Why You Need to Be an Active Member of a Co-operative Society

By Philip K. Olesitau 16th April 2017.

The co-operative movement has remained a mystery to some people over the years despite making significant contributions to individuals,their families, local communities, cooperative unions and to the national economy. There are significant benefits accruing from being an active member of a cooperative society, despite the teething challenges usually experienced by young cooperatives and systematic and governance issues with large and old ones.

How co-operatives work has remained a mystery to some communities hence individuals within them because of lack of enough information on how individuals co-operate to pool their meager resources to do mega projects that transform their lives in many ways.

Secondly, this is coupled by lack of adequate people and organization management and leadership; knowledge, skills and attitudes among co-operative leaders leading to occasional wrangles and embezzlement of members funds instead of effective investments of the pooled resources in form of appropriate and effective credit facilities to members and profitable projects that increase members’ returns on investment. However, despite these setbacks, the movement in the country has for the most part remained solid and progressive and it is today estimated to hold over Kshs 250 billion in members’ savings. 

Wherever you look in Kenya, you will see the hallmarks of the co-operative movement that include; Banks like the Cooperative Bank, Equity Bank, Family Bank, multi-national dairy processing factories, high rise buildings, members housing estates, large and numerous tracks of land bought by members pooled funds among others.This does not only show how organized the movement is or how successful it has been but also highlights the fact that the co-operative movement is an important segment of the economy and hence cannot be ignored by any section of the country, by families or individuals.

 It is therefore of great interest that every Kenyan or at least one member in their family is a member of a cooperative society, be it a savings and credit co-operative society SACCO), a housing cooperative, an investment cooperative or other type of cooperative within the industry in which they thrive in. This does not only help them to access affordable savings and credit services but also provides an opportunity for like minded individuals to pool their meager resources together for wealth creation and economic empowerment.

Almost all SACCOs provide members with loans at an affordable 1% interest per month or 12% per year as compared to the lowest commercial Bank at an average of 1.4% per month or 16.5% per year. SACCOs bring members together based on the principle of common bond, meaning members are drawn from a specific segment of the economy such as; livestock, agriculture, conservation, real estate, profession, e.t.c. Co-operatives help people with similar needs and interests to pool their meager resources together to create a revolving fund where members can borrow from at competitive interest rates which are often lower than in the commercial banks as illustrated above.  This same interest charged members as they take loans is later returned to them inform of dividends after deducting expansion funds and the  operating costs of running the society.

Once members start creating wealth at the individual level, they again pool higher levels of savings to do profitable projects together hence everyone in the SACCO benefits proportionally. The more successful a SACCO is, the more it attracts new members and the more the pooled resources build up. Further, large SACCOs subscribe to cooperative unions at an even higher level to pool together larger amounts of funds for mega economic projects like high-rise office block buildings. The Kenya Union of SACCOs or KUSCO for example lends large sums of funds to smaller member co-operatives at less than 12% interest per annum for on-lending to their members. The members still repay at the same interest rate charged by their local SACCO and then their SACCO shares the profits with the cooperatives Union.

At the individual level, members benefit from customized credit, savings and investment products and services provided by their Co-operative Society.  members are encouraged to save with the society to be able to access loans up to three times their loans.  This is possible because not every member gets loans at the same time and amounts repaid by those with loans are directed to new loan applicants.

Members credit(loans) is guaranteed by other members and these loans are used to meet various needs such as; school fees, medical emergency, house construction or improvement, plot purchase, re-financing of more expensive commercial bank loans, purchase of a new car etc.

Members access loan amounts of up to three (3) times their own savings in the Society.  1/3 of the loan is quaranteed by their own savings in the society and  2/3 of the loan is guaranteed by other members who become co-signers to the loan. For example if a member needs to by a dairy cow worth Kshs 100,000, they only need to have saved kshs 34,000 in their SACCO and get written guarantees for the balance of Kshs 76,000 from at least three or more members. They also in turn guarantee others later when he/she is are not taking a loan or when their loan balance has reduced after several repayments.

A cooperative society with 100 members contributing small amounts monthly of say, Kshs 2,500 per member, contributes a total of Kshs 250,000 per month and accumulated Kshs 3 million in core savings one year and a further Kshs 400,000 in loans interests charged to members as they take small loans. This interest of Kshs 400,000 is allocated between operating expenses, reserve fund and dividends to members. This means that the interest is used to strengthen the society  and shared again at the end of the society's financial year among members as dividends with a small portion going to meet the costs of running the SACCO. Growing organically, such a society would be able to grow their loan portfolio to over Kshs 74 million and about 1000 members in just 5 years.

Other than the obvious economic empowerment of members, other critical benefits include;
  1. A strong sense of community as members get to interact much more closely 
  2. Leadership capacity development of members as they lead their SACCO organization
  3. Increased socio-economic capacity building of members as they get to access trainings and participate in learning exchange trips organized by the SACCO.
  4. Improved community development and participation in local governance as members pull together their economic and social assets to leverage on what is best for their communities.

From the foregoing, despite teething challenges at the start of a co-operative societies, the benefits of the co-operative movement are key ingredients to local community and individual socio-economic development as well as county and national development.

About the Author:  
Philip K. Ole Sitau is the Chairman of Puaan Emaa Co-operative Society Ltd and an active member of the successful Kimisitu SACCO and Kimisitu Investment ltd.  He can be reached through: email: puaan.emaa@gmail.com Mobile: +254722466060/727666952