Cooperative leaders have been urged to tap into new and lucrative avenues in order to grow the sector and double their resources.
Despite controlling close to Sh. 1 trillion worth of assets, the cooperative movement has yet to fully exploit new economic opportunities in areas such as real estate, retail, and wholesale.
The Cooperative Alliance of Kenya (CAK) Chairman, Macloud Malonza, stated that the cooperative movement has continued to register impressive growth, contributing significantly to the country’s overall economic development.
“The cooperative societies have continued to mobilize more resources and disburse them in the form of loans. Although the current scenario presents a very progressive outlook and a strong future, cooperatives have still not tapped into other lucrative economic sectors to drive further growth,” said Malonza.
Speaking at a two-day workshop themed, “Integrating Continuous Improvement in Audit, Financial Reporting, and Risk Management Strategies for the Cooperatives of Tomorrow” which was organized by CAK on how cooperative leaders can align with current tools and face emerging business risks, the chairman noted that primary cooperatives have traditionally concentrated on sectors like coffee, dairy, and tea, but have not explored new opportunities.
According to the Sacco Supervision Annual Report 2023, released this week by the Sacco Societies Regulatory Authority (SASRA), Savings and Credit Cooperative Societies control the largest proportion of the sector’s assets, amounting to Sh. 971.96 billion, representing 6.43 percent of the national nominal gross domestic product (GDP).
In 2023, loans issued by 357 regulated SACCOs grew by 11.50 percent, reaching Sh. 758.57 billion up from Sh. 680.35 billion in 2022, reflecting increased demand for credit services.
These loans were mainly funded by savings and deposits from members, which increased by 9.95 percent to reach Sh. 682.19 billion in 2023, cementing regulated SACCOs as key mobilizers of domestic savings.
Malonza said the cooperative movement is on course, and the new Cooperative Bill, currently in its second reading and expected to be finalized by October, will change SACCOs’ business models.
The Director in charge of the Cooperative Banking Division at Cooperative Bank of Kenya, Vincent Marangu, noted that cooperatives play a key role in enhancing financial inclusion.
He said that by July 2023, the asset base controlled by cooperatives had reached nearly Sh. 1.7 trillion, demonstrating the sector’s strength.
“There are more opportunities the cooperative movement can pursue to grow their businesses, for example, property development, retail and wholesale sectors, hospitality, transport, and the health sector,” said Marangu.
In the developed world, credit unions control a significant portion of the economy and national savings. According to the State Department of Cooperatives, approximately 35 percent of national savings in Kenya are held by cooperative societies.
Marangu explained that cooperatives can grow their credit businesses by expanding beyond traditional sources such as salaries, and exploring other business opportunities associated with their members.
“This requires a high level of business innovation and interaction. For example, a SACCO credit officer could ask a teacher, banker, or transport officer what other income-generating activities they are involved in. If a farmer is engaged in dairy or poultry farming, where are their proceeds deposited?” Marangu added.
He gave an example of cooperatives investing in housing projects, emphasizing the importance of scaling up such projects at the right level and ensuring they can be absorbed by their members.
“What we are seeing is an appetite for large, mega-projects. However, we have observed that the most successful investment or housing cooperatives are those that take on smaller projects, where they are confident that the majority of their members will participate,” he said.
The Director encouraged SACCOs that typically make good profits at the end of the year to think critically about their reserves and capital-building efforts to prepare for future challenges.
“If there ever was a time for such preparation, it is now. SACCOs should focus not only on paying dividends or interest on deposits but also on creating reserves and building capital for the future,” he added.
Marangu noted that SACCOs and corporates in general have remained resilient, which is crucial for the sector’s sustainability. He stated that, “Supporting members by offering loans at fair rates and sharing profits in a sustainable manner is what will move our cooperatives forward.”
