• Participation

The concept of people’s participation in their own development is central for good, effective and efficient governance of the SACCOs. All women and men who are shareholders/ members should have a voice in the decision-making process either directly or through the organs that represent them. Such participation should be fair and free of intimidation, duress or undue influence.

  • Transparency

All processes, decisions and relevant information should be conducted in a transparent manner and should be accessible to all those concerned.
Governance organs should hold regular meetings to direct the affairs of their SACCOs. The Committees should meet at least once a month while the General Meeting should be held at least once a year. Being working committees, the Credit/Loans and Supervisory/ Audit Committees should meet regularly to ensure close supervision of the SACCOs’ leading and general business.

  • Accountability

All decision-makers; Administrative Committee, Supervisory Committee, Audit Committee and Management must be accountable to their immediate supervisors and ultimately, to the members (through the General Assembly) and the members of their

  • Consensus Orientation

In-spite of the uniform membership criteria, there is bound to be differing interests, views and opinions in the SACCO. It is, therefore, very important to reach broad consensus among the parties concerned on all matters of the SACCOs’ operations. This will best be achieved through an all-inclusive participatory approach, transparent systems and operations, and full accountability to the members.
People in positions of power, like chairpersons, should be open to differing viewpoints.

  • Efficiency and Effectiveness

The governance and management organs of the SACCOs must have processes and procedures which produce results in time, using resources in the most economical way. The results should meet the needs of clients and stakeholders. This is an indicator of good governance.

  • Equity (fairness to all)

All members and clients should have equal opportunities to benefit from the SACCOs’ services in order to improve their economic status and share in the vision of the society. They should therefore, be equally accorded the SACCOs’ opportunities and services. The basis for equitable participation could either be a combination of the members’ share capital and saving deposits or any one of them as it may have been agreed upon. In the governance organs, none should be suppressed, ignored or shut up when they have suggestions.

  • Respect for Rules, Policies and Regulations

The legal framework and policies under which SACCOs are regulated and operate should be respected, strictly and impartially enforced. They should be made known to all members at all times.

  • Strategic and Visionary Leadership

The SACCOs must have leaders and managers who have a vision for and commitment to the organization. The leaders and managers should seek and improve their institutions and do all that is necessary to satisfy the needs of their members and the communities in which they are located. Their character and past record should be free of any professional and operational flaws. Such leaders and managers need to have strategic thinking so that the affairs of the SACCO are managed with a sense of purpose.

  • Knowledge and Skill in Leadership

The members of the governance organs should be knowledgeable and trainable in the matters of the SACCOs’ governance and operations. It would be of good if all members of the governance committee (the Administrative Committee, Audit and Loans Committees) were holders of at least Ordinary Level Certificate or higher qualification.

  • Organizational Performance and Growth

SACCO growth both in portfolio size and savings volumes is often an indication of good governance. Sound Governance will lead to sound management and sound operations. In return, these aspects will lead to excellence in performance. Continued growth of the SACCO will result in its survival and sustainability in the long-term. In the same respect, a poorly governed SACCO will hardly post good performance and annual growth on a continuous basis.


Organizational Vision, Mission, Goals and Objectives

LEADERSHIP FUNNELEvery SACCO should have a clear statement of its vision, mission, goals and objectives in order for all those involved in its management/ operations to have a clear sense of destiny, and for the Management Committee/Board of directors to guide or direct management in that direction.
 Vision- This is the ultimate aspiration of the SACCO as an institution and its members. The institutional vision expresses the dreams of the SACCO as an institution and its members in the long run. An example of SACCO vision may run as follows “ a rich and prosperous membership served by a profitable and sustainable SACCO”
 Mission Statement – this is a brief statement that indicates the purpose for which the SACCO was formed, it indicates the direction to which the SACCO is intended to move, and the clientele it aims to serve. It seeks to answer the following questions:
1) What business is the SACCO in?
2) What business does the SACCO want to be in?
3) What do we intend to achieve?
4) Who are our clients and stakeholders?
Examples of mission statements could be:
“We aim to excel in meeting the savings and credit service needs of the community through provision of safe and secure saving deposit services as well as affordable and easily accessible credit facilities”
“Through provision of high quality financial services, intend to help our membership excel and thereby maintain a leading position in the local market;”
 Goals – these are medium and long-term aspirations that the SACCO wants to achieve, based on its mission statement and driven by its vision. Examples of a goal statement may run as follows “Maximize savings and credit services to members while maintaining a healthy portfolio during the next 6 years” or “Attaining and maintaining a leading market position by way of clients served and gross loan portfolio in four years’ time”
 Objectives are specific quantified targets that the SACCO has set to be achieved in a short-term period, which will move it in the direction of achieving its goals. Examples SACCO objectives may include the following:
– To increase savings by 20% per annum over the next five years
– To increase credit services to members by 20% by the end of the year
– To increase income and net profits by 15% per year, etc.
– To increase the number of members from 80 to 200 by the end of next year
– To serve 2,000 borrowers and 6,000 savers, with a loan portfolio of Ksh. 1.2 Million in two years’ time.
– Increase the savings deposits by 200% in the next five years
– To improve the gross income by 155% and net income by 215% in seven years
One goal may have one or more objectives, which are in a sense the more specific targets contributing to the attainment of the goals.


Savings Management

The savers are mainly concerned with the safety of their deposits as well as being able to access these funds as and when the need arises. These two reasons therefore call for good management of the savings if the SACCO is to effectively mobilise savings from their membership.
Effective savings management requires consideration of liquidity reserves, proper cash handling procedures, and adequate internal controls on the part of the SACCO. These will ensure the SACCO has the trust of its members since savings mobilization requires
members’ confidence that they will be able to access their savings when they want them.
 Liquidity management requires a reserve to be created as a percentage calculated on all withdrawable savings. The SACCO should deposit these reserves in short-term, secure investments in formal financial institutions. This reserve ensures that the SACCO will have funds available to meet withdrawal and disbursement demands.
 Good cash management procedures at the SACCOs are critical for the successful management of the savings. This is so considering that a substantial portion of the money held by the SACCO is mobilised from savers so if it is not handled with extra care, it can spell danger. The cash management procedures should include daily cash retrieval records from the safe by the accountant/cashier, logging in the accountant/ cashier’s balancing report, general journal to record cash inflows and outflows. These records should be filled by the accountant/ cashier and verified and signed by the manager.
 The SACCOs should ensure the safety of the savings by having adequate internal controls. The controls will include amongst other preventive measures like the safes having two sets of locks and keys (one set of keys kept by the manager and the other by the accountant on another senior person), daily filling of records that are verified by the manager, and regular reconciliation of the cash record with the cash count. No one person should be able to open the safe and access money without the other being present, i.e. the 4 eyes principle has to be observed at times. The members of the supervisory committee should also regularly conduct
cash counts. These measures will amongst other ensure that fraud risk is well managed.

Types of savings products

The SACCO members have the urge to develop and to make their lives better. The question remains therefore ―How can they make their lives better?‖ Saving for the future is one of the ways that they can improve on their livelihood. It is therefore essential to know the various savings products available so that one makes the best choice and selects what suits them best. Savings products can broadly be classified in to three namely;
 Compulsory savings products
 Voluntary savings products
 Contractual savings products.
Compulsory Saving:
These are funds that must be contributed by all members of the SACCOs as a condition of membership and in some instances to access credit (loans). Compulsory savings can be considered as part of a loan product rather than actual savings product since they are closely tied to receiving and repaying loans. Compulsory saving is a saving that a member is forced to make on regular basis; it is a membership saving and must be saved on a weekly or monthly basis. This compulsory saving is collected to lend to
members. If members fail to save on time they will get penalized based on the saving policy of the society. Unless the member quits from membership, he or she should save on regular basis. If a member wants to withdraw from the SACCO, he will have the right to take this compulsory saving. The SACCOs are supposed to provide interest for this savings. There are 2 kinds of compulsory loans i.e.
Group saving: composed of a certain percentage of the loan portfolio contributed monthly or weekly. Saving continues through the loan period and therefore protects the portfolio on one hand and serves, as an investment fund for economic ventures of the group members to supplement the loan in case of emergency needs.
Personal or individual saving: This is where each borrower is required to save a minimum amount per month but motivated to save more voluntarily.
Voluntary Saving:
Voluntary savings are savings, not for access to credit, but for the sake of saving. These are not an obligatory part of accessing credit services. They are provided by both the borrowers and non borrowers who can deposit or withdrawal according to their needs.
The voluntary savings are best fit for people who don’t receive constant cash flow like farmers who get incomes when they sell off their produce once or twice a year. They can make voluntary saving during harvest time, and transfer monthly to their compulsory saving accounts. Farmers, and other individuals, can save the full amount for the coming year’s compulsory savings in advance with the SACCO by depositing 12 months worth of saving in a voluntary account. Following that, each month on the appropriate day the member will come to the SACCO to withdraw the amount of one month’s compulsory saving from the voluntary saving -account and deposit it in the compulsory saving account. This maintains the fundamental function of the SACCO and allows individuals with seasonal incomes to be members. This ensures regular flow of cash to the SACCO society and promotes members participation. This kind of saving can be withdrawn at any time when the owner needs it. The SACCO society may or may not provide saving interest for this voluntary savings. Farmers are highly advised to save on voluntary saving for small capital investment like purchasing seed for cultivation.
Contract Saving:
These are the kind of saving accounts where by the person saves to meet a particular goal.
These include:
1. School fees savings accounts: This is the type of account used by most parents so that they are able to save for their children’s education.
2. Target Savings Accounts: This is where the client opens up an account particularly to meet a particular target like buying land, paying a mortgage among others.
3. Fixed Deposit Accounts: This is the savings accounts were by a person deposits once and they withdraw the money after a period of time. The time ranges from 3 months onwards.
This kind of saving is not used by most SACCOs unless the SACCO has acquired and mastered the good skills in managing the loans and savings effectively. It can be short-term saving like if someone wants to pay school fees; he may save to pay school fees. It can also be long term like fixed deposit accounts were time deposit bring the opportunity of high interest rate on savings. This kind of saving is good in the future when the SACCO is in a good capacity and position of managing its savings and loans properly and if there is a shortage of feasible financial demand by members. This kind of saving can be collected from members and none members but the amount, period of collection and interest for this saving should be decided by the General Meetings of  members.


Savings Mobilisation Strategies

As it has been highlighted in the previous posts in this blog, savings mobilisation is very critical if the SACCOs are to attain operational self sustainability. The SACCOs therefore have to develop a good savings mobilisation strategy. The key aspects of the SACCOs savings mobilisation strategy should include the following:
1) Increased participation of the members in the governance of their SACCOs: This will increase their trust and commitment to the institutions. This can be done by giving them an opportunity to express their concern during the General Meetings, having suggestion boxes for them to comment on the various aspects of the SACCOs’ operations. The SACCOs can also set aside a particular day on a quarterly basis during which the management, committee members and general SACCO members interact and determine the way forward for their SACCOs.
2) More sensitisation of their members on the importance of Savings: During the membership mobilisation meetings, the SACCO staff should always talk to potential new members about the importance of savings for their personal development as opposed to focusing on credit. This message should also be echoed during any meetings between the staff and members of the SACCOs. One way to enhance this is to ask some successful members to give testimonies during pre-arranged members meetings.

3) Improve on the SACCO’s financial management and reporting systems: Safety of the savings is very important in the savings mobilisation endeavours. The SACCOs should improve on the financial accountability systems. Financial information generated should regularly be shared with the members to allay any fears of their finances being misappropriated. The staff should also prudently manage their savings and be able to grant the members’ interest on their savings so as to motivate them to save more.
4) Staff training: The SACCOs staff should specifically be trained on savings mobilisation. Considering that the staff usually interact with the members in their daily execution of their activities, they can always encourage the members to safe more. This is important because if the staff are not well prepared for this task, they will fail to encourage the members to continue saving.
5) Savings products development: The SACCOs should aim to develop different savings products that are tailored to the needs of their members basing on the major economic activities undertaken in their areas of operations. Given that the major proportion of the members are engaged in agricultural activities, the SACCOs could for instance develop savings products that encourage the members to save with the objective of being supported to acquire improved seeds, irrigation equipment or value adding equipment.
6) Entrepreneurship training for the SACCO members: As the SACCOs commence their lending operation; their memberships should be trained in business management skills so that they engage in gainful Income Generating Activities (IGAs) thus increasing their disposable income which results in improved savings.

The above strategies will tremendously improve the SACCOs capacity to mobilise savings from their membership thereby accessing low-cost funds. This will be a great step towards these SACCOs becoming operational self-sufficient.

External Conditions for Savings Mobilisation

Appropriate Regulatory Environment:
To ensure the safety of the members’ savings, a rigid and effective regulatory framework with on-site and off-site inspections is important. The failure of financial institution and eventual loss of savings can lead to a detrimental effect on the savings  mobilisation initiatives of the financial institutions. The SACCO regulators need to strengthen their capacities to effectively perform their respective duties, this will go a long way in increasing the membership’s trust and easing their fears about the possibility of losing their hard earned savings that are kept at the SACCOs.
The experience in other countries has been that SACCOs that are not supervised by the regulator tend to have fairly weak internal controls and poor financial disciplines. As a result these SACCOs have suffered from fraud perpetuated by the managers and the
elected leaders, a fact that has made them fail to mobilise savings from their membership who view them with suspicion and only seek credit/ loans from these institutions.
Macroeconomic stability:
The ability of the SACCOs to successfully mobilize savings is dependent on the macroeconomic environment which allows them to operate at rates that are viable and sustainable while providing a real positive return to protect the value of their members’ savings. When inflation rates are high, the SACCOs members may see the value of their savings being eroded, thus seeking other alternative ways of saving like buying domestic animals, investing in capital assets like land and buildings or storing grains thus depriving the SACCOs a critical source of funds.
The ability of the SACCOs to manage savings will also depend on the level of inflation. If savers are unable to recover the real value of their savings, they will stop saving with the SACCO. In high inflation economies where political instability and shallow financial markets allow for few alternatives, savers turn away from the formal institutions and shift to informal ways of saving in alternative forms or assets-real goods, such as animals or building materials-which may be illiquid but will maintain their value.
The problem with saving in alternative forms arises when a saver needs to access his or her savings quickly, but may not be able to liquidate the asset.

Institutional Requirements for Savings Mobilisation

Savings mobilization is a contract between parties: the SACCO receiving the savings and the SACCO member placing savings. Considering that the key consideration of the savers are; safety of savings, liquidity (easy access) and interest on savings, there
are critical measure that the SACCOs must address in order to successfully mobilise savings from their membership. These include;
 Strengthening governance and organisational structure
 Develop suitable savings products and marketing strategies
 Enhance management capabilities
Strengthening governance and organisational structure
Trust in the SACCO by the general membership is very important in savings mobilisation. This trust can be built through active participation of the members in the governance of their SACCOs. Because of the high level of participation in the affairs of the SACCOs, the members’ levels of ownership and commitment to the SACCO will be enhanced thereby increasing savings level at the SACCOs.
Savings mobilization also influences financial management function of the SACCO since the institution needs to prudently manage the funds to gain the members’ confidence and trust. The threat of deposit withdrawal due to savers’ lack of confidence in management should compel managers to operate within prudential guidelines, since widespread withdrawals would eliminate the base of funds and threaten the sustainability of the SACCO. As a result, members of the supervisory and administrative committees and managers are forced or expected to operate according to sound principles by ensuring the SACCO has adequate capital reserves, provisions for loan loss, and have liquidity reserves in order to protect client savings and the existence of the institution.
Developing savings products and marketing strategies
The SACCOs should aim to offer a wide range of savings products that are tailored to the specific needs of the members depending on the economic activities they are engaged in. These economic activities may include; agriculture, commercial activities, fishing amongst others. Having a wide range of savings products gives the members an opportunity to make choices between immediately accessible, liquid products, or semi-liquid accounts or time deposits with accordingly higher interest rates.
Simple and clear design of basic savings products enables depositors to easily select the product that best suits their needs. The simple and transparent design of the savings products also enables staff to administer them with ease, reducing administrative costs.
Having developed the savings products, the SACCO should embark on marketing and sensitising (create awareness) amongst the general community so that they attract many members from the communities to join the SACCO.
Enhancing Management capabilities
The mobilization of savings requires establishing a close and trusting relationship with the clients, which is easier when staff are familiar with the members and relate well with them. This therefore necessitates the SACCOs to do the following:
 Train staff in savings mobilisation: So that staff understand that it’s their duty to mobilise savings from the membership as well as knowing the importance of savings for the eventual success of the SACCO. This training also highlights the key factors that determine whether the members save informally or with formal institutions like the SACCOs.
 Financial Management: To ensure the safety of the members’ savings, the SACCOs need to improve on their financial management capabilities so that the savings are safeguarded from fraud through having strong internal control systems in place as well as prudently investing the funds to earn interest which can also be paid to the savers.
 Liquidity Management: This is important so that the SACCO does not invest all the funds and fails to pay members’ savings as and when they need to withdraw some of it. The managers of the SACCOs need a good liquidity management system in place so that the savers can access their savings while at the same time the SACCOs also maximise returns by investing the surplus cash by advancing loans to their members.
 Financial Records: The Umurenge SACCOs should maintain a good track record of accountability. This will ensure that the members’ trust is gained thereby enhancing the savings volumes at the institution.


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