SACCOs have played and continue to play a critical role in our financial ecosystem.

Players in the SACCO space have reluctantly embraced digitisation despite its obvious benefits. The coronavirus pandemic has however flung many sectors into the digital space as people opt to perform their transactions online to minimise movement and contact with other persons.

We sat down with Cynthia Wandia (pictures), Co-founder and CEO of fintech firm Kwara to discuss why it is important for SACCOs to optimise their processes in this digital era.

Why should SACCOs in Kenya digitise their processes?

The times we live in now have placed a premium on digitisation, by offering cost savings, faster service delivery and enhanced security of data, processes and funds.

The number one reason why it is critical for SACCOs to digitize their processes is to guarantee efficient, convenient and secure service delivery for its members. Securing their funds through access controls and a centralized platform that is robustly protected is more preferable, even essential. 

Competition from digital lenders has laid bare the fact that members are presented with options to access money faster, regardless of the conditions.

The challenge set in a few years ago, when digital lenders penetrated the market and went direct to consumers with easy to access mobile financial services that provide superior user experiences. Almost from one day to the next, members had alternative financial options at the palm of their hands. SACCOs without large IT budgets or in-house expertise were immediately negatively impacted.

Finally, if 2020 has shown us anything, it is that in the event of an unpredictable event like the Covid-19 pandemic, Digitisation is the key to maintaining service delivery in a safe and efficient manner. We surveyed close to 50 SACCOs at the beginning of the pandemic, and almost 60 per cent had been forced to reduce their loan offerings due to the restrictions on movement. That has a massive financial impact both on the members as well as the SACCOs income streams.

Digitisation could mean using any Enterprise Resource Planning (ERP) solution as long as it eliminates paperwork, is this sufficient for SACCO operations?

It is the case that digitisation means moving from analogue to digital. Many SACCOs have used and continue to use various ERPs to manage a number of functionalities such that they are today being used to facilitate tasks that they were not originally designed for.

SACCOs need to invest in proper internal infrastructure like SACCO core banking systems that will guarantee flexibility and configurability even as they use ERPs to manage other processes.

Digitisation is not just about eliminating paperwork, it involves the broader view of ensuring productivity at a minimal cost, while being flexible to expand your offerings.

If your ERP cannot let you customize your products or launch new ones fast, and is a closed system you cannot integrate with others, does it really serve you well?

In your assessment, how is digital adoption in Kenya’s SACCOs compared to the rest of the world especially in Africa?

As Kwara, we have been privileged to research and interact with the cooperative movement as far away as in Asia and Latin America, and closer to home in Southern Africa. We have found a comparatively high rate of digital adoption in the Kenyan SACCO market.

Kenya’s SACCO sector ranks first in Africa in terms of assets, belying a deeply trusted and entrenched relationship with its members. Due to this size of growth, SACCOs in Kenya have been open to digital adoption from the onset. From customised Management Information Systems (MIS) to ERPs, we saw it here first.

What can Sacco Societies Regulatory Authority (SASRA) and other stakeholders can do to support Digitisation of SACCOs?

Our regulatory structure is once again setting the standard globally in its support for digitisation at the sector level. They have allowed SACCOs to grow and provided an enabling regulatory space for SACCOs to embrace various digital solutions.

They are innovating in models to ensure the rising tide of digitisation raises all the boats. That’s why consultation around a shared digital banking platform is so innovative. As proven in Brazil, a cooperative movement that pools its resources grows at a tremendous rate.

As stakeholders we must always continue to engage with the regulator (SASRA) in our collective quest to better Kenya’s SACCO sector.

A number of SACCOs in Kenya have had issues regarding misappropriation, embezzlement and other corrupt deeds. To what extent could digitising processes safeguard the industry against such occurrences?

It’s disheartening to read such news, as it affects the perception of SACCOs countrywide. As a result, it is not uncommon to hear young people express skepticism about the security of SACCOs. This is a conversation that we must change.

Digitisation certainly provides a first, defensible layer around the members’ data and their funds by enabling strong access controls, providing immutable audit trails and surfacing analytics and reports on the health of the SACCO as well as its members. 

It also provides a way to engage members on a regular basis, reducing member apathy and involving them in the democratic process of governing their SACCO. This leads to better repayment and deposit mobilization rates, as well as the general members’ satisfaction.

Despite the benefits of digitisation, there is obviously the conversation around security. What are your thoughts on this and how can you instill confidence on the skeptics and the general SACCO sector?

The conversation around security is a critical one, especially in the context of introducing online and mobile banking that is securely embedded and linked to a core banking system. All stakeholders need to be prepared to provide assurances.

The numbers tell the story. Starting with reliability, uptime and cloud-based services, your service provider should compete with world-class equivalents. Alongside that comes the scalability question. The power of cloud-computing means that in the event of a sudden increase in valid traffic, a core banking system will have access to additional resources in real time to prevent networks going down.

What are the benefits of SACCOs embracing digital services versus using the traditional manual operations?

SACCOs carry the trusted history of our grandparents and parents, and ourselves. Now let’s look into the future: Imagine a young teen seeing a Facebook advertisement to build their savings towards their first diploma. They click and immediately register seamlessly, providing video and photo verification. Accounts are opened and they link their mobile wallets. They are encouraged to add their friends, set goals and start savings.

They receive digital financial literacy ‘snacks’ - consumable content on how to grow. They then grow their savings effortlessly in a secure digital platform with an intended goal to finance their Diploma, unlocking future income opportunities. Within no time, they own assets through their SACCO, receive working capital for their first ventures and even save for their big day - all with the encouragement of their peers.

Now imagine a group of informal traders coming together to build a Chama without any digital infrastructure. In as much as they can be diligent in savings due to consistency in cash flow, the productivity of the Chama will be almost at zero majorly due to manual processes. Digitisation spurs innovation which in turn powers productivity in any SACCO

SACCOs must now embrace technology so as to empower their members in this technology era.

How optimistic are you in your agenda to ensure that SACCOs in Kenya are all digital and what drives that belief?

We are very optimistic, and this is driven by the fact that SACCOs are above all member-based institutions. They will reflect the members' needs, as they exist to serve them. In an increasingly digitised world, the SACCOs sector will ultimately have to optimize so as to better serve the ever changing member needs.

Generally, technology has taken over many processes in our financial space, and SACCOs being critical players in the sector will have to adapt and allow technology to drive a lot of its operations.

I believe that to grow the capacity of our SACCOs will require the deliberate efforts of all stakeholders in the SACCO sector. We have the right infrastructure to power our SACCOs to digitisation. Let’s utilise them to grow the productivity of our SACCOs and impact the members towards their goals of financial health, resilience and wealth.

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