Licensing of Saccos by Sasra

1. Introduction

The Sacco Societies Regulatory Authority (SASRA) is empowered to license, regulate and supervise deposit taking Sacco Societies under the Sacco Societies Act 2008 (the Act), and the Regulations issued there under. The Act requires all Sacco Societies carrying out deposit taking business to apply for licenses from SASRA (Section 23 of the Act and Regulations 4). Deposit taking Sacco societies in the context of the Act refers to the Sacco Societies operating Front Office Savings Activity (FOSA).

2. Who should apply for license?

With effect from 18th June 2010, the date of publication of the Sacco Societies (Deposit Taking Sacco Business) Regulations, 2010:

All Sacco Societies intending to operate FOSA shall apply for license from SASRA (section 23 of the Act and regulation 4(2)); and

All Sacco Societies already operating FOSAs are required to apply for license from SASRA by 17th June 2011.
3. What are the licensing Procedures?

The licensing procedures are detailed in Section 24 of the Act and Section 4 of the Regulations. These procedures are split into five main stages as explained below.

3.1 First stage: Application for License

Duly complete and submit the “APPLICATION FORM FOR A LICENCE” coded SASRA 1/001) in the regulations for SACCO Societies (Deposit Taking Business) to SASRA. This form is available here. The completed application form should be accompanied by supporting documentation including:

a) a certified copy of the Sacco society’s registration certificate, issued under the Co-operative Societies Act [Cap 490] Laws of Kenya.

b) a verified official notification of the Sacco society’s registered head office and branches, if any;.

c) a certified copy of the Sacco society’s bylaws.

d) a certified extract of minutes of the general meeting resolution authorizing the application for deposit taking license. This requirement applies to Sacco Societies seeking to commence FOSA operations.

e) name of the proposed chief executive officer.

f) Certified copies of the financial statements for the last three years

g) Evidence that the Sacco society has adequate capital by completing and submitting the Capital Adequacy Return (downloadable from http://www.sasra.go.ke) as set out in Form 1 in the second schedule to the Sacco Societies (DT) Regulations, 2010. Refer to the guidance notes on capital adequacy for capital requirements at the point of making the application for license.

h) Business plan and Feasibility study available here

A Sacco Society must prepare and submit a comprehensive four year business plan in line with the transitional provisions (and feasibility study for a Sacco Society making the application to commence FOSA operations) detailing:

1. the vision and mission;
2. Scope and nature of business operations;
3. Economic and financial environment;
4. Organizational structure and management;
5. Financial and risks analysis;
6. Projected financial statements and analysis using the format provided in the regulations. The projections should show how the institution will meet the prudential standards within the plan period, namely:
1.
Capital adequacy – indicate sources of capital over the plan period.
Loans quality and provisioning – Evaluate the loan portfolio, age the delinquency and make provisions as appropriate.
Liquidity – plans on liquidity management in full compliance with regulatory requirements.
Investment – divesting to comply with regulation 48 (limits on property, equipment and financial assets).
Sustaining the asset structure and quality

1. Control measures and monitoring procedures

The financial projections are based on the business plan and hence should assist in monitoring the strategic goals of the Sacco Society and therefore an implementation plan and monitoring framework should be included.

Note: Where the Sacco Society has a current business plan, the same should be reviewed in the light of the regulatory requirements and the four years transitional period.

h) Fit and Proper forms

Duly complete and submit the “Fit and Proper test” form (SASRA 01/002) with the application for license. The form should be completed by all persons proposed as directors and senior management as defined in the form. This form is available here.

3.2 Second Stage: Letter of Intent

SASRA will assess the application for fulfillment of the requirements in the first stage and if satisfied issue a Letter of Intent to the Sacco Society to put the following in place:

3.2.1 Institutional Infrastructure or business premises appropriate for deposit taking Sacco business. This includes but not limited to:

A banking hall;

A adequate working space;

Physical security measures; and

Strong room and safe.

3.2.2. Management Information System

The Sacco Society’s Information Management System must be capable of performing and accounting for all transactions and providing the minimum reports required by the Authority in an accurate and timely manner. The system should be operationally integrated and provide adequate security including data back up.

3.2.3 Risk Management policies and internal control systems

Sacco Societies face constant risks in the course of their business including credit, liquidity, interest rate, operational, reputation and regulatory risks. The Authority will require the Sacco Society to develop risk management policy framework addressing each of the risk identified. The risk management framework must address the following key considerations.

a. Clear definition of roles and responsibility of the Board and management in development, implementation and review of the risk management systems;

b. Adequate policies, procedures and limits;

c. Risk monitoring and information system;

d. Adequate internal controls and audit specific to each risk area.

3.3 Third stage: Onsite inspection

Upon completion of all the requirements specified in the Letter of Intent, the Sacco shall notify SASRA so that an independent on site inspection can be conducted to ascertain compliance. The inspection will be carried out within 30days from date of notification.

3.4 Fourth stage: Letter of Compliance

Upon completion of on-site inspection, if SASRA is satisfied that the Sacco Society has complied with all the conditions as stated in the letter of intent, it shall issue a compliance letter allowing the Sacco Society to pay the license fees within 30days.

3.5 Fifth stage: Issuance of a License

SASRA shall issue a license to the applicant Sacco Society upon payment of license fee of Ksh.50,000 (fifty thousand shillings) for head office and Ksh.20,000 (twenty thousand shillings) for each branch. The license shall be issued within 14days from the date of payment of the license fees.

4. What happens if a Sacco Society operating a FOSA at the commencement of the Regulations does not apply for license within the twelve months provided?

In line with Section 23(1), such a Sacco Society is in contravention of the law and the officers liable to the actions stipulated in section 23(2) of the Act among others.

5. Other matters

5.1 What happens after licensing of a Sacco Society?

a. The Authority shall within fourteen days from date of licensing publish in the Kenya gazette particulars of any newly licensed Sacco society.

b. At the beginning of each year and not later than 31st January, the Authority shall publish in at least one newspaper of national circulation particulars of licensed Sacco societies.

5.2 When is renewal of a license due?

A licensed Sacco Society will be required to apply for renewal of a license at least ninety (90) days before the expiry of its operating license in respect of its head office and any other place of business. The expiry date for all licenses will be 31st December.

 

EXAMPLE OF A SWOT ANALYSIS OF A SACCO SOCIETY

Did you know that…

a) No management or Supervisory Committee member is allowed to receive from the society any payment apart from sitting allowance, and travelling and subsistence allowance, except an honorarium from the net surplus as allowed in the By-Laws.

b) The Management and Supervisory Committee members, and employees of the society hold in the strictest confidence all transactions of the society with its members.

c) When any Committee member is disqualified or unable to perform his duties, the Committee can co-opt a member or members of the society to serve on the Committee until the next general meeting if the number falls below five.

d)  No member of the management or Supervisory Committee shall in any manner participate in the deliberations and determination of any question affecting his/her financial interest. In the event of any disqualification, the remaining qualified Committee members present at the meeting, if constituting a quorum with the disqualified person may exercise, with respect to the matter, all powers of the Committee.

f) A copy of the By-Laws is to be furnished to every member who joins the society or on request upon payment of a fee not exceeding its actual cost to the society.

 

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.

 

CO-OPERATIVES SOCIETIES ACT ON AMENDMENT OF BY-LAWS

Co-operative Societies Act CAP 490 Section 8 states:
(1) A co-operative society may, subject to this Act, amend its by-laws, including the by-law which declares the name of the society.
(2) No amendment of the by-laws of a co-operative society shall be valid until the amendment has been registered under this Act, for which purpose a copy of the amendment shall be forwarded to the Commissioner in the prescribed manner.
(3) If the Commissioner is satisfied that any amendment of the by-laws of the Co-operative society is not contrary to this Act and any rules made thereunder, he may register the amendment.
(3A) The Commissioner may, if he is satisfied that an amendment under this section was effected pursuant to a misrepresentation or concealment of a material fact by the person applying for registration, cancel the amendment.
(4) An amendment which changes the name of a co-operative society shall not affect any right or obligation of that society or any of its members, and any legal proceedings pending may be continued by or against the society under its new name.
(5) When the Commissioner registers an amendment of the by-laws of a cooperative society, he shall issue to the society a copy of the amendment certified by him, which shall be conclusive evidence of the fact that the amendment has been duly registered.
(6) In this section, “amendment” includes the making of a new by-law and the variation or revocation of a by-law, but excludes the variation of the registered address of a co-operative society where this forms a part of the bylaws of such a society.

Related articles

• Co-operative Legislation In Kenya (funnyardstick.wordpress.com)
• Guideline on Marketing-co-operatives (funnyardstick.wordpress.com)
• Division of Co-operative Societies (funnyardstick.wordpress.com)
• Mergers or Amalgamation of Co-operatives (funnyardstick.wordpress.com)

 

CO-OPERATIVE REGISTRATION PROCEDURE

View this document on Scribd

Download the power point here: CO-OPERATIVE REGISTRATION PROCEDURE

QUALITIES OF GOOD INFORMATION SYSTEM-SACCOs

Good information system should possess the following qualities:

The co-operative should provide relevant information. Relevance is determined by the user of the information and therefore the management of the co-operative should first define the objectives of the various reports to be produced. Based on the user, the system should generate the following:-

• Detailed daily operational/transactional reports that are accurate for use by supervisors.
• Summarized current and projected information, regardless of whether internally or externally sourced, that is likely to affect performance for use by the managers.
• Highly processed information for strategic planning and management control, obtained from within the co-operative for use by directors and the CEO.

The system should also be designed to generate exceptional reports.

The information should be timely for it to be acted upon. The officer in charge of ICT should review the system constantly to assess its speed and recommend upgrading or replacement.

Information should be free from errors and the user should be notified of any assumptions or estimates.

The co-operative should obtain information from authoritative sources only.

(Excerpt from Chapter 4: Co-operative Society Management and Prudential Guidelines Manual Template-Developed by VAS Consultants Ltd for Department of Co-operatives).

 

Related articles

• Model By-laws for Saccos (funnyardstick.wordpress.com)
• Co-operative Legislation In Kenya (funnyardstick.wordpress.com)
• Effective Internal Control in Saccos (funnyardstick.wordpress.com)
• Management information systems: What is it, and how to earn a degree (reply.com)
• Suspension and Expulsion of a Member of a Sacco/co-operative (funnyardstick.wordpress.com)
• Information Systems in the Organization (kxw1.wordpress.com)

 

GUIDELINE ON MARKETING-CO-OPERATIVES

PURPOSE

The marketing management guideline provide minimum standards that co-operative societies should have in order to create or change the perception of a product or service in the eyes of the target audience by making use of research and communication media. Each co-operative should however, formulate its own detailed marketing policies that take into account its special needs and circumstances.

SCOPE

The guidelines provides practices in marketing management.

RESPONSIBILITY

It is the responsibility of the board to ensure that the co-operative society develops policies that would lead to best practice in marketing function. Marketing policies include areas such as:

MARKETING RESEARCH

Co-operative societies require detailed and objective understanding of their own business and market in which they operate, in order to make fact based decisions regarding their operations. This means that the co-operative societies need to invest in research to collect the data required to perform accurate market analysis. As the marketers employ a variety of techniques to conduct market research, the small co-operatives should pool resources to enjoy research benefits.

MARKETING STRATEGY

Co-operative should use information obtained from market research to make key strategic decisions and develop a marketing strategy designed to maximize the market share, revenues and profits. By selecting target segments the co-operative would subsequently allocate more resources to acquire and retain customers in the target segment(s). Some of the other innovative strategies that a co-operative could pursue include:-

Market Niche

The co-operative could identify market niches. A market niche is defined as an area of consumer need that is not being completely satisfied and is often too small for larger businesses to pursue. A co-operative could pursue niche opportunities in the area of:

• Product differentiation and certification. The co-operative emphasizes the product/service’s characteristics which are different from competition such as organic, pesticides free, certified among others.
• Value-added processing. The co-operative adds value to raw products to create new product or product use based on consumer demand.
• Encourage partnership between the consumer and the co-operative. The partnership could take the form of contract for products and prepayments.

Promotion Strategies

The co-operative should adopt promotion strategies that ensure that it reaches the target consumers and develops relationships with them to encourage use of product or services. Some of the promotion strategies that a co-operative could apply include.

• Purchasing media advertising (newspaper, radio, TV, yellow pages, etc.)
• Organization direct mailing of announcement flyers, coupons, newsletters among others, to current consumers and other target consumers.
• Posting signs or posters in areas frequented by target consumer.
• Participation in or hosting community or regional special events.
• Participation in public interest events- events with community groups which builds a relationship and reputation as a generous and involved community member.
• Utilizing the internet

MARKETING PLAN

After the co-operative identifies its strategic objectives, selects the target market, determines the desired position for its product or brand, a marketing plan should be developed. The marketing plan specifies how the chosen strategy will be executed and the set objectives achieved. The content of marketing plan includes:

• An executive summary.
• Situation analysis to summarize facts and insights gained from market research and marketing analysis.
• The co-operative’s mission statement or long-term strategic vision.
• A statement of the co-operative’s key objectives, often sub-divided into marketing objectives and financial objectives.
• The marketing strategy the business has chosen, specifying the target segments to be pursued and the competitive positioning achieved.
• Implementation choices for each element of the marketing mix (4Ps).
• A summary of required investments (in people, programs, ICT systems, etc.)
• Financial analysis, projections and forecasted results.
• A timeline or high-level project plan.
• Metrics, measurements and control processes.
• A list of key risks and strategies for managing identified risks.

MARKETING INFORMATION SYSTEM

The co-operative will need to design marketing management system that provides cross-functional leadership for various marketing activities. This system should provide pertinent information for decision making, feedback and monitoring and evaluation.

FEEDBACK AND CONTROL SYSTEMS

The co-operative society shall design various control systems, such as sales forecasts, sales force and reseller incentive programs, sales force management systems, and customer relationship management (CRM) tools to measure progress against objectives. It is the responsibility of marketing managers to ensure that the execution of marketing programs achieves the desired objectives and does in a cost-efficient manner.

(Excerpt from Chapter 7: Co-operative Society Management and Prudential Guidelines Manual Template-Developed by VAS Consultants Ltd)

Related articles

• Division of Co-operative Societies (funnyardstick.wordpress.com)
• Importance of Targeting a Niche Market (thetechscoop.net)
• What is Your Growth Strategy? (projecteve.com)

SHORT HISTORY OF THE CO-OPERATIVE MOVEMENT IN KENYA

The co-operative movement in Kenya was found in the beginning of 20th Century. Africans were allowed to form co-operative societies in the 1950’s when they were permitted to grow cash crops. The attainment of independence in 1963 became the turning point in the movement. It has ever since grown in terms of societies membership and share capital/member deposits.

The firs Kenya co-operative society, Lumbwa Co-operative Society, was formed in 1908 by the European farmers with the main objective of purchasing fertilizer, chemicals, seeds and other farm inputs and then market their produce to take advantage of economies of scale. In 1930, Kenya Farmers Association was registered as a co-operative society to take over the role of supply of farm input played by Lumbwa Co-operative Society. The African smallholder farmers fought for formation of their own co-operatives and later in 1950’s they were allowed to promote and register co-operatives for cash crops like coffee and pyrethrum. Consequently at independence in 1963, there were 1,030 co-operatives societies with 655 being active with a total membership of 355,000.

Related articles

• Division of Co-operative Societies (funnyardstick.wordpress.com)
• Co-operative Legislation In Kenya (funnyardstick.wordpress.com)
• Obligation of Co-operative Movement (funnyardstick.wordpress.com)

 

Father Son Conversation

Once day, father was doing some work and his son came and asked, “Daddy, may I ask you a question?” Father said, “Yeah sure, what it is?” So his son asked, “Dad, how much do you make an hour?” Father got bit upset and said, “That’s none of your business. Why do you ask such a thing?” Son said, “I just want to know. Please tell me, how much do you make an hour?” So, father told him that “I make Ksh. 500 per hour.” “Oh”, the little boy replied, with his head down. Looking up, he said, “Dad, may I please borrow Ksh. 300?” The father furiously said, “if the only reason you asked about my pay is so that you can borrow some money to buy a silly toy or other nonsense, then march yourself to your room and go to bed. Think why you are being so selfish. I work hard every day and do not like this childish behavior.” The little boy quietly went to his room and shut the door. The man sat down and started to get even angrier about the little boy’s questions. How dare he ask such questions only to get some money? After about an hour or so, the man had calmed down, and started to think, “May be there was something he really needed to buy with that Ksh. 300 and he really didn’t ask for money very often!” The man went to the door of little boy’s room and opened the door. “Are you a sleep, son?” He asked. “No daddy, I’m awake,” replied the boy. “I’ve been thinking, maybe I was too hard on you earlier”, said the man. “It’s been a long day and I took out my aggravation on you, Here’s the Ksh. 300 you asked for”. The little boy sat straight up, smiling “oh thank you dad!” He yelled. Then, reaching under his pillow he pulled some crippled up notes. The man, seeing that the boy already had money, started to get angry again. The little boy slowly counted out his money, then looked up at his father. “Why do you want money if you already had some?” the father grumbled. “Because I didn’t have enough, but now I do,” the little boy replied. “Daddy I have Ksh. 500 now. Can I buy an hour of your time? Please come home early tomorrow. I would like to have dinner with you”. Father was dumbstruck. Moral: It’s just a short reminder to all of you working so hard in life! We should not let time slip through our fingers without having spent some time with those who really matter to us, those close to our hearts. If we die tomorrow, the company that we are working for could easily replace us in a matter of days. But the family & friends we leave behind will feel the loss for the rest of their lives. And come to think of it, we pour ourselves more into work than to our family.

Arthur Unknown?

Related articles

• Must Read Father Son Conversation ! By Alan, Australia (snoozybutsnoopy.wordpress.com)

Story of burned biscuits

When I was a kid, my Mom liked to make breakfast food for dinner every now and then. And I remember one night in particular when she had made dinner after a long, hard day at work. On that evening so long ago, my Mom placed a plate of eggs, sausage and extremely burned biscuits in front of my dad. I remember waiting to see if anyone noticed! Yet all dad did was reached for his biscuit, smile at my Mom and ask me how my day was at school. I don’t remember what I told him that night, but I do remember watching him smear butter and jelly on that biscuit and eat every bite!

When I got up from the table that evening, I remember hearing my Mom apologize to my dad for burning the biscuits. And I’ll never forget what he said: “Honey, I love burned biscuits.”

Later that night, I went to kiss Daddy good night and I asked him if he really liked his biscuits burned. He wrapped me in his arms and said, “Your Momma put in a hard day at work today and she’s real tired. And besides – a little burned biscuit never hurt anyone!”

Moral: Life is full of imperfect things and imperfect people. I’m not the best at hardly anything, and I forget birthdays and anniversaries just like everyone else. But what I’ve learned over the years is that learning to accept each others faults – and choosing to celebrate each others differences – is one of the most important keys to creating a healthy, growing, and lasting relationship.

Author Unknown??

Related articles

• Burned Biscuits (luckypennylayne.com)
• Valuing Relationships; (nahimabnay.wordpress.com)
• Thought provoking A lesson worth learning About Burned Biscuts (americanfreedombybarbara.com)
• Burned Biscuits (goodtimestories.wordpress.com)
• Thought for the Day: Life is full of imperfect things and imperfect people -cnbnews.net (gloucestercitynews.net)

DID YOU KNOW THE MANDATE OF THE DEPARTMENT OF CO-OP DEVELOPMENT AND MARKETING?

The Mandate of the Ministry of Industrialization and Enterprise Development Department of Co-operative Development and Marketing is specified in the Presidential Circular No. 1/2005 on organization of the Government of the Republic of Kenya as follows:-

• Co-operative Policy Implementation
• Co-operative Legislation and Extension Services
• Co-operative Education and Training
• Co-operative Financing policy.
• Co-operative Savings, Credit and Banking Services Policy
• Co-operative Governance.
• Co-operative Tribunal.
• Co-operative College
• Co-operative Marketing, including Value addition and processing.
• Promotion of Co-operative Ventures.
• New Kenya Co-operative Creameries.

Related articles

• Speech by Hon. Adan Mohamed, Ebs, Cabinet Secretary for Industrialization and Enterprise Development During the 91st International Cooperative Day Celebrations on 6th July 2013 (funnyardstick.wordpress.com)
• Uhuru says China to help Kenya combat poaching (capitalfm.co.ke)
• China, Kenya sign deals worth $5bn (thebricspost.com)
• Co-ops: sustainable success and business breakdown (theguardian.com)
• Co-operative Legislation In Kenya (funnyardstick.wordpress.com)
• We Are 48 on Our Facebook Page!! (funnyardstick.wordpress.com)
• Co-operatives Department set the pace for economic prosperity (sierraexpressmedia.com)
• Co-Operative Society in Nigeria – Registration, Rules and Regulations (gistarea.com)
• Co-operative Prayer (funnyardstick.wordpress.com)
• Co-operative Development – Role of Government in Cooperatives (gistarea.com)

Investment by SACCO Societies

The core business of a SACCO society is to receive savings contributions from members and to provide them with credit facilities.  This is in form of revolving fund from the members’ savings. The law does not encourage co-operative societies to invest funds in non-core business.

If money doesn’t grow on trees, why do banks have branches? 🙂

The first investment that a SACCO Society should invest its funds in is in its members in the form of loans.  Here, the society can introduce as many loan products as is practicable.  Members should be able to apply and utilize as many loan products as they may qualify for.  This should be subject to the regulations in place for loans in general, and for each loan products.

When the members’ loan demand has been fully met and there are no pending loan applications due to inadequate funds for lending, the society can invest any surplus funds in financial instruments. this is because the funds can be recalled within short notice when the need arises.

The probable areas that SACCO Societies can invest surplus funds in include; purchase of shares in companies and other institutions, investing in Government treasury bills, putting money in fixed deposit accounts. Surplus funds should first be determined and should be invested in institutional funds or other SACCO.

Before the officials decide to invest any surplus funds and where, they should properly analyze the funds position and ensure the excess liquidity is not temporary and that the core business will not be affected.

Any investment of society funds outside the core business should be able to conform with and promote the basic goals and objectives of the society.  the society should be able to get maximum return on the investment for the benefit of the members.

For SACCO Societies that qualify and are able to open and operate Front office Service Activity (FOSA), surplus funds can be invested in that activity and be utilized by members through various products that may not be offered through the back office.  Such products include short term loans and advances and loan clearing for the back office.  These products have become very popular with members and are a good source of income for SACCO Societies.

Where a society wants to invest in a building for own accommodation, or enter into long term investment, then it should use institutional capital and not members funds.   Where a society invests in real estate other than for its own accommodation, it shall not hold more than 20% of the equity in the investment.  It should also not expend a sum exceeding 25% of its share capital in such venture.

SACCO Societies should not enter into the business of acquiring land or buildings for members. Members can form separate housing co-operatives for such activities.   Members should also be sensitized and encouraged to get individual loans from their societies and join with like minded friends to acquire property.  they can later decide on what to do with the property jointly acquired.

Any involvement in non-core business should get the approval of the Commissioner and general meeting through a special resolution.

How can mobilization of member funds be improved?

Cooperatives need to find ways to increase member funding, since this provides the lowest cost, lowest risk form of capital for operations and investment. As government and donor support continues to decline, increasingly this also becomes the only practical source of funding for cooperatives. Even where outside support is still available, the advantage of increased reliance on member funding is that it gives greater autonomy to the cooperative and lowers the risk of eventual withdrawal of outside funding.

The strategy for increasing member funding depends on the particular circumstances of the cooperative, the type of activity it is engaged in and its scale of operation. Among the strategies to consider are:

Improving operating efficiency

Improving efficiency can be important for the mobilization of funds. It enables a cooperative to offer more competitive prices, securing and keeping member loyalty.

Funding and efficiency are related. Cooperatives with sufficient funds are able to invest in training and technology to reduce costs, and to increase or improve production. Well managed, technologically efficient cooperatives are generally more likely to accumulate capital.

Promoting patronage

The more members use the cooperative’s services – that is by taking loans and saving with the the cooperative – the more funds the cooperative will receive. It is therefore important for the cooperative to promote patronage. This is most easily achieved when cooperatives provide services valued by members, offer competitive interest rates and prompt payments.

Giving priority to mobilizing member funds

Most cooperatives will have to rely on member generated funds to finance their operations. Members’ financial stakes in the cooperative enforce greater accountability of the cooperative to members, build member participation in decision making and strengthen cooperative financial self-reliance and operational autonomy.

There are a number of ways in which member funds are obtained. In many cases, increased levels of funding can be achieved through adjusting these methods:

· Non-refundable membership fees upon joining/entrance/registartion fees

These fees are often small, but they need not necessarily be so if new members are buying into a successful business that provides valuable services.

·          Member shares

All members are required to purchase shares, which are usually the primary source of member capital. Shares purchased should earn dividends and are transferable to other members upon withdrawal from membership or given to his/her heirs in the event of the member’s death.

·         Member deposits

Co-operatives can also consider increasing minimum monthly contributions.

Products

     Other than loan products, co-operatives can introduce saving products e.g. holiday savings, withdrawable savings scheme, etc. Major source of affordable loans/credit. Why?

1)      Core objective and best form of saving

2)      Prerequisite for investment

3)      Saving for retirement

4)      Members earn GOOD returns at the end of the year

·          Retention of surplus.

Surplus can either be retained by the cooperative as institutional capital, or paid out in patronage refunds to members following the close of each year. In practice, cooperatives often offer interest rates more favourable than those prevailing in the market, creating little surplus and making it impossible to offer patronage refunds. Whenever possible, these practices should be altered either to build up surpluses or increase patronage refunds and attract new members.

 

·          Deferred payments

A surplus creates two opportunities for increasing capital available to a cooperative. One is the surplus retained, and the other is the patronage refund that is allocated but not immediately paid out in cash. During the period between the realisation of the surplus and the cash pay-out of patronage refunds, the cooperative has the use of the cash. Pay-out may take the form of a share or of an obligation to pay the member in the future.

Consider use of outside funding

In simple terms, the higher the institutional capital and member deposits, the more outside lenders such as banks and suppliers will be willing to loan funds to the cooperative. Care should be taken in borrowing, however since the higher the outside funding as a proportion of funds used, the higher the risk if something goes wrong.

Too much institutional capital?

For the majority of cooperatives in developing countries, the possibility of accumulating too much institutional capital any time soon is small. However, members should be aware that it is actually possible for the original purpose of the cooperative to be lost if the amount of institutional capital becomes too large.

This may result in the exclusion of new members, because present members do not want others to benefit from the services provided and surpluses produced by the capital accumulated.

Member financing builds the sense of member ownership

Cooperatives have always been referred to as “member-owned” organizations, yet in countries where cooperatives have depended too heavily on outsiders for financial support, that sense of ownership and personal financial stake has been lost. It is not uncommon to hear members and shareholders refer to their cooperative as the “government’s cooperative” instead of their own cooperative. This is largely because the financial stake or contribution of the membership of the cooperative is small relative to the non-member stake. In spite of the one-member-one-vote principle, the major suppliers of capital, in this case non-members, have the largest say and tend to determine the main priorities of the cooperative business. Cooperative member participation drops and the cooperative promise is weakened.

Conclusion

It is important to build the membership’s financial stake in the cooperative. This increases the sense of collective ownership, makes the cooperative’s management more accountable to serving members, strengthens member commitment and loyalty and thus provides a true and sustainable basis “or cooperation.

Adapted from http://www.fao.org/docrep/003/w5069e/w5069e07.htm

 

Factors to be considered when borrowing a loan

1.       Business concept
It is the duty of member to put together details of the investment to be undertaken- the purpose of the loan i.e. the loan for increasing stock, purchase of machine, purchase of building materials, purchase of land, etc.

2.       Character of borrower

Assess your character- how do you behave when you have money and when you don’t?

-put in safety measures to ensure you use the loan for the purpose intended/wisely.

-why are you borrowing? Is it because you need the loan or is it because the money is available?

-are you a trustworthy applicant? Hardworking?

3.       Capacity to pay

This is the ability to repay credit if extended. Assess your own ability to repay the loan in line with society’s loan policy and your personal financial position.

Consider your capital standing or financial strength i.e. monthly financial obligations not on the palsy that may hinder you from repaying the loan or make you suffer pecuniary embarrassment.

4.       Own contribution

This is the amount of funds borrower is willing to invest in the business. Do not expect your society to finance your project 100%

5.       Collateral for loan

These are details on security put forward by the borrower in good faith as a guarantee that money borrowed will be repaid.

In co-operatives this is basically a guarantor. However, members should use other forms of security e.g. share certificates and insurance policy, in case the society loan policy allows.

6.       Interest rate

Consider the interest rate of the loan to be borrowed and its effect on your income for the whole period of the loan repayment.

Members should concentrate on development loans for their own development and take school fees loan where necessary.

They should avoid unnecessary emergency loans at all cost because mostly one cannot do much and they reduce member’s ability to take a development loan.

RULES GOVERNING LOAN APPLICATION

An applicant shall be considered or accepted for the processing upon a members meeting the following conditions:

1.       Must have been an active member of the society for a period f not less than six months

2.       Must be consistent saver with the society for a period of not less than six months

3.       Must be willing to conform to all rules, by laws and co-operative societies act

4.       Must be a Kenyan citizen with a valid identity card and be a person of sound mind who has not been declared bankrupt or barred to contract for any reasons

5.       Must be earning regular income either from business or employment

6.       The loan application must be for prudent purposes and application must justify its legality by stating its purpose

7.       Must be willing to make all necessary disclosures of information necessary to facilitate loan processing and guarantorship

SPEECH BY HON. ADAN MOHAMED, EBS, CABINET SECRETARY FOR INDUSTRIALIZATION AND ENTERPRISE DEVELOPMENT DURING THE 91ST INTERNATIONAL COOPERATIVE DAY CELEBRATIONS ON 6TH JULY 2013

Co-operative Leaders

Distinguished Guests

Ladies and Gentlemen

It gives me great pleasure to join you today to celebrate the 91^st International Co-operative Day, locally known as Ushirika Day. This is a special day that enables co-operators to reflect on the importance of the co-operative movement in Kenya and the rest of the world. I am glad to note that the theme of this year’s event is “Co-operative enterprise remains strong in times of crisis”.This positions co-operatives as strong and sustainable enterprises that are able to survive even during hard economic times. This is because the Co-operative Business Model ensures full participation of members across all cultures, social and ethnic groups, as well as economic strengths.

Cooperatives generally mobilize both human and financial capital from their members.  It further explains why cooperative in both developed and developing economies were not adversely affected by the global economic meltdown which affected major economies.

Fellow Cooperators

The Cooperative Movement in Kenya continues to contribute enormously towards the socio-economic welfare of our people.  As you are aware, the activities of the Movement cuts across all sectors of our economy, and it impacts greatly areas such  as Finance, Agriculture, Transport, Health, Education, Housing , Youth  among others.

The Cooperative Movement in Kenya is rated 1^st in Africa and 7^th globally, according to the International Cooperative Alliance.  It continues to grow impressively as an alternative model of doing business.  To date the Cooperative Department has registered slightly over 15,000 cooperative societies .

The Sacco sub-sector continues to play a key role in the development of our economy through provision of financial access to many Kenyans are unbanked.  The sub-sector has currently mobilized domestic savings to the tune of Ksh.400 billion that is 33% of national savings and boasts an asset base of Ksh.300 billion.  It is projected that the savings will reach Kshs.700 billion mark with the registration of Saccos for Kenyans in the diaspora.  The department last year registered two such Saccos in the United States of America and the United Kingdom.  We are also targeting to register more Saccos in countries with high concentration of Kenyans.  This initiative will assist Kenyans in the Diaspora to make structured remittances and facilitate investment at home.

In understanding the role the movement plays in delivery of vision 2030, the Saccos mobilize savings, finance economic activities and bring together people hence meeting all aspects of the economic, social and political pillars under vision 2030.

Ladies and Gentlemen

The core mandate of the ministry of Industrialization and Enterprise Development that is incharge of Co-operatives is to promote the growth and development of the Co-operative Movement in all sectors of the economy. It is gratifying to note that the co-operative philosophy has been inculcated in virtually all economic and social enterprises countrywide.

In conformity to the requirements of the constitution, my ministry has already posted County Co-operative Commissioners and County Co-operative Directors of Audit to all the 47 counties. I urge co-operative leaders to engage these officers in the revitalization of County Co-operative unions to play the vital role in farm input supplies and distribution. This will make farmers enjoy the economies of scale while at the same time ensuring availability of inputs on time and stabilizing prices. Besides these efforts, we have also registered the Kenya Farmers Co-operative union whose main agenda is to support farmers through the supply of affordable farm inputs such as fertilizers and animal feeds.

The Ministry has also promoted the formation of County co-operative Development Committees to coordinate the cooperative agenda in the various Counties.

Distinguished Guests

Value addition to agricultural produce has been prioritized by the Government in Vision 2030. The future of our agricultural co-operatives lies in aggressively undertaking value addition of various produce including coffee, tea. Cotton, pyrethrum, horticultural crops, livestock and fisheries.

It is no longer feasible to continue marketing our produce in their raw form as has been the case over the years. The success in value addition has been more pronounced in the dairy sector where dairy co-operatives like Githunguri have increased returns to farmers more than ten-fold. Value addition therefore remains the best option for enhanced service delivery to our farmers and overall success of the agricultural co-operatives.

Ladies and Gentlemen

The Co-operative Development Policy explores measures aimed at empowering young people to rise from unemployment to entrepreneurship and enterprise development. To achieve this, we aim to empower the youth especially through promotion of youth cooperatives, capacity building and financing of projects managed by youth. The government offers financial support to these projects through the Youth Enterprise Fund. Apart from these the department of co-operatives has made specific interventions in the following areas:-

·        Linking Women and Youth to Youth and Women Enterprise Development Funds from which they can access credit at affordable interest rates

·        Due to limited involvement of Youth in leadership positions, the department has undertaken to promote the formation Youth led Co-operatives as an affirmative action

·        The bicycle and motorcycle transporters known as Boda Boda operators have been encouraged to form SACCOs and other types of cooperatives from where they can access credit

·        The department of Co-operative Development in partnership with the Ministry of Transport has endeavored to instill some order in the Matatu industry by promoting and registering matatu saccos

·         Through the partnership and in collaboration with our Youth Desk office, the 25 registered Youth Bunge SACCOs have been taken through three levels of training covering the importance of co-operatives, Management and Governance of SACCOs and Credit Management

Ladies and Gentlemen

As you are aware, the United Nation General Assembly declared the year 2012 as the International Year of Co-operatives in recognition of the importance of the Co-operative movement globally. The Government acknowledges that co-operative organizations help this country to revitalize the agricultural, financial sectors and  the  rural  economy. It  is clear  that, while  Co-operatives  may  not be  the only  solution  to   Kenyans problems, they  are  certainly  part  of the  solution. Kenyans are expected to fully embrace the culture of savings through SACCOs and to work together on the basis of the International Co-operative Principles and Values, as well as their objectives and goals. Ladies and gentlemen, Let me now turn my attention to the role of the Government. You are aware that the Ministry has promoted a vibrant and co-operative sector through an enabling Policy and Legal framework for the growth of a sustainable socio economic development in Kenya. In this regard the Department has in the past realized achievements which include: ·        The establishment of  the  Sacco  Societies Regulatory  Authority (SASRA)  to regulate the  large  financial Saccos; ·        The establishment of the Ethics Commission for Co-operative Societies (ECCOS) to address governance matters. ·        Revitalization of the  Co-operative Alliance of Kenya (CAK), the  Apex body of  co-operatives,  to enable  it play a more  critical  role  in modernization  of the  co-operative  sector including  participation  in serious  investments; ·        Promotion and registration of Matatu Saccos ·        Promotion and registration of County Youth Bunge Saccos ·        Promotion and registration of Sharia compliant co-operatives ·        Promotion of and registration of Diaspora co-operatives ·        Revitalizing key commodity co-operatives in areas such as dairy, coffee, cotton and horticulture. ·        Formulation of Guidelines for Co-operative Development Fund ·        The Government is also in final stages of developing the Human Resource Policy for Co-operative Movement.

Ladies and gentlemen:

As you are aware some co-operatives are faced with a few challenges as they struggle for survival. Some experience deficiency in their management, leadership and governance not to mention lack of ethics and integrity.  Similarly some of them lack adequate resources to provide quality services, as well as invest in modern technology.

However I am happy to note that a lot of improvement has been made and notable progress continues to be made in these areas.

Finally, I wish to assure the co-operative movement of the Government’s commitment in providing an enabling environment for the sector, to enable it continue playing its vital role not only in serving the members but also in the economic development of our country.

With these remarks, I wish the cooperators successful Ushirika celebrations.

 

Message of the International Co-operative Alliance (ICA)

91st ICA International Co-operative Day

19th UN International Day of Co-operatives

6th July 2013

“Co-operative enterprise remains strong in time of crisis”

 

This year’s International Co-operative Day celebrated July 6, 2013 has the theme “Co-operative enterprise remains strong in times of crisis”. It is an apt theme when one considers how other forms of business measure up when faced with current global economic struggles.
Investor owned business models currently suffer from a crisis of unsustainability in economic and social and environmental terms while the co-operative model has demonstrated time and again that it is resilient in times of crisis.
The financial crisis was an epic example of the perils of valuing short term gain over longer term viability. The global crises we have faced derive from a business model that puts financial return ahead of human need; a model that seeks to privatise gains and yet socialise loses. There is considerable evidence that a diversity of ownership models contributes to a more stable financial sector as a whole. By placing human need at their core, co-operatives respond to today’s crises of sustainability and deliver a distinctive form of “shared value.” Furthermore the co-operative model does not fall victim to the lure that has afflicted capitalism for more than twenty years in which financial performance is the central indicator of good business. Quite simply a co-operative is a collective pursuit of sustainability for it seeks to “optimise” outcomes for a range of stakeholders without seeking to maximize the benefit for any one stakeholder.
This also means that as times become more difficult the entire workforce is viewed as vital to the well-being of the co-operative, not just a few people at the top.
Certainly another area in which the global public has been buffeted is in the practices and ultimately the closing of many big banks. What were considered venerable institutions safe for investment and deposits too often have been shown to be weak and poorly run. Financial co-operatives however have often fared far better.
Savings and credit co-operatives, co-operative banks and credit unions have grown; kept credit flowing especially to small and medium sized enterprises, and remained stable across regions while indirectly creating employment. It is their unique combination of member ownership, control and benefit that is at the heart of their resilience and that provides a series of advantages over its competitors. With financial co-operatives representing an astonishingly large slice of the global banking market, it is important to better understand the model.
A recent report distributed by the International Labor Organization (ILO) and written by Professor Johnston Birchall, examines financial co-operatives from their origins in Germany in the 1850s to the global movement they represent today.
Birchall explained in an interview with ILO how before the crisis, economists said financial co-operatives were bound to be less efficient than investor-owned banks because they did not reward their managers with shares. However, the crisis has proved that financial co-operatives were less likely to risk as much as PLC banks, particularly because their managers did not receive a share of the profits.
“Stability and the aversion to risk are built into the DNA of financial co-operatives. They make surpluses and they need to, otherwise they wouldn’t be businesses. But what they do with those surpluses is put them into the reserves, which means they are very strong financially and they don’t tend to have problems with the capital requirements of the regulators.
“In credit unions in other parts of the world you can see that they didn’t even face a drop in 2008. They didn’t notice the banking crisis; they just kept on growing slowly, regularly, not dramatically.”
Another benefit of co-operatives in times of crisis should also not be overlooked: its social dimension. As economies shrink and pressure is put on governments to reduce social benefits, co-operatives often provide an invaluable lifeline. In short co-operatives contribute to the social capital in ways that investor owned businesses do not. Co-operatives may also be critical in delivering services such as health care centres that would otherwise come from private insurance or the state or may not be provided at all as state budgets shrink.
And of course one should not overlook a key benefit of consumer co-operatives: the ability to offer the public lower costs for food and other essentials – so vital when consumers’ paychecks are shrinking or they have none.
This International Day of Co-operatives July 6, 2013 gives us an opportunity to reflect on all that co-operatives have done in hard times and in good times and to redouble our resolve to ensure that this values based business model continues to draw more attention and support globally. It is a model that works time and again.

 

Understanding a Co-operative Society

What is a co-operative society?

A co-operative society is an association of persons who have come together with a common purpose of pooling their resources together for mutual economic and social benefit.

Types of co-operatives societies in Kenya

a) Savings and credit co-operative societies

These are formed to provide financial support to members. They accept deposits from members and grant them loans at reasonable interest rates in times of need.

b) Housing co-operatives societies

These are co-operative societies formed to provide residential houses to members. They purchase land, develop it and construct houses or flats and allot the same to members. Some societies also provide loans at low rates of interest to members to construct their own houses.

c) Consumer co-operative societies

These societies are formed to protect the interest of general consumers by making consumer goods available at reasonable price. They buy good directly from producers or manufacturers thereby eliminate middlemen in the process of distribution.

d) Agricultural/marketing/farmers co-operatives

These are formed by small farmers to work jointly in marketing their produce and thereby enjoy the benefits of large-scale farming.

e) Producer co-operative societies

These societies are formed to protect the interest of small producer by making available items of their need for production like raw materials, tools and equipment, machinery, etc..

f) Multipurpose co-operative societies

These are co-operatives that deal with more than one activity. The Ministry of Co-operative Development and Marketing discourages the formation of such co-operatives as their overall performance has been found wanting.

What are the objects of a co-operative society?

The main object of a co-operative society is to organize and promote the economic interest of its members in accordance with the Co-operative Principles and Values. The specific objects include:-

• promotion of thrift among members-opportunity for accumulation of savings/deposits; loans at fair and reasonable rates of interest
• to provide opportunities for members to improve their economic and social conditions
• perform those functions and exercise powers designated for Co-operatives Societies under applicable by-laws.

The Co-operative Values:

• Self-help
• Mutual responsibility
• Equality
• Equity
• Honesty
• Openness
• Social responsibility

The seven universal co-operatives principles:

• Voluntary and open membership
• Democratic member control
• Economic and participation of members
• Autonomy and independence
• Education, training and information
• Co-operation among co-operatives
• Concern for community

Structure of co-operative movement in Kenya

The co-operative movement in Kenya is divided into four distinct divisions namely:-

a) The National Apex:

Kenya National Federation of Co-operatives Ltd (KNFC)- defunct, was formed on 28th April 1964 as the Apex Co-operative organization of the Kenya Co-operative Movement with the mandate to lobby, advocate for, network, collaborate and unite all co-operatives in Kenya. It has been replaced by Co-operative Alliance of Kenya that was inaugurated in 2010.

b) National Co-operative Organizations:

• The Co-operative Bank of Kenya
• The Co-operative Insurance Company of Kenya CIC
• Kenya Union of Savings and Credit Co-operative KUSCCO
• Kenya Rural Sacco Societies Union Limited KERUSSU
• National Co-operative Housing Union Ltd NACHU
• Co-operative Collage of Kenya
• Kenya Planters Co-operative Union KPCU-registered both as a company and a co-operative society
• New Kenya Co-operative Creameries Ltd KCC

Secondary Co-operative Societies:

Comprises of all co-operatives unions countrywide.

Primary Co-operative Societies:

Comprise over 12,000 primary co-operative societies registered countrywide.

Registration of Co-operative Societies

Pre-requisites

The co-operative Societies Act, Chapter 490 of the Laws of Kenya, states that for a society to be registered with or without limited liability, it:

• has to have its object as the promotion of the welfare and economic interest of its members and
• has incorporated in its by laws the co-operative principles

Essentials for registration of a co-operative societies

For a society to be registered under the Act, it must:

• in the case of the primary society, consist of at least ten persons all of whom shall be qualified for membership of the co-operative society
• in the case of a co-operative union, it consists of two or more registered primary societies
• in the case of an apex society, consist of two or more secondary societies

Procedure for registration

• an application is made to the commissioner for co-operatives development in the prescribed form and signed by at least ten would be members
• the application is accompanied by four copies of the proposed by-laws of the society in English and the person or persons by whom or on whose behalf such application is made, shall furnish such information with regard to the society as the commissioner may require
• if the commissioner for co-operatives development is satisfied that a society has complied with the Act and any rules made there under and if the proposed by-laws are not contrary to the Act, he may register the society and its by-laws.

Registration Documents 

• The proposed by-laws in four copies
• Filled application for registration form in four copies
• Supplementary information form in four copies (if any)
• Economic appraisal in four copies
• In case of salaried workers with check-off agreement with employer, a letter from the employer is needed.

Model By-Laws:-xxxxxxxx SAVINGS AND CREDIT CO-OPERATIVE MODEL BY-LAWS