1. 2ND PRACTITIONERS’ SEMINAR, 2017
GOVERNANCE IN CO-OPERATIVE SOCIETIES
FRIDAY, 16 JUNE, 2017

2. Contents Looking at Co-operative Societies as businesses.
Identify available opportunities for Practitioners.

3. Preliminaries
Vision for Kenya’s financial sector “To become the leading financial centre in Eastern and Southern Africa, in competition with similar centres in the Western Indian Ocean rim” (Medium Term Plan for financial services ( ) Vision 2030)

4. Classification of the Financial sector
Formal prudential
Commercial banks
Deposit taking microfinance institutions (DTMs)
Deposit taking Saccos (DTIs)
Capital markets
Insurance providers
Forex bureaux
(Source: Fin Access Survey 2013)
Source: Fin Access Survey 2013

5. Classification of the Financial sector
Formal non-prudential
Mobile phone financial service providers (MFSP)
Postbank
NSSF
NHIF

6. Sacco sub-sector: Selected Statistics
Deposit-Taking Saccos:Status in 2015.
Total asests-Ksh.342.8b (2014-Ksh.301.5b)
Number of DT-Saccos-177 ( ).
Total deposits- Ksh b (2014-Ksh b)
Loans to members- Ksh b (2014-Ksh. 251b).
(Source: SASRA Annual Report, 2015).

7. SACCO SUBSECTOR SWOT ANALYSIS (PKF)
Strengths
Weaknesses
Enabling policy environment
Rural and urban access
Clear vision and direction
Products and services
Resilient and hardworking membership
Duplication of support services
Recruitment of management staff
Staff development
Risk management
IT technical capacity
Product research and development
Governance

8. SACCO SUBSECTOR SWOT ANALYSIS (PKF)
Opportunities
Threats
Goodwill of Government
Regulator
New constitution
Emerging innovative technologies
Collaboration
Outsourcing
Low penetration among the Youth
Competition
Institutional capacity
Weak capital base
High indebtedness
Political interference
Aging membership
High unemployment rates
Non remittances by employers
Staff retrenchment

9. Other subsector issues/challenges
Inadequate marketing skills/reach
Corruption, mismanagement and governance issues, e.g. investments in non-core business
Low risk management skills
Inadequate internal controls
Failure to abide by laid down accounting standards

10. Sacco Competitive advantages
Fair, reasonable and steady interest rates
Member loyalty through democratic governance
Member ownership/management
Transparency in terms of lending

11. Exercise One
Watu Sacco has over 18,000 members spread across three counties.
In the last AGM, up to 3,000 members attended and the meeting lasted from 9.00am to 6.00pm.
In subsequent Board meeting following the AGM, the Board meeting lasted 8 hours.
Identify issues requiring attention and in what context.

12. Areas of Opportunities for CSs
As a financial institution, compliance is critical.
Guidelines issued by the Regulator (SASRA):
Prudential guidelines-concerned with financial soundness of the Sacco
Reporting guidelines
Role of the Board.

13. Areas of Opportunities for CSs-Cont’d
Responsibilities/rights of members.
Development of Code of Best Practice.
Management of Meetings.
Board Composition/Structure/Succession Plan.
Interpretation of financial statements.
Development of Board Charter & Strategic Plan.

14. Areas of Opportunities for CSs-Cont’d
Board Evaluation as a tool to measure and improve performance.
Enterprise Risk Management (ERM).
Training-Board induction and continuing professional development, including governance issues.
Human capital issues.

15. Take a Moment….
What are some of the issues that are likely to be included in the prudential guidelines, taking into account that the guidelines are concerned with the financial soundness of the Sacco?

16. Some Elements of Prudential Guidelines
Capital adequacy, including minimal capital requirements.
Credit Risk-Sacco will need a credit policy.
Delinquent loans-provisioning policy.
Liquidity & funding risk- eg maintenance of liquid assets, branch expansion.
Loans-Sacco must have a loan policy.

17. Some Elements of Prudential Guidelines-Cont’d
Investment – Sacco must have an investment policy.
Prohibition of conflict of interest and related party exposure, eg handling loans to directors/staff.
Internal and external audit requirements.
Divided to be paid at the rate recommended by the Board and approved by the AGM.

18. The Modern Sacco
Most urban Saccos are led by very well informed persons, including the general membership.
However, the general membership is politicized and sometimes, polarized.
Most members start savings with their first earnings. This is good.
Board members earn reasonable allowance.

19. The Modern Sacco-Cont’d
Leadership has a fairly free hand to manage the business of the Sacco.
The modernization is however work-in-progress. There is still a lot of work to be done.

20. What is expected of CSs?
Develop a wider understanding of the Sacco subsector and related aspects:
The Cooperative Societies Act (CSA)-applies to all (Sacco )matters that are not specifically provided for by the SSA (S.67 SSA)
The Sacco Societies Act 2008 (SSA)
The Sacco Societies ( Deposit –Taking Businesses) Regulations 2010 (SSR)
The Sacco By-laws
Other relevant statutes (employment, taxation, safety, public procurement, public ethics etc)
The Common Law on directors duties and liabilities.

21. In conclusion
The purpose of this discussion was to bring to your attention potential areas of opportunities for CSs.
Therefore………..

22. THANK YOU