SACCOs stare at early grave in numbness to digital era

The Savings and Credit Cooperatives (SACCOs) concept could be staring at an eventual demise in what has been a slow-adoption of innovation in service delivery.

Commercial banks and other micro-financial institutions have embraced the digital disruption to scale up their enterprises but Saccos remained seemingly stuck in limbo, apparently largely sheltered from the innovation wave.

However, a recent technology meeting for Sacco’s Chief Information Officers (CIO’s) organized by CIO East Africa noted that the cooperatives are beginning to wake up to the new digital reality.

“SACCOs boards of directors are mostly made up of old people who are not normally flexible on matters technology hence the slow adoption.

“However, as we see products such as mobile money further their spread, SACCOs have no option but to catch up if they want to stay afloat,” Chai Sacco CIO Robert Karioki told Citizen Digital.

The institution has remained stable with both its loan book and deposits growing according to the latest Kenya Financial Sector Stability Report of 2017 but lately. mobile money and digital loan applications represent the highest increase in usage.

According to the report, SACCO loans and deposits stand at Ksh.331.2 and Ksh.305.3 billion having grown by 11.3 and 12 percent respectively from 2016 as the entities remained secluded from the interest rate cap regime introduced in September 2016.

The financial institution has however been on the slide in comparison to peers going by the Financial Access 2019 Report released earlier this month by the Central Bank of Kenya (CBK) in conjunction with the Kenya National Bureau of Statistics (KNBS).

Lenders have embraced mobile banking to grow their participation in Kenya’s finance sector to 40.8 percent from 14 percent in 2006 as digital loan applications take up an 8.3 percent as SACCOs’ share of the economic segment slid, losing 1.8 points to the competition.

Similarly, SACCOs have seen a decline in their choice as a saving instrument to 9.4 percent from 12.8 percent over the same period while bank’s savings accounts as a choice have doubled to 25.4 percent even as mobile money hits 53.6 percent as a choice for savings.

SACCOs have been in the intermediary, largely remaining in the brick and mortar platforms even as a majority of customers express frustrations of long queues and delays to the collection of proceeds from the institutions including dividends.

In spite of the recognition of the need to catch up to the new digital reality, Kimisitu SACCO Chairman Phillip Oyuko says any innovation in the sector has to take into consideration, the true dynamics of the savings and credit cooperatives.

“It is not a question of catching up with other financial institutions but rather a question of meeting our vision of servicing our customer. The decision to invest in digitization or not should be guided by the client. Some of our members still prefer to receive services through physical branches,” he said.

Although most SACCOs remain stuck in the ancient mode of delivering services, not all cooperatives are taking the digital disruption laying down.

Brian Omwenga, the founder of Tech Innovators Sacco of Kenya has seen the real danger to a slow adoption of technology and other innovations by the cooperatives to pursue an ideal mix of the Sacco attributes and digitization principles.

“SACCOs have to shift to the digital reality. How will Sacco’s look like in the future? There are two dimensions to the transformation. What can technology do for SACCOs and what can cooperatives do for tech? The solution lies in finding compatibility between the Sacco model and innovation,” he said.

Notwithstanding the risks to a slow transformation to the digital age, SACCOs remain an integral part of Kenya’s financial sector given their direct interaction with consumers.