From time to time we, Kenyans wake up to the news of yet another savings and credit cooperative society (Sacco) in trouble. The truth is, financial institutions don’t suddenly become broke or find themselves under the heavy weight of non-performing loans. Such things develop over time. When investigated, collapsing SACCOs will always show that bad things have been going on for a while.

So, how does a licensed and supervised Sacco get to the point of collapse? Bad leadership mostly as well as other factors that come into play.

External auditors

Saccos are required by law to appoint an external auditor, whose name it submits to Sasra, the Saccos supervisory body in Kenya. External auditors are required to raise any concerns to Sasra, and the financial statements they give to the public should give a timely indication of impending trouble if all is not well at Sacco. Also, if something is amiss they are supposed to raise their concerns to the Sacco’s leadership through a management letter.

SASRA team

Each Sacco has a team that oversees its affairs appointed by Sasra that has supervisory authority to the Sacco.  The team is required to investigate the Sacco leaders’ conduct on duty. If the team follows the book, then it will be able to give an early warning strategy and intervention policy for a troubled Sacco and adopt a more proactive risk-based supervision approach.

Why Saccos collapse

Saccos do not just go down overnight; something has been going on for some time to make this happen. At times, the rot is left alone until it is too late.  When a Sacco collapses, it is usually a reflection of deeper underlying issues that should have been remedied earlier.

So, what forms a well-lead Sacco?  Here are pointers:

Sound decision-making practices

People’s participation in their own development is central to good, effective, and efficient governance of savings and credit cooperative societies (Saccos). All women and men who are members should have a voice in the decision-making process. Such participation should be fair and free. All processes, decisions and relevant information should be conducted in a transparent manner and should be accessible to all those concerned.

Regular meetings

Regular meetings between external auditors, the Sasra team, and Sacco’s leadership must be held to help nip problems in the bud. These have been found to be highly effective in the discovery and resolution of issues. The public has every right to expect the highest levels of competence and expertise from regulators, Sacco leaders, and external auditors. After all, it is their hard-earned money that is usually at stake.

Sacco committees should meet at least once a month while the General Meeting should be held at least once a year. Working committees such as Credit, Supervisory, and Audit Committees should meet regularly to ensure close supervision of the Saccos’ leading and general business.

In spite of the uniform membership criteria, there are bound to be differing interests, views, and opinions in the Sacco. This will best be achieved through an all-inclusive participatory approach, transparent systems and operations, and full accountability to the members.

Equal opportunity for all

All members should have equal opportunities to benefit from Sacco’s’ services in order to improve their economic status and share in the vision of the society. They should, therefore, be equally accorded Sacco’s’ opportunities and services. In the leadership organs, none should be suppressed, ignored, or shut up when they have suggestions. The legal framework and policies under which Saccos are regulated and operate should be respected, strictly, and impartially enforced. They should be made known to all members at all times.

Sound leadership practices

People in positions of power, like chairpersons, should be open to differing viewpoints. The leadership and management organs of the Saccos must have processes and procedures which produce results in time, using resources in the most economical way. The results should meet the needs of clients and stakeholders. This is an indicator of good leadership.

All Saccos must have leaders and managers who have a vision for and commitment to the organization. The leaders and managers should seek and improve their institutions and do all that is necessary to satisfy the needs of their members and the communities in which they are located. Their character and past record should be free of any professional and operational flaws. Such leaders and managers need to have strategic thinking so that the affairs of the Sacco are managed with a sense of purpose.

Knowledgeable and Trainable Leaders

The members of the leadership organs should be knowledgeable and trainable in the matters of Sacco’s’ leadership and operations.

Sacco’s growth both in portfolio size and savings volumes is often an indication of good leadership.

Sound leadership will lead to sound management and sound operations. In return, these aspects will lead to excellence in performance. The continued growth of a Sacco will result in its survival and sustainability in the long term.

By the same token, poorly led SACCOs will hardly post good performance and annual growth on a continuous basis. The results show that leadership has enormous effects on the performance of a SACCO. Moreover, critical factors which affect performance have been identified. The major causes of the misappropriation of funds which include political influence and wrangles can now be dealt with to protect membership funds. SACCOs can be a key solution to Kenya’s economy if prudently managed.