majority votes they agree, then that member is endorsed. The management committee then will accept the new member after ensuring that he/she meets all other qualifications for membership.

Through meetings of the cells, which can be every month or when need arises, members socialize with one another and therefore it becomes easier to accept guaranteeing new members of the society. This is unlike where cells are not available, where one is not able to attend annual delegates meeting or any other meetings organised by the society. Also societies hold one or two general meetings in a year which is not sufficient for members of the society to socialize and know one another sufficiently so as to act as guarantors.

One of the major challenge of cells is that management committee/board of directors and supervisory committee have to belong to the cells and therefore act as guarantors and therefore contradicting the policy that states “No executive officer, management and supervisory committee member shall act as endorser, guarantors for borrowers from the society.” In cells, the management committee/board of directors and supervisory committee are not allowed to be coordinators or secretaries of the cells. They are in the cells as members of the society and not management committee/board of directors or supervisory committee members. It will be difficult for these committee members to be guaranteed within the cell given the cell rules if this policy was to be enforced. It is therefore important that these committees members be allowed to act as endorsers or guarantors only through the cells.

It is high time Saccos must become innovative and introduce cells or come up with other ways of assisting their members access their products. It will be useless for one to belong to a Sacco and not being able to get a loan more that his/her shares and deposits. I am a member of a Sacco and I went through this and I almost immediately withdrew my membership and move to another Sacco within my “area of operation” where I know I could get guarantors easily. It is a world of competition out here, you can no longer sit in your cocoons offer the same services the same way and expect to grow in membership and surplus. IT CAN’T HAPPEN.

Ask yourselves, what happens when I am transferred to another region where I am not known? What happens when I am the only member of the society in a whole sub-county/district? Can society allow me to scan my filled loan application form to members of the society that I know who can act as guarantors and who can send to Sacco the forms on my behalf or send me back for me to forward to the Sacco? These must be answered….probably 🙂

If Saccos are wondering why their membership is not growing, then look no further.

 

GUARANTORSHIP/LOAN SECURITY IN SACCO SOCIETIES

 

Most of us are aware of the following in our various Sacco Societies concerning loan security:

1. All loans must be secured by at least three guarantors. All guarantors should be members of the society, must have a good track record of repaying their own loans and not be guarantors of another outstanding loan which is in default.
2. The total deposits of the guarantors should be equal to or more than the loan applied for.
3. A borrower or guarantor may apply to the credit committee for a change of guarantors.
4. The obligation of the guarantors shall cease when the loan granted has been repaid to equal or less than the loanees total deposits.
5. The obligation of the guarantor may also cease upon alternate guarantors acceptable to the society being substituted.
6. No executive officer, management and supervisory committee member shall act as endorser, guarantors for borrowers from the society.
7. The committee may refuse to accept as a guarantor a person who is himself in receipt of a loan, and may decline to grant a loan subsequently to a member while he remains liable as a guarantor.
8. Other than the usual deposits of a member, certain loan categories or loan amounts shall be secured from pledges in form of articles as share certificates, land title deeds or insurance policy up to their surrender value may be accepted.  The Society must deposit such articles in a bank for safe custody but must be handed back to the members immediately the loan balance equals the deposits.  Confirmation as regards the validity of the articles so pledged from the issuing authority must be obtained before such documents can be admitted as security for the loan.  Mortgage in real estate can be taken as a security for a loan not exceeding two thirds of the mortgage value.
9. Upon the death of a guarantor, the loanee is required to find a replacement within a period of 30 days.
10. Loanees who do not contribute their deposits through check-off system shall seek guarantors from members within the check-off system. However, where the loanee fails to get guarantors and the loan applied for is below his or her deposits, the loan shall be granted.
11. A member’s deposits pledged as security for another member’s loan shall not be surrendered to offset his/her outstanding loan unless the former provides and alternative guarantors.

So what happens when you cannot get guarantors for one reason or another?

 

CUSTOMER SERVICE IN SACCO SOCIETIES

What is customer service?

This is a broad term which refers to those activities which are deliberately undertaken by the service or goods provider with the objective of satisfying the current customers and also attracting potential customers.

Generally it is a concept which explains all those activities undertaken by an organization to satisfy a customer.

The customer can only be satisfied if their perceived expectations of needs and wants are met by the organization.

Reasons for customer service in co-operative societies:

• a customer who is cared for and satisfied will always become a loyal customer
• a customer who is satisfied will tell other people
• a satisfied customer will become your agent recruiting others
• to be able to cope with competition
• the customer makes the organization survive
• the customer is the organization’s life
• the customer is the voice of the organization
• the customer makes the organization become proud of its business
• the customer is the organization’s future
• a dissatisfied customer will tell other people about his dissatisfaction and this will spoil the image of your Sacco.

Employees of Sacco Societies must possess the following qualities for effective customer service:

• Communication skills. It calls for the use of right word when talking to a customer. Avoid phrases that may be offensive to the customer.
• Personal presentation. You must be clean and appropriately dressed (in all ways). Avoid talking to a customer when smoking or eating unless you know him/her.
• You should have an idea of the type of customer you are dealing with. These are his/her requirements, needs and priorities, his concerns, etc.
• Product knowledge. You must have a sound (technical) knowledge of the type of product/service you are offering. The is only way you can confidently answer a customer.
• Respect. Respect a customer for what he/she is. He/she may appear boring, proud, poor, uneducated, etc, but you must respect him/her. If you respect a customer, he will value you and will be ready to listen to you.
• Mental ability. This is the ability to think quickly, to handle questions quickly and to respond with sensible answer.
• Dependability and honesty. You must keep promises. Keep appointments. If you cannot, explain this in advance.
• Self-Control. Avoid showing irritation, impatience, temper, open rudeness, fear, hesitation and other such negative behavior.
• Sociability. Be a sociable and cheerful person. Leave your troubles at home but do not take them to your customers. It is necessary to know the names of the customers you are dealing with.
• Courage, determination and perseverance. Have confidence in yourself and the value of the services you are offering.

How can your Sacco participate in customer service?

• offering quality services to the existing customers
• efficient handling of customer inquiries
• quick and effective handling of customer complaints
• professionalism when dealing with customers, both current and potential
• competitive pricing of your service or product
• seeing the customer as an integral (and indispensable) part of you business
• greet the customer with enthusiasm and smile
• thank the customer for transacting business with your Sacco and invite him/her back
• heighten his/her wish to return soon
• be positive.

In conclusion the customers’ perceived expectations must be met by your organization in order to have a satisfied customer. Customer care is not responsibility of one individual but everybody in the organization must participate. The customer is the king and he/she pays your salaries and must therefore be taken care of. A customer is not an outsider, but part of the business.