Automation of SACCOs - FSD Kenya

The purpose of the visits was to spend enough time with each SACCO to
understand their requirements in detail through individual interviews. This
would require an estimated 2.5-3 full working days at each SACCO. Given the
time available the project team could visit six SACCOs in total. The considerable
limitation of this method was that any findings might be biased to the
condition of one or a few individual SACCOs and not representative for the
approximately 200 SACCOs obliged to comply with regulations. In order to
mitigate this methodological deficiency the sample of SACCOs to be visited
was carefully selected with the support of WOCCU and FSD to identify six
institutions with the least of this tendency.
The sample also needed to represent the variation of the SACCO business
model that does exists in the form of focus on e.g. agricultural sector members,
integration with members employer, building up a branch network, offering
microfinance products, expansion to rural areas etc. It was assumed that these
SACCOs have many common core requirements but that each also has unique
requirements corresponding to its segment and specific product offering. For
this reason it was necessary to understand the range of different segments
that existed and include one SACCO from each segment in the sample.
Two possible options for segmenting SACCOs were identified: 1) a quantitative
method by which a number of key variables, that apply to all FOSA SACCOs,
such as number of members, branches, assets under management would
be identified and, using regression analysis, the six SACCOs which are the
least unique could be identified. 2) Alternatively industry experts would be
consulted to subjectively but logically identify representative SACCOs for each
segment. Given the sample size (6) and the approximate population size
(200), the team decided that the random variable would be too great and the
benefit of the former method would not motivate the effort. Instead, the team
had several conversations with subject matter experts (SMEs) from KUSSCO,
WOCCU and FSD to understand what different types of SACCOs exist.
During discussions with these experts the following key SACCO characteristics
were identified:
Urban: Urban SACCOs are very large, Kshs 5-15 billion in terms of total
loan portfolio. They are practically all head quartered in Nairobi and are
characterised by access to ample supply of skilled labour and a relatively
reliable and efficient telecommunication network.
Rural: Rural SACCOs are among the smallest in the industry rarely
exceeding Kshs 2 billion in total assets, they are found in villages or
towns with 1,000-20,000 inhabitants and primarily have members with
an income below the national average (for SACCO members) and are
sustained through agriculture, either as employees of a plantation or as
independent farmers.
Employer-based: Have usually been created for employees of a
specific organisation. This could be one large local private company such
AUTOMATION OF SACCOS: ASSESSMENT OF POTENTIAL SOLUTIONS • 5
as a plantation or it could be for policemen or military personnel across
Kenya. They distinguish themselves by processing salaries on behalf of
the employer or by letting the employer process the transactions related
to the SACCOs products on its behalf.
Agricultural: SACCOs who are partially or fully focused on offering
products tailored to the needs of farmers.
Public sector: SACCOs focused on the public sector might have
developed unique practices or developed unique products that were
deemed necessary to consider.
Private sector: SACCOs focused on the private sector might have
developed unique practices or developed unique products that were
deemed necessary to consider.
Size (per total assets): SACCOs with a large loan portfolio under
management were expected to have developed unique practices due to
the economies of scale generate by their volume.
Size (per number of branches): Connecting a large and geographically
dispersed branch network creates challenges that need to be overcome.
Software in place: It was relevant to visit SACCOs who had recently
implemented what was perceived as competitive solutions as well as
those who use legacy solutions.
Any SACCO could represent one or several of these creating several unique
combinations. However, from a requirements gathering perspective it was
considered sufficient if the sample as a whole would represent all, disregarding
the combinations. The exception is SACCOs that have a large branch network
and operate in a rural area. The logic being that they face a unique challenge
in connecting the branches while the available infrastructure and income per
capita in the region impose severe limitations.
It was decided to choose the six candidates from those SACCOs that were
affiliated to WOCCU and FSD projects or had been in contact with WOCCU/FSD
earlier in order to leverage the network and contacts. The risk of restricting the
sample to those 30-40 SACCOs seemed negligible.
A list of nine SACCOs: Muramati, Kirinyaga, Wakenya Pamoja, Ndege Chai,
Universal Traders, Stima, Harambee, Ukulima, and Mwalimu was finally
produced. These SACCOs represented a well balanced mix between the above
mentioned characteristics. As the project schedule only allowed for visiting
six SACCOs, three had to be ruled out. The team looked at unique features
within all nine SACCOs in order to pick the ones that were given priority 1. This
prioritisation was confirmed during discussions with WOCCU and FSD. The
following six were chosen as priority 1 candidates to be contacted first:
Muramati SACCO: Rural tea farmers SACCO, has largest number of
branches and also has implemented Bankers Realm recently (interesting
from a lessons learnt point of view).