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How to gauge a successful society

By Metro Reporter
The list of attributes and performance indicators that shows how successful a Sacco is includes membership, deposits, turnover, loans and advances, assets and core capital.


In the 2012 Sacco Supervision Annual Report, Mwalimu Sacco topped the list with assets worth Sh22 billion, core capital of Sh3.6 billion and deposits worth Sh16.6 billion. It was followed closely by Harambee Sacco with Assets worth Sh16.9 billion and deposits of Sh11.5 billion. Afya Sacco was rated third after Mwalimu and Harambee with assets worth Sh9.4 billion, deposits of Sh8.3 billion and assets worth Sh10.8 billion.

Unaitas was listed as the second leading Sacco in terms of membership at 113, 048 while the largest Sacco in the country is K-Unity Finance with 124,072 members at the close of 2012.

The 2012 Sacco Supervision Report listed the top 10 Saccos in the country as Mwalimu, Harambee, Afya, Stima, Kenya Police, United Nations, Ukulima, Kenya Bankers, Imarisha and Gusii Mwalimu Sacco.

Sacco Review spoke to Chief Executives of some of the leading Saccos to shed light on what it takes to make it to the top of the ladder and remain there.

“Saccos are like any other economic entity and as such, regardless of size, a successful credit union must have adequate return on capital ratios, able to pay dividends to members and must be able to meet the goals and objectives stated in its vision and mission statement,” said Joshua Ojall, Mwalimu Sacco Chief Executive Officer.

 Mwalimu Sacco has the largest asset base of Sh 22 billion, an indication of its strides in efforts to mobilise savings from members.

“With this level of assets, we are able to loan out more to members and in turn create more resources within the organisation,” said Ojall.

 Apart from ability to loan and advance cash to members, a successful Sacco should also have a short turnaround time when processing loan applications as well as have the ability to collect repayments from lenders,” added Ojall.

At each Ushirika annual event, successful Saccos in various categories are feted and awards given to recognise their efforts.

 An independent Ushirika Committee, drawing members from apex bodies in the industry, carries out an assessment of the Sacco industry each year and gives the awards.

 “We usually file returns with the Commissioner of Co-operatives, data that is used by these committee as well as designed forms which we are required to fill in,” said Ojall.

 The regulatory body, SASRA, has set a number of minimum operational regulations and prudential standards in the conduct of Sacco business. For instance, all licensed deposit-taking Saccos must have a capital adequacy ratio which is measured by the ratio of core capital and institutional capital to total assets of 10 and 8 per cent respectively.

 All licensed deposit-taking Saccos have until June 2014 to build capital ratios to the regulatory minimum. The regulator is already monitoring progress of individual deposit-taking Saccos to ensure full compliance by the set deadlines.

Liquidity is also an important indicator of financial stability in a Sacco and shows its ability to meet obligations as they fall due. The 2012 Sacco Supervision Report shows that as at December 31st, 2012, average liquidity-net liquid assets divided by savings deposits and short term liabilities- for all licensed deposit-taking Saccos - stood at 36 per cent against a statutory minimum of 15 per cent.

 Demand for loans continues to put pressure on liquidity with the regulator already in discussion with stakeholders to improve legal and regulatory framework on liquidity management across the industry.

 Prudential guidelines for Saccos cover availability of funds to face potential unexpected losses arising from poorly performing loans or investments, quality of the loan book, expenses relative to income, liquid funds to cater for creditor needs and the overall asset structure.

 “The yard-stick that one can use to assess how successful a Sacco is includes provision of loans to members, how prudent the investments are, governance structure and amount of dividend payout,” said Afya Sacco Chairman, Vitalis Lukiri.

 Apart from the regular reports filed by Saccos to the regulatory authority and the ministry, Saccos are also being urged to become IT complaint, to reflect the ever changing financial infrastructure in the country.

 How successful a Sacco is can also be seen in its ability to empower members acquire assets such as land and property, creating employment and lifting them out of poverty.

 Standing tall above the crowd is Bingwa Sacco which announced a 14 per cent dividend payout, giving it the highest dividend payout award 2013, a feat attributed to its aggressive marketing strategy.

The Sacco received six awards from the Cabinet Secretary for Commerce and Industry, Adan Mohammed during the Ushirika Day Celebrations.

The awards included the Best Managed Financial Institution in Kirinyaga County, the Best Education and Training Finance Institution in the country, the best ICT Compliance Sacco in the country, Sacco with Highest Shares Mobilisation and Sacco with Highest Deposit at Co-operative Bank in Central Kenya.

The firm, which targets mostly tea farmers, had deposits worth Sh1.2 million, turnover of Sh372 million and had loans and advances totaling Sh938 million.

Cumulative loans disbursed by the society since inception stands at Sh8.4 billion from Sh7.2 billion as at May 2013.

 But it has not been smooth sailing for the entire Sacco business with a number of players still 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,” said Mohammed,

The Sacco sub-sector continues to play a key role in the development of our economy through provision of financial access to many Kenyans that are unbanked.  Saccos have mobilised domestic savings to the tune of Sh400 billion that is 33% of national savings and boasts an asset base of Sh300 billion.

 It is projected that these savings will reach Sh700 billion mark with the registration of Saccos for Kenyans in the diaspora. The core mandate of the Ministry of Industrialisation and Enterprise Development that is in charge of Co-operatives is to promote the growth and development of the Co-operative movement in all sectors of the economy. The ministry has already posted County Co-operative Commissioners and County Co-operative Directors of Audit to all the 47 Counties. The Government of Kenya has also promoted the formation of County Co-operative Development Committees to coordinate the Cooperative agenda in the various Counties.

 

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