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.


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