In order therefore to promote and tap investments from the Muslim community, the. Industrialization Ministry has established Sharia compliant co-operative ...
RESEARCH: Improving Rural Livelihoods: A Study of Sharia Cooperatives in Kenya
Name of project leader:
Abd elrahman Elzahi Saaid Ali
Team member:
Abdul Ghafar Ismail
Research Assistant:
Wahida Mohamed Athman Ali
Research cluster:
Poverty and Financial Inclusion
EXECUTIVE SUMMARY OF RESEARCH PROPOSAL Recent studies shows that improving the livelihoods of people who experience poverty represent significant challenge to governments and development partners. Through six case studies this research attempts to highlight poverty alleviation initiatives of the participating Islamic cooperative institutions in Kenya. The exploration of the dimensions of the rural poor outreach (scope, cost, worth, depth and social benefits) for each cooperative is used to provide a more detailed picture of the impact the Sharia cooperatives have on the livelihoods of Kenya’s Muslim communities they serve. The ensuing impact study then synthesizes and shares findings in the following manner:
Whether the cooperatives by reliably offering services - such as credit, savings, training and technical assistance to their members help them earn higher and more stable incomes.
How the cooperatives are helping members adopt more sustainable economic activities, despite limitation in the service offerings
How the cooperatives are helping to level the playing field between Islamic microfinance institutions, banks and cooperatives.
The role of capital’s financing and training on the impact that the Sharia Cooperatives have on rural livelihoods.
The study highlights areas for further research in the form of examination of available avenues for strategic alliance and partnerships between the cooperatives and other institutions and how to forge and successfully effectively implement mutually beneficial alliances and partnerships. The study is conducted in collaboration with Ajewarji, Bilal, Crescent Takaful, Rayma and Taqwa Sharia Cooperatives of Kenya who reflect the range of services offered in
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terms of geography, empowerment of micro-small enterprises, length of relationship with cooperatives, and diversity of sustainability. A structured questionnaire comprising of both open and closed-ended questions on household characteristics, economic activities, Income, products suites and social support networks/coping strategies offered by the Sharia Cooperatives was administered to the members of the Sharia cooperatives. Questionnaire II was administered via Focus Group Discussion to staff members of the sharia cooperatives to determine among other factors the impact of capital financing and training on the cooperatives, the extent to which cooperatives are helping to level the playing field with Islamic Banks. It also made use of the dimensions of rural poor outreach. Triangulation, reading and re-reading of data to search for and identify emerging themes in the data was done consistently. Results are categorized into themes in line with study objectives. It is expected that this study will give an insight onto the current state of Sharia Cooperatives as a competitor to the traditional Islamic microfinance, Islamic banks, State managed funds and other prevailing approaches to poverty alleviation. The results will therefore be of significant use to governments, funders, implementers and practitioners who are seeking to develop a financial inclusion strategy that leverages on Sharia cooperatives. It is also expected to be a valuable tool to students, institutions and individuals who want to learn more about Kenya’s Islamic community, its economy, financial services sector and the Sharia Cooperative industry.
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Improving Rural Livelihoods: A Study of Sharia Cooperatives in Kenya Part I:
Background
Chapter 1:
Introduction
Pioneer Muslim traders with links to the Persian Gulf arrived at the Kenyan coast around the eighth century with reports being made of the thriving Muslim towns of Pate and Manda in Lamu County by the tenth century. Their presence grew considerably during the 12th century as trade increased in the Indian Ocean. The earliest Muslim settlers came from Oman, Yemen, and Iran, establishing communities along the Somali coast, Lamu, Mombasa, Zanzibar, and other coastal areas of East Africa. Most conversions to Islam were of individual nature, however there were communities that embraced Islam en-masse such as the Digo and Pokomo of the Lower Tana region. Islam reached Nairobi-Kenya’s capital city at the close of the Nineteenth Century where it established a small village known as the present day as Pumwani. Muslim traders also introduced Islam to the western region of Kenya between 1870 and 1885 to the areas of Mumias, Homa Bay, Kakamega, Kisumu, Kisii and Bungoma. According to the 2009 census there are now 4,304,798 1 Muslims in Kenya which translates to 11.15 per cent of the total population. About half of this population still lives in the coastal strip in and around the cities of Mombasa, Malindi and Lamu. The next biggest grouping mainly of Somali origin is located in North Eastern Kenya around the towns of Garissa, Wajir and Mandera .Considerable numbers of Muslims are also found in large cities and towns such as Nairobi, Nakuru, Eldoret and Kisumu. In a survey by the Kenya National Bureau of Statistics (KNBS) and Society for International Development (SID), the predominantly Muslim towns of Lamu, Tana River, Kwale and Kilifi counties lead in the poverty index with the residents experiencing problems of low income, expenditure and immense inequality. The report published in 2013 is based on the 2009 national census shows that the counties are the poorest in terms of general poverty, income disparity, and access to education, sanitation, water, lighting and housing. The report also indicates that the national average in terms of the ratio of the wealthiest to the poorest per county is 9 to 1 and that the five counties with the worst income inequality measured, as a ratio of the top to the bottom, are at the coast. The ratio of expenditure by the wealthiest to the poorest is 20 to 1 in Lamu, Tana River, Kwale and Kilifi counties. In terms of mean expenditure, the poorest counties include Mandera, Wajir and Tana River.
1 https://www.scribd.com/doc/36670466/Kenyan-Population-and-Housing-Census-PDF 3
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Besides abject poverty that many Kenyan Muslims face they also tend to have several grievances, many of which drive the depth and breadth of poverty. These include the lack of adequate and effective representation in politics, discrimination, lack of economic, educational, and other opportunities as well as the more recent issue of heavy-handedness and human rights abuses perpetrated by antiterrorism legislation and tactics. Unemployment is also rife in the Muslim population. North East Province, Nairobi, and Coast Province, have the highest levels of unemployment in the country as of 2005– 2006, 2 as well as the highest rates of youth unemployment in 2008.3 Furthermore, economic development in the tourism industry, particularly in Coast Province, has generally deteriorated due to violence and terrorism threats. Chapter 2:
Macroeconomic Conditions
Kenya's economy is market based with few state-owned infrastructure and maintains a liberalized external trade system. The country is generally perceived as the Eastern and Central Africa's hub for Financial, Communication and Transportation services. Major industries include: agriculture, forestry and fishing, mining and minerals, industrial manufacturing, energy, tourism and financial services. As of March 2014, economic prospects were positive with above 5% GDP growth expected 4 largely because of expansions in telecommunications, transport, construction and a recovery in agriculture. These improvements are supported by a large pool of English speaking professional workers. There is a high level of computer literacy, especially among the youth. By 2015 estimates, Kenya had a GDP of US Dollars 69.977 making it the 72nd largest economy in the world. Per capita GDP was estimated at US Dollars 1,587. Kenya’s HDI value for 2014 was 0.548 put the country in the low human development category positioning it at 145 out of 188 countries. This may seem dismal but not so, when considered within the context that between 1980 and 2014, Kenya’s HDI value increased from 0.453 to 0.548, an increase of 21.1 percent or an average annual increase of about 0.56 percent. Table 1 reviews Kenya’s progress in each of the HDI indicators. Between 1980 and 2014, Kenya’s life expectancy at birth increased by 3.8 years, mean years of schooling increased by 3.8 years and expected years of schooling increased by 1.7 years. Kenya’s GNI per capita increased by about 24.9 percent between 1980 and 2014.
2 World Bank, “Kenya—Poverty and Inequality Assessment: Executive Summary and Synthesis Report,” 2009, available at . 3 World Bank, “Kenya—Poverty and Inequality Assessment: Executive Summary and Synthesis Report,” 2009, available at .
4 http://www.africaneconomicoutlook.org/en/country-notes/east-africa/kenya/ 4
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Table 1: Kenya's progress in each of the HDI indicators
Source: Human Development Report 20155
Slower export growth, rising world food and fuel prices, severe drought, global economic recession, post-election violence of 2007/8, substantial decline in tourism receipts, remittances and investment, as well as private capital inflows slowed Kenya’s growth to 1.6 percent in 2008, compared to 7 percent in 2007, and inflation surged from 4.3 percent in 2007 to 16.2 percent in 2008, after reaching a peak of 31.5 percent in May of that year. The official response to the crisis was timely. Prudent economic policies have helped reduce public debt and has accorded the necessary space to ease fiscal policy and help sustain domestic demand in the face of slowing economic growth. The economy started to rebound in 2009 aided by falling import prices, rising domestic consumption and a normalization of food supply and transport. Growth rose to 2.7 percent and inflation slowed down to 9.3 percent. Recovery continued in 2010 with GDP growth reaching 5.8 percent. The Kenyan economy experienced a moderate growth at 4.4 percent in 2011 primarily driven by financial intermediation, tourism, construction and agriculture sectors, and was at 5.1 and 5.6 percent in 2012 and 2013 respectively. The Gross Domestic Product in Kenya grew by 5.6 percent in 2015, compared to a 5.3 percent growth in 2014. Agriculture was the major contributor to the expansion (grew 5.6 percent from 3.5 percent in 2014), followed by manufacturing (3.5 percent from 3.2 percent in 2014), transport and storage (7.1 percent from 4.6 percent), real state (6.2 percent from 5.6 percent), construction (13.6 percent from 13.1 percent) and financial and insurance activities (8.7 percent from 8.3 percent). In 2016, the economy is expected to advance 6.8 percent. GDP Annual Growth Rate in Kenya averaged 5.41 percent from 2004 until 2015, reaching an all-time high of 12.40 percent in the fourth quarter of 2010 and a record low of 0.20 percent in the fourth
5 http://www.africaneconomicoutlook.org/fileadmin/uploads/aeo/2015/CN_data/CN_Long_EN/Kenya_GB_2015.pdf
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quarter of 2008. This GDP Annual Growth Rate in Kenya is as reported by the Kenya National Bureau of Statistics. However, while, Kenya is on the path to economic growth poverty alleviation remains a challenge. According to UNICEF Kenya overview 6 nearly half of the country's 43 million people live below the poverty line or unable to meet their basic needs. A study ‘Reasonable Goals for Reducing Poverty in Africa - Targets For Post 2015 MDGs And Agenda 2063’ by the Institute of Security Studies has ranked Kenya sixth among top 10 countries in Sub-Saharan Africa with large populations living in extreme poverty. The study expounds that the country will not be able to combat poverty by 2030 unless radical measures are taken to rescue the 18 million people under the poverty line. It goes on to say that failure to reduce poverty is
threatening Kenya’s economic success. Rural poverty in Kenya is also strongly linked to environmental concerns – especially poor water management, soil erosion, declining soil fertility and land degradation. Climate change, which is one of the major challenges facing the Kenyan economy, could undermine the resource base and contribute to declining agricultural yields. Droughts and floods have increased in frequency and intensity over the last decade making poverty and food insecurity acute in the arid and semi-arid lands of North Eastern Kenya. It is important to note that this area is dependent on livestock farming has been affected by recurrent droughts. Chapter 3:
Financial System
Kenya's financial system is relatively well developed. According to the Central Bank of Kenya -Developments in the Kenyan banking sector report for the quarter ended 30th September 2012 the sector comprised 43 commercial banks, 1 mortgage finance company, 6 deposit taking microfinance institutions, 5 representative offices of foreign banks, 111 foreign exchange bureaus and 2 credit reference bureaus. These include two fully fledged Islamic Commercial Banks and six conventional banks offering sharia compliant products. The performance of the banking sector in the past years has been overall sound despite the global crisis due to in part, the proactive supervision by the Central Bank which heightened its supervisory activities to detect any immediate stress present in the system. Most Banks introduced stricter appraisal for new credit facilities and tighter monitoring of credit portfolio, while some have also scaled back their foreign
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http://www.unicef.org/kenya/overview_4616.html
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currency loans and revised their relationships with foreign banks in order to reduce vulnerability to exchange rate shocks. The size of assets stood at Ksh. 2.3 trillion (USD 23 billion), loans & advances worth Ksh. 1.32 trillion (USD 13 billion), while the deposit base was Ksh. 1.72 trillion (USD 17 Billion) and profit before tax of Ksh. 80.8 billion (USD 800 million) as at 30th September 2012.7 During the same period, the number of bank customer deposit and loan accounts stood at 15,072,922 and 2,055,574 respectively. A variety of financial institutions, including microfinance institutions (MFIs), Cooperatives and the Kenya Post Office Savings Bank, also offer deposit and lending services to those segments of the Kenyan population that are underserved by commercial banks. A clear strategy for developing formal and informal institutions has started to emerge. The microfinance industry is playing a pivotal role in deepening financial markets and enhancing access to financial services and products, particularly in rural areas. In this regard the Microfinance Act was passed in May 2008 to regulate MFIs through licensing and supervision. Kenya is also world leader in mobile banking. Its landmark M-Pesa platform, a service offered through a partnership between Safaricom and Vodafone, allows a range of money transfer, cash-flow management and banking options through mobile phones. Launched in March 2007, M-Pesa boasts of 20 million customers as of April 20078, and has received widespread acclaim as banks and other countries are working to emulate its successes. Mshwari launched in 2012 is a savings and loan product between Commercial Bank of Africa Ltd (CBA) and Safaricom- is immediately accessible to the 20 million users of Safaricom’s MPesa. It gives MPesa users access to banking services – savings and loans without having to walk into a bank hall or fill out a single form. It allows them to save as little as 1 shilling (earning interest of between 2-5% a year) or borrow as little as 100 shillings (Ksh 100 is equivalent to about $1.17 at the fixed rate of 7.5% repayable in 30 days) and attracts no account maintenance fees or transfer fees. It is a great product for people who are classified under the ‘informal sector’. In terms of default protection, the loans is self-securing in that for each loan, an equivalent amount of a person savings in the phone are frozen until the loan is repaid. M-Shwari had by 2014 savings worth Ksh 135 billion (USD 1.35 billion) and has attracted 9 million customers, making it the biggest virtual bank in Kenya. CBA has reported disbursing loans amounting to KSh24 billion (USD2.4 billion), while maintaining a
7 https://www.centralbank.go.ke/index.php/news/243-banking-sector-registers-improvedperformance 8 http://www.safaricom.co.ke/mpesa_timeline/timeline.html 7
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repayment rate of 97 percent; a far more impressive than the repayment rates for loans advanced by commercial banks. Hot on the footsteps of Mshwari is Equitel, a similar product launched by Equity Bank in 2015. Its loans attract an interest rate of 1-2% and has the advantage of interoperability allowing users to send and receive money from other mobile money platforms. These two mobile banking products do impact on the services of the savings and credit societies (SACCO’s). The Nairobi Stock Exchange (NSE) has about 659 listed firms cutting across the financial, industrial, service and agricultural sectors. The NSE was adversely affected by the global financial crisis and experienced a bearish run in 2009 as exits by foreign investors contributed to panic selling from domestic retail investors. The NSE 20 share index fell from 4 180 in September 2008 to 3 005 in September 2009, reaching a low of 2 475 in February 2009. Similarly, the stock market capitalization as a share of the GDP dropped from approximately 47 percent in 2007 to 33 percent in 2009 to recover to 38 percent in 2010. The money market is relatively active, with the now 44 commercial banks participating in the interbank money market featuring 30 unit trusts operated by commercial banks as well as Kenya Shilling Money Market Funds offered by various insurance companies, investment banks and fund managers. Interbank activity tends to be concentrated mainly in the overnight market, while the 91-day Treasury bill remains the most frequently used money market benchmark. Kenya features a fairly active fixed income market with a growing investor base. A variety of government securities are regularly issued, with a strategic target set at keeping Treasury bonds and bills to 70 percent and 30 percent of domestic debt respectively. As of March 2013 Kenya a sovereign rating of B+ by Fitch and Standard and Poor's. The Kenyan fixed income market has a relatively diversified investor base, with a growing presence of fund managers and foreign investors, the latter of which indirectly conduct investments via banks and fund managers. No over-the-counter trading occurs on the primary market and all transactions must be finalized by brokers. As per regulatory requirements, all bonds, corporate and sovereign, are traded on the Stock Exchange and trading orders for listed securities must be placed by licensed stockbrokers. An automatic trading system (ATS) was launched in 2009, making Kenya the first country in East and Central Africa to feature an automated bond-trading
9 https://www.nse.co.ke/listed-companies/list.html?start=50 8
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market, which also led to a significant increase of activity on the secondary market. The derivatives market features a limited number of cross currency and interest rate swaps and currency forwards, often used on the interbank market. Kenya's pension sector has expanded significantly in recent years, and inflows and asset sizes have increased following the establishment of the Retirement Benefits Authority under the Retirements and Benefits Act. The sector has also become an important investor in government securities, holding about 28 percent of outstanding issues in late 2009. The insurance market, with over 4710 insurers 1 of whom is sharia compliant. It is deemed overpopulated, highly segmented and has a limited core of companies with adequate retention capacity and underwriting policies. The 2006 Insurance Amendment Act led to the establishment of an Independent Insurance Regulatory Authority in April 2008, which is working to improve insurance penetration. Kenya has also set its ambition of becoming the Islamic finance hub of East Africa by leveraging first mover advantage in this niche market within the region. Towards this end The Capital Markets Authority (CMA) has been focusing its efforts on two fronts, namely: establishing the supporting institutional, policy and regulatory environment and widening of the sharia-compliant products and services base. A Round table meeting was held in October 2011 to share the findings of a research study and solicit input in the development of a roadmap towards Kenya's Islamic Capital Markets policy and subsequent regulatory framework. In October 2012, another stakeholder meeting was held to explore the issuance of and opportunities provided by Sukuk in tapping international investment and by December 2012 CMA had facilitated the training of relevant officers in structuring and regulation of Sukuk in Malaysia. Kenya is expected to issue its first Sukuk in the year ending June 2016. In 2013 CMA adopted a Policy Concept Note by CMA, developed proposals for the establishment of a National Sharia Advisory Council that is expected to establish a framework benchmarked against international standards; facilitate informed decision making by market participants; foster market integrity through the timely disclosure of relevant and reliable information as well as enhance the consistent application of Sharia rulings within the capital market. CMA is also working towards the creation of a level playing field between Islamic and conventional products and services by ensuring neutrality in the current tax regime governing Islamic securities transactions through collaboration with the Ministry of Finance (MoF) - Treasury and the Kenya Revenue Authority (KRA). This is aimed at accelerating the process of addressing current tax provisions that may be potentially inhibiting the development of the Islamic capital market. 10 https://en.wikipedia.org/wiki/List_of_insurance_companies_in_Kenya 9
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Further, in order to develop an implementation road map for Islamic finance reforms, a scoping exercise was carried out by Islamic Finance Council (UK) in mid-2014. This exercise proposed inter alia the establishment of a Project Management Office (PMO) that will help design and coordinate a range of interventions to enhance Islamic finance markets in Kenya. These include the development of a regulatory framework; design and delivery of capacity building programmes for financial sector regulators and market players; establishment of a Sharia governance framework for Islamic finance in Kenya; support of domestic and international communications and market awareness raising activities. This PMO was made operational in August 2015. Fears of structural weaknesses in Kenyan banks have resurfaced following the placing of a third bank under receiver management in less than six months in 2016, with analysts pointing to weak supervision and outright fraud by bank directors. The Central Bank of Kenya put Chase Bank under receivership in April 2016 after a run on deposits of US $80 million caused by the restatement of the Bank's accounts for 2015 to reflect the actual bad debt and insider lending position; and the exit of the bank chairman and Group Managing Director. The National Bank of Kenya has been forced to restate its bad debt position and provisioning, and to send home five top managers over the wanting disclosures. Orders for their arrest have also been issued. This situation is similar to the speculation that prevailed during the major bank failures caused by systemic weaknesses in 1988, 1993 and 1998 that claimed more than 50 financial institutions. A running thread in the failures of what came to be known as "political banks" was unsecured lending to directors, politicians and their associated companies; a factor in the closures of Dubai Bank, Imperial Bank and now Chase Bank. While analysts say another round of bank failures is not on the cards, they have been warning banks since 2012 to stop understating loan provisions and to increase their capitalization. The Central Bank of Kenya has now undertaken to provide a credit facilities to banks or micro-finance institutions faced liquidity problems. It is also expected that the number of Kenyan banks will shrink to 30 in the next three years. The minimum core capital requirement for banks is to be steadily raised from the current KSh1 billion (USD 9.9 Million) to KSh5 billion (USD 49.5 Million) by 2018, affecting 22 lenders that will be forced to raise funds, merge or sell stakes to comply with the law. The Kenya 10
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Bankers Association has also unveiled a new ethics code that it hopes will address corruption and unethical practices and boost confidence in the banking industry.
Part II:History and Development of Cooperatives in Kenya Chapter 4:
History of Cooperatives in Kenya
The history of cooperatives in Kenya dates back to 1908 when Lumbwa Co-operative Society was established. For about two decades, the society was restricted to the settler (colonialist) population. In 1931 the first Co-operative Ordinance which did not allow Africans to participate in cooperatives was enacted primarily to regulate the operations of co-operatives by the government. A second Co-operative society ordinance was enacted in 1946 when the colonial government acknowledged that Africans needed to participate in the economy through co-operatives. In this year the Department of Cooperatives was established and a Registrar appointed. The Swynnerton Plan paved the way for the formation of more co-operatives in 1955 when Africans begun to be involved in the growing of cash crops. 1,894 societies had been registered by 1969, key examples of which were the Kenya Co-operative Creameries (KCC), Kenya Planters Co-operative Union (KPCU), Kenya Farmers Association (KFA) and Horticultural Cooperative Union (HCU). Priority was given to establishing a standardized accounting system in coffee and dairy farming, marketing cooperatives, and a system popularly referred to as Members Transactions(MT)followed by a savings and credit system integrated to the MT system. A retired Swedish banker, Sven Lindkvist, was hired to study the feasibility of introducing rural credit Saccos linked to the marketing cooperatives. The scheme assumed his name, and was known as Lindkvist Production Credit Scheme (LPCS). It was later renamed as Cooperative Production Credit Scheme (CPCS). Lindkvist’s study revealed that although cooperatives were the main sources of deposits for banks, it was difficult for cooperatives to get credit from the banks due to stringent, and what was considered discriminatory, lending policies. Members could not open savings or deposit accounts because of unrealistic minimum balance requirements. Lindkvist recommended that cooperatives start their own savings and credit system. This is how the standardized MT system became an enabler for initiation of savings and credit system for rural Saccos. Initially, the CPCS was to use borrowed funds to lend to individual society membership. The MT system allowed members to migrate from cash receipts for their produce to savings deposit accounts through their societies. The plan was to introduce and 11
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encourage a culture of saving in rural cooperatives. Society members were also encouraged to deposit surplus cash from other sources to build a pool from which to borrow and diversify their activities. The cooperative unions established savings and credit (union banking) sections to manage these activities. In many district cooperative unions, this activity developed into rural banking units, with huge savings and loan portfolios. When these developments were taking place, the establishment of the Cooperative Bank in 1965 was under way. The bank provided the momentum for the growth of the union banking units by lending to the societies. At the same time the concept of creating a common bond between a Savings and Credit Cooperative Society (Sacco) with an employer was mooted. The Government also introduced subsidies and free access to government credit and free extension services. The year 2012, was dubbed The Year of Cooperatives, a crowning moment in Kenya’s cooperative movement calendar. The International Cooperatives Alliance (ICA), which unites, represents and serves cooperatives Worldwide, identified Kenya’s cooperative movement as one of the most regulated in Africa and the best in East Africa. In July 2013 WOCCU recognized Kenya SACCOs as the fastest growing subsector in the World. Today, cooperatives have made remarkable progress in sectors, such as agriculture, banking, credit, agro-processing, storage, marketing, fishing, housing and transport. Emerging sectors, such as Information, Communication and Technology (ICT), are leveraging on the demands of the traditional cooperatives to infuse innovation and technology in their operations. The sector may now be categorized into financial and non-financial cooperatives. The former dealing with the marketing of members’ produce and services such as dairy, livestock coffee, tea, handicrafts while the latter comprise of Saccos, housing and investment cooperatives. The Sacco industry does play a key role in financial deepening and intermediation in Kenya. The structure of the cooperative movement in Kenya places individual members at the bottom of a pyramidal organizational structure. The Cooperative Alliance of Kenya (CAK), formerly known as Kenya National Federation of Cooperatives (KNFC), is at the top as apex body. Saccos fall under the Kenya Union of Savings and Credit Cooperative Societies (KUSCCO) under a similar structure. The cooperative movement in Kenya is vertically organized into a four-tier pyramidal structure that links up primary cooperatives at the local (lower) level to the national (higher) level. The structure consists of primary cooperatives at the bottom, district/ commodity cooperative unions, national cooperative organisations and one confederation, CAK, whose membership includes national cooperative organisations as well as some cooperative unions and primary cooperatives not affiliated to any union. It is through CAK that the Kenyan cooperative movement is linked to the World’s cooperative movements. 12
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Most of the primary cooperatives in Kenya have their origin in state-controlled promotion of cooperative development, which saw people join cooperatives not on the basis of their common bonds and mutual trust, but due to the directive from the state that compelled those engaged in similar economic activities to join specific types of cooperatives. For instance, in the agricultural sector it became mandatory for cash crop farmers to join cooperatives in order to market coffee, cotton, pyrethrum and milk. Chapter 5:
Legal and Regulatory Framework
Savings and Credit Cooperative Societies (SACCOS) in Kenya are regulated by the Sacco Societies Regulatory Authority (SASRA) established in 2010 after the gazettement of the SACCO Societies (deposit taking SACCOS) regulations. Kenya and South Africa are the only countries in Africa with independent regulators and specific regulations for Saccos – the Sacco Societies Act and Co-operative Banking Act, respectively. In most countries, central banks regulate and supervise Saccos, which denies the societies the flexibility to serve members adequately. The Sacco sub sector can be described as two-tiered given the range of financial services to members and regulatory regime. The traditional Savings and Credit Cooperative Societies (Saccos), described in law as Non-Deposit taking Saccos provide a limited range of savings and credit products, are registered and supervised under the Cooperative Services Act, CAP 490. The Deposit Taking Saccos (DTS) besides the basic savings and credit products, also provide basic ‘banking’ services (demand deposits, payments services and channels such as quasi banking services through ATMs and Mobile banking. The general trend is that Saccos start as nondeposit taking Sacco business and grow to deposit taking Sacco business to expand the range of financial services to members. Sessional paper No. 10 of 1965 on “African Socialism” gave impetus to rapid Africanization of Kenyan economy and poverty eradication based on principles similar to those adopted by the co-operative movement. Thereafter the first postindependence Government Co-operative Development Policy of 1966 saw the enactment of the Cooperative Societies Act (Cap 490).Sessional Paper No. 8 of 1970 main goal was the consolidation of the cooperative activities. This included improvement of management of societies, intensification of education and training for members, committee and staff with provision of government support staff as supervisors. Another review of the Co-operative Development Policy took place in 1975 where the government continued to recognize co-operatives as vital organs for mobilizing material, human and financial resources for national development. Sessional Paper No. 4 of 1987 on “Renewed Growth through the Co-operative Movement”, reiterated its commitment to enhance the participation of Kenyans in the economy through Co-operatives. The responsibility of organizing and managing co13
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operatives was left to the members and their management committees while the government played an advisory role. Sessional Paper No. 6 of 1997, on “Co-operatives in a Liberalized Economic Environment”, the government reviewed its involvement in the management of cooperatives by providing a legislative framework under which cooperatives were to survive in a competitive economic environment. The enactment of the Co-operative Societies Act No. 12 of 1997 removed completely the government’s role in the affairs of co-operative societies. This resulted into a near collapse of the entire co-operative movement in the country. The National Poverty Eradication Plan launched in 1999, provided for a broad-based approach to economic growth, especially in the rural areas, with cooperatives being a key vehicle. The Cooperative Societies Amendment Bill of 2004 sought to reintroduce some degree of government control. This act prepared the new Cooperative Societies Rules, 2004. It also revamped the role of Co-operative Tribunal Court, a specialized Co-operative Commercial Court, to fast track and speedily dispenses the backlog of cases. This is the first Tribunal of its kind in Africa and many countries are consulting on how to establish their own. The Sacco Societies Act introduced prudential regulation of all deposit-taking Saccos was enacted in 2008. It paved way for the establishment in 2009 of the Sacco Societies Regulatory Authority (Sasra) and the Cooperative Alliance of Kenya Limited (CAK) as the national apex organisation for the cooperative movement in Kenya, following the collapse of the Kenya Federation of Cooperatives Union. CAK’s mandate is to promote cooperative development, unite the movement and represent the cooperatives’ interests on all matters of policy and legal framework. CAK has been recognized internationally and admitted to the Group 10 of the most developed movements globally. The others are the United States, Canada, Mexico, Brazil, Australia, Poland, Costa Rica, Caribbean Confederation and Ireland. The Ethics Commission for Cooperative societies was established in 2011 to handle ethical and integrity issues. The commission works closely with the national anticorruption agency to minimise losses occasioned by graft, and recover all assets, including land and buildings of cooperatives that have illegally been acquired. By December 2013 there were over 6,000 registered non-deposit taking Saccos in Kenya, 1,995 of which were active in the context of Saccos that filed their audited financial statements with the Commissioner for Cooperative Development as a legal requirement. Chapter 6:
Cooperatives and the economy of Kenya
Kenya has the highest proportion, in percentage points, of GDP attributable to cooperatives globally, standing at 45 per cent, followed by New Zealand with 22 per cent. Kenya is ranked number one in Africa and seventh in the world on the strength of savings in excess of kshs400 billion which is 35 per cent of total savings.
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About 60 per cent of the Kenyan population earn a living from cooperatives. There are now 3,280 Saccos that account for about 60 per cent, 64 per cent, and 63 per cent of the country’s savings, loan, and assets respectively. The movement provides two million jobs with 70 per cent of Kenyans depending directly or indirectly on cooperatives. One out of every five Kenyans is a member of a cooperative. This means at least eight million Kenyans are members of cooperatives while 20 million depend on the movement indirectly. The cooperatives movement in Kenya boasts of an annual turnover of Ksh 436 billion (USD 4.4 billion) equivalent to 45 per cent of the national GDP. In their operations, the cooperatives have mobilized savings of over Kshs230 billion and provided affordable credit of over Kshs184 billion to members. The total number of societies and unions registered had a 5.4 per cent growth, rising from 4,228 in 2011 to 14,990 in 2012. A total of 45 multi-purpose societies were registered in 2011 while the number of dairy societies increased from 313 in 2011 to 343 in 2012. Saccos control over Ksh 250 billion. There are 1.8 million members with Sacco loans compared to 1.9 million people with bank loans. Saccos have also established over 400 Front Office Services Activities (FOSAs) in both urban and rural areas providing basic banking services to over four million Kenyans – a number that compares favourably with the number of accounts in the commercial banking system. Recovery of Ksh.3.8 billion in Sacco’s remittances from employers by 2010 out of Ksh. 4.3 billion arrears that had been outstanding since 2004. SACCOs had mobilized savings to the tune of Ksh.380 billion with asset base of 493 billion as at 31st December, 2012 Savings mobilization in the SACCO subsector has been growing at the average rate of 30% per annum. Income to co-operators has increased, e.g. milk-from ksh.8 (USD .08) to ksh38 (USD0.38) per liter; coffee-from ksh.10 (USD 0.1) to ksh.140 (USD 1.4) per kg. There has been tremendous growth of co-operative financial organization into giant financial power houses which surpass the normal commercial banks and other financial Institutions. The Co-operative Bank of Kenya is the 3rd largest bank in Kenya, whiles the Co-operative Insurance Company of Kenya (CIC), is the 2nd largest insurance in Kenya and the only one of its kind in Africa. Value addition is being done by some co-operative societies for example the New Kenya Cooperative Creameries (New KCC), Githunguri, Meru Central and Kenya Coffee Co-operative Exporters (KCCE)will continue value addition under Kenya’ development plan -vision 2030 in order to control larger part of product value chain. Co-operatives are also playing a vital role in input supply and distribution. The Kenya Farmers’ Co-operative Union (KFCU) will participate in bulk fertilizer importation and 15
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Distribution using the existing infrastructure (stores, vehicles and machinery) owned by co-operatives and unions. In order to address the problems of fragmentation and informality that exist in supply chain, the government ministry will encourage linkages between the formal market operators (wholesale and retail hubs), e.g. supermarkets and producer cooperative organizations. There is also the development of Diaspora co-operatives (SACCOs) - already the Ministry of Industry, Investment and Trade has promoted two Diaspora SACCOs in the America and United Kingdom (UK) in order to tap enormous resources generated by this subsector to channel into the country’s investment opportunities. 600 Matatu SACCOs have been registered in order to streamline and promote viable Investments in transport subsector in the country. With the country experiencing an acute shortage of housing, especially for the lowincome segment of the population in urban settlements, the Ministry has promoted 440 housing Co-operatives. However, these housing programmes have stagnated due to lack of affordable mortgage facilities and long term lending to assist in housing development. Besides poor planning, high cost of construction and building material and the complex land administration mechanisms discourage investors/cooperatives in committing funds for housing projects. The Ministry in collaboration with USAID has registered and supported 27 County Youth Bunge SACCOs in order to engage the youth in gainful business enterprises. These SACCOs have already mobilized Ksh. 10 million (USD 100,000) savings and loaned out Ksh. 7 million. (USD 70,000). In 2014 USAID injected Ksh.8 million (USD 80,000) grants in form of a revolving fund to this programme. Part III:
Sharia Cooperatives in Kenya
Chapter 7: Background Only 20% of the Muslim Population is being served by the current SACCO community. In order therefore to promote and tap investments from the Muslim community, the Industrialization Ministry has established Sharia compliant co-operative by-Laws to roll out products geared towards this segment market. The Sharia compliant co-operative policy is underway with Officials from the ministry meeting in 2014 at the Co-operative University College in Karen, Nairobi, to fine-tune the draft policy. This draft identifies challenges that Muslims face in joining cooperative enterprises and calls for a shift towards a more proactive engagement between the Government, Muslims, the co-operative movement and other stakeholders in addressing them. The policy seeks to create an enabling environment for the full participation of Muslims in the cooperative sector through the establishment of an appropriate legal and institutional framework and development of Sharia compliant products and services. 16
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The government is also looking towards institutionalizing observance of Sharia compliant principles in co-operative development with the aim of creating conducive business environment for Muslims. Other objectives of the new guidelines include; the development of appropriate products, mobilization of savings from Sharia observant communities and institutions and building capacity on Sharia compliance to all stakeholders. Case Studies Results The following are the Sharia Compliant Co-operatives registered in Kenya that participated in this survey- , Cresent Takaful Sacco (CTS), Taqwa Sacco, Ajewarji Sacco, Bilal Sacco, Della Sacco and Raymah Sacco. (i) Cresent Takaful Sacco (CTS), CTS, headquartered in Nairobi, became the first Islamic Sacco to run front office operations(FOSA), such as deposit-taking and lending in 2013 after two Islamic banks formed in 2008 — Gulf African Bank and First Community Bank- turned profitable and expanded beyond Nairobi in what was seen as growth potential for Sharia-based financial services. According to CTS CEO –Safaricom figures show that Eastleigh –an area in Nairobi inhabited by huge numbers of the Muslim community of Somali origin is the most profitable area per square kilometer while Garissa (an area of similar ethnicity) in North Eastern Kenya is the most profitable per call. It is on this premise that CTS is endeavoring to offer services on mobile and ecommerce portals. It also offers trade finance and investment services. Since CTS is not limited by geography or sector it has the ambitious target of gaining membership of 300,000 -400,000 and 20-30 billion shillings in deposits by 2018. Demographic Details 80% of the member respondents from CTS were male with 93.3% and 86.7% being heads of their household and married respectively. The average age of the respondents is between 26 -45 years old. 93.3% reported to having four or more dependents. A total 73.3% of the respondents reported to being business persons, 20% livestock farmers and 6.7% employed by the government. None of the respondents is a university graduate however at the same time none reported to not having gone to school at all; which implies that the CTS members targeted under this study was a fairly literate group. The average monthly income as reported by the CTS members is said to range between Ksh 10,000 (USD 100) to Ksh 100,000 (USD 1,000). An indication perhaps that the respondents CTS Sacco members fall outside the portion of Kenya’s population that lives on less than USD 2 per day. CTS members also confirmed to having accounts elsewhere. Interestingly they listed four conventional banks, namely: Equity Bank Ltd, Kenya Commercial Bank Ltd, Sedian 17
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and Cooperative Bank of Kenya Ltd. None of whom are fully fledged Islamic Financial Institutions although Kenya Commercial Bank Ltd does have an Islamic Finance arm. Equity Bank was reported to be the alternative banker to 46.7% of CTS members. Scope of Outreach CTS was reported to having being in operation for between 2-3 years. It has nine permanent staff and two branches with one located in a rural area. The total number of clients ranges from between 1500 -1600 out of which active accounts are only 800 – 900 which is slightly above 50% of the whole portfolio. 33.3% of the CTS members learnt about the CTS SACCO from family and friends, followed by agent (26.7%) and then through CTS SACCO marketing initiatives (20%). Mosques were also reported by 20% of the respondents to be playing a role in the dissemination of CTS SACCO information. No reports of the use of mass media and SMS Messaging service were made. However 50% of CTS members indicated that they prefer person to person interaction as a mode of the way CTS communicates with them. SMS messaging service and Mail was the preference of only 20% of the respondents. Telephone calls were the least preferred mode of communication at only 7%. 40% of the respondents rated their knowledge of CTS products and services as low while the knowledge of CTS staff on the same was rated as high. CTS staff reported that products and services could be accessed through branch, mobile and representative office (agent). All the CTS member respondents reported to being fully able to use mobile phone devices but had issues with knowledge of the internet and its applications. The use of the ATM machine and Debit card did not fare well either and only 55.6% were aware about agency banking. This could perhaps explain why 86.7% of CTS member reported to undertaking transactions at the CTS branch/bank teller while 13.3% made use of the mobile phone and no mention of agency banking was made. The types of transactions typically undertaken were listed by CTS Members were savings (66.7%) and loan (20%). Chama (group) savings, advance against expected harvest or livestock produce and insurance products were not listed as transactions that could be undertaken at CTS Sacco by its members. 40% of the CTS members reported that it takes 3 days for a loan application to be considered and approved while 20% said it took up to 4 weeks. However a total of 40% of the CTS members indicated that loan approval takes a maximum of two weeks.
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The loan processing period was reported to be a week by CTS staff members which is more or less in line with the above member’s responses. CTS Staff indicated that the average loan amount was between Ksh 250,000(USD2, 500) and Ksh 300,000(USD 3,000) which serves to corroborate the member respondents of the same. The maximum loan amount to an individual and a group at any one time was indicated to be Ksh 1,800,000 (USD 18,000) and Ksh 1,000,000 (USD 10,000) respectively by CTS staff. They also indicated that CTS does require collateral to secure its loans, which can be in the form of assets, stock or coguarantors. Loan amounts as reported by CTS members ranged from Ksh 10,000(USD 100) with 60% of the respondents reporting to taking loans above Ksh 100,000(USD 1,000). A total of 80% of the respondents reported to making monthly loan repayments of between Ksh 5,000(USD 50) to Ksh 20,000 (USD 200). Moreover, 20% of the respondents reported to making monthly payments of above Ksh 20,000(USD 200). These loans were reported by the CTS members to be used to start a business (53.3%), pay school fees (26.7%) and for construction (20%). The typical maturity for the loan was said to be 6 months by 60% of the respondents however there were 6.7% of the respondents who reported loan maturities of 24 months. This would perhaps indicate that the longer term maturity loans were used for construction purposes while the short term loans could cater for school fees and business purposes. Savings per month ranged from Ksh 1000 (USD 10) –Ksh 5,000(USD 50) for 60% of the respondents and Ksh 10,000 (USD 100) to Ksh 20,000 (USD 200) for 20% of the respondents. The typical savings amount per month as reported by CTS staff is Ksh 5,000 which is in tandem with the above mentioned CTS member responses. These savings earned no return as reported by 100% of the CTS members. Interestingly with regards to new product offerings 26.7% of the CTS member respondents asked for the introduction of Annual General Meeting, emergency loans, Insurance and 24 hour service were requested by 20% of the respondents. ATMs were ranked last with only 13.3% of the respondents deeming them as necessary. Worth of Outreach 53.3% of the respondents reported to operating their businesses less than a kilometer away from CTS branches with 20% did report to being stationed between 5-10km away. As to whether distance affects the way they transact with CTS 40% of the respondents confirmed that it did. However 66.7% said this factor did not influence their decision to becoming CTS members.
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CTS was said to have by its staff members to have the correct human resource and financial mix for it to achieve most of its goals but required capital injection to increase its products suite, reduce cost of operations, expand to the rural areas and enhance confidence. Religious reasons were ranked poorly as a prompt for choosing to become a member of CTS when compared to security from fraud, opportunity to save and invest, lower transaction costs that were ranked 1st, 2nd and 3rd respectively by the members.
Depth of outreach CTS Staff reported that 50% of their clientele were women while the youth represented 20%. Farmers and livestock farmers were reported to be 10%. The number of rural poor accounts held were 250 out of the total 1600 accounts; 100 of which were active out of 800 active accounts. CTS staff also did list Chama (group) and livestock products as components of the suite of products offered by CTS yet these were not listed by any of the CTS member respondents. With regards to the question of whether CTS targets the rural poor, women, youth and farmers 53.3% of CTS members indicated that CTS products were not targeted at the youth, women or farmers. 33.3% of CTS members also indicated that that the very poor were also not targeted by CTS. A reason for this difference in opinion could perhaps be due to the fact that products targeting the youth, women and farmers were in the early stages of being rolled out as reported by CTS Sacco staff members. The number of active borrowers was reported to be 60 by CTS staff with voluntary savings members totaling to between 750 – 800. It is important to note that 53.3% of CTS members reported holding both a savings and loan account; while 46.7% reported to holding only a savings account The ratio of outstanding deposits against loans was reported by CTS staff to be Ksh 35,000,000 (USD 350,000) against Ksh 12,000,000 (USD 120,000). CTS staff members reported that it did not have enough capital to reach the required depth of outreach and the options available to CTS with regards to increasing its capital was commercial borrowing, development financing, capital injection and deposit mobilization by CTS Staff members. However it is only the Government of Kenya ‘Youth /Uwezo ‘fund’ that was listed as government or donor funding programme that 20
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could be beneficial to CTS and not deposit mobilization which would have seemed to be the easier option.
Cost of Outreach CTS Staff members indicated that CTS products and services were cheaper in comparison to conventional cooperatives and other Islamic Financial Institutions. This was in agreement to CTS member respondents who unanimously agreed that Sharia cooperative services were cheaper and less complicated than Islamic Banks products and services. More specifically 60% of CTS members cited its loans to be very cheap and the application process to be simpler than that of the Islamic Banks. Further, 60% of the respondents did acknowledge that it was easy to access CTS products and services. As far as pricing of services was concerned CTS Staff indicated that what was not working well was the underpricing of products and services and that this could be improved by increased marketing and pricing. CTS staff reported that it was expensive to send out information to attract new clients but they did acknowledge getting referrals from existing clients. They also indicated that use of mobile phone could reduce the cost of sending out this information. As to the question of affiliation with other institutions was concerned – CTS was cited unanimously by its members to have a need for beneficial affiliations that would improve technology and increase CTS product suite. CTS Staff indicated that the institution did have affiliation with Takaful Insurance of Africa, CAK and KUSCCO. They also reported that CTS was regulated by the Commission of Cooperatives and that these affiliations did not make their products and services more costly. No affiliation to Islamic Bank or mobile services provider was reported; however CTS staff did indicate that there is a need for strategic alliances and partnerships. It is worthy to note that the affiliation to Takaful Insurance of Africa should have ideally been reflected in CTS product offerings in the form of an insurance product but it is not. CTS staff members indicated that other sharia cooperative, MFIs, Islamic Bank and conventional cooperatives were CTS main competitors. Therefore how and whether affiliations, strategic alliances and partnerships that are beneficial in terms of improvement in technology, capital investment and increase in product suites can be put in place and executed with perceived competitors remains to be seen. 21
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Social Benefits There was agreement from all the CTS member Sacco respondents that income levels had changed with 86.7% of the CTS members claiming it had become more regular and that they now owned more assets. 30.8% of the respondents reported to purchasing business equipment, 23.1% vehicle, 15.4% - purchased stock and a plot of land each. Most importantly 84.6% said they would not have been able to purchase these assets if they were not members of CTS. All the CTS members reported to starting a business as a result of being CTS member. The types of businesses are namely: shop (retail), gas supply and hardware selling construction materials. 66.7% of the respondents indicated that they would not have been able to establish these businesses either if they were not members of CTS. CTS does not offer any training or technical assistance as reported by its members, who made a call during this study for training on investments, business and finance management and Sharia banking. CTS staff did indicate that plans for business training were coming up even though this training would not be taking advantage of the local, national, regional and international cooperative education efforts. CTS Staff also indicated that it would be beneficial if CTS Board of Directors undertook cooperative training. A point to note was also the call for by the members for participation in the Annual General Meetings which are currently being attended by the founders only. This point is strengthened by CTS staff reporting that the current governance structure did not effectively allow for information flow between CTS members and its board. It was reported by CTS Staff that a newsletter was circulated but it only catered to news on member’s investments. Major concerns listed by CTS staff members were capital inadequacy, cost of operations and lack of a mobile banking solution. With regards to overall trust of the institution 73.3% of CTS members highly trusted the institution but 33.3% had low trust in the technology in use; 58.3% and 46.7% had average trust on 3rd party agents and security from fraud respectively. This could explain the fact that most CTS members seem to prefer undertaking their transactions within CTS premises. The greatest social benefit of CTS as cited by its staff is the economic empowerment of its members. (ii) Taqwa Sacco 22
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Taqwa Sacco was established in 1998 and has 2000 registered members. Based on its 2013 audited accounts Taqwa Sacco has Ksh 75,000,000 (USD 750,000) in deposits and has advanced loans to its members worth Ksh 81,000,000 (USD 810,000). Its products include a normal loan that is three times the shares held by a member, repayable within 36 months, school/college fees loan repayable in 12 months, Zakat management services for its members and Children savings account. In 2013/2014 Taqwa Sacco purchased 30acres of land at Konza (where Kenya’s first techno city will be built) and divided it into 114 quarter acre plots. These were balloted to subscribing members. It is now offering for sale shares to its members of a prime property worth Ksh 250,000,000 (USD 25 million) in the Central Business District of Nairobi at the cost of Ksh100,000(USD 1,000)that will also offer FOSA services. Every member is also required to pay Ksh. 12,000 (USD 120) towards Taqwa Sacco share capital which stands at Ksh. 4,068,000 (USD 40,680) which has greatly boosted the Sacco’s expansion plan towards formation of FOSA. Its membership is drawn from Government Ministries, NGOs, Parastatals and the private sector. Taqwa Sacco has a check off system with the Teachers Service Commission and Kenya’s Defense Force. Its expansion project is the opening FOSA branches North Eastern, Eastern, and the Coast of Kenya. As reported in its Annual General Meeting of 2012 Taqwa Sacco recorded an overall increase in turnover of 71% to Ksh 1,273,400(USD 12,734) - from Ksh 740,800(USD 7,408) in the year 2010. The members’ deposits rose by 11% to stand at Ksh 35,434,811(USD 354,348) up from Ksh 31,694,900(USD 316,949) in the year 2010. On the other hand loans to members balance rose from Ksh 30,509,203(USD 305,092) in the year 2010 to Ksh 39,903,328 (USD 399,033) which accounts for an increase of 31%.
Demographic Details 66.7% of the member respondents from Taqwa Sacco were male with 93.3% being heads of their household and married. The average age of the respondents was between 26 -45 years old. 80% reported to having more than four dependents. A total 80% of the members reported to being business persons, 13.3% livestock farmers and 6.7% employed by the government. 6.7% of the respondents was a university graduates; none reported to not having gone to school at all and 53.3% reported going to high school which implies that the Taqwa Sacco members targeted under this study were literate.
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The average monthly income as reported by the Taqwa Sacco members was said to range between Ksh 10,000 (USD 100) to Ksh 100,000 (USD 1,000). An indication perhaps that Taqwa Sacco members fall outside the portion of Kenya’s population that lives on less than USD 2 per day. Taqwa Sacco members also confirmed to having accounts elsewhere. Interestingly they listed the same four conventional banks listed by CTS members, namely: Equity Bank Ltd, Kenya Commercial Bank Ltd, Sedian and Cooperative Bank of Kenya Ltd. None of whom are fully fledged Islamic Financial Institutions although Kenya Commercial Bank Ltd does have an Islamic Finance arm. Equity Bank was reported to be the alternative banker to 53.3% of Taqwa Sacco members.
Scope of Outreach 33.3% of the Taqwa Sacco members learnt about the Taqwa Sacco from family and friends, followed by agent (6.7%) and then through Taqwa Sacco marketing initiatives (20%). Mosques were also reported by 40% of the respondents to be playing a role in the dissemination of Taqwa Sacco information. No reports of the use of mass media and SMS Messaging service were made. 47% of Taqwa Sacco members indicated that they prefer person to person interaction as a mode of the way Taqwa Sacco communicates with them. SMS messaging service and Mail was the preference of only 27% and 20% of the member respondents respectively. Telephone calls were the least preferred mode of communication at only 7%. 26.7% of the member respondents rated their knowledge of Taqwa Sacco products and services as low while the knowledge of Taqwa Sacco staff on the same was rated as average. Taqwa Sacco was said to have by its staff the correct human resource and financial mix for it to achieve most of its goals but required capital injection to increase number of branches and improve technology. Taqwa Sacco staff reported that products and services could be accessed through branch and website. A total of 60% the Taqwa member respondents reported to being fully able to use mobile phone devices but 73.3% had issues with knowledge of the internet and its applications. The use of the ATM machine and Debit card did not fare well either. However a total of 77.8% of the Taqwa Sacco respondent member were aware about agency banking. This could perhaps explain why 73.3% of Taqwa 24
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Sacco members reported to undertaking transactions at the Taqwa Sacco branch/bank teller while only 26.7% made use of the mobile phone and no use of agency banking was made. The types of transaction typically undertaken as listed by Taqwa Sacco members were savings (73.3%) and loan (20%). Chama (group) savings, advance against expected harvest or livestock produce and insurance products were not listed as transactions that could be undertaken at Taqwa Sacco by its members. Taqwa Sacco staff on the other hand listed loans, savings and investments as components of the suite of products offered by Taqwa Sacco similar to those listed by the member respondents. 40% of the Taqwa members reported that it takes 3 days for a loan application to be considered and approved while 13.3% said it took up to 4 weeks. However a total of 46.7% of Taqwa Sacco members indicated that loan approval takes a maximum of two weeks. The loan processing period was reported to be two weeks by Taqwa Sacco staff members which is in line with the above response. Taqwa Sacco Staff indicated that the average loan amount was Ksh 600,000(USD 6,000)) which corresponds to 60% of the Taqwa member respondents who indicated amounts of over Ksh 100,000 (USD 1,000) with 60% of the respondents reporting to taking loans above this amount. The maximum loan amount to an individual and a group at any one time was indicated to be Ksh 1m (USD 10,000) by Taqwa Sacco staff who also indicated that Taqwa does require collateral to secure its loans, which is in the form of guarantor. Taqwa Sacco member respondents reported to making monthly loan repayments of between Ksh 5,000(USD 50) to Ksh 20,000 (USD 200). However 20% of the respondents reported to making monthly payments of above Ksh 20,000(USD 200). These loans were reported by the Taqwa Sacco members to be used to start a business (60%), pay school fees (26.7%) and for construction (13.3%). The typical maturity for the loan was said to be 6 months by 60% of the respondents however there were 6.7% of the respondents who reported loan maturities of 48 months. This would perhaps indicate that the longer term maturity loans were used for construction purposes while the short term loans could cater for shorter term needs such as school fees payments and working capital for business. Savings per month ranged from Ksh 1000 (USD 10) –Ksh 5,000(USD 50) for 60% of the respondents ; Ksh 10,000 (USD 100) to Ksh 20,000 (USD 200) for 26.7% and Ksh 20,000 (USD 200) to Ksh 100,000(USD 1,000) for 13.3% of the respondents. The typical savings amount per month as reported by Taqwa Sacco staff was Ksh 25
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10,000(USD 100) for individuals and Ksh 7,000(USD 70) for groups. These savings earned no return as reported by 100% of Taqwa Sacco members. With regards to new product offerings 26.7% of the Taqwa Sacco member respondents asked for the introduction of emergency loans; Insurance, ATMs and 24 hour service were requested by 20% of the respondents. Mobile Transaction Services were ranked last with only 6.7% of the respondents deeming them as necessary Worth of Outreach 73.3% of the respondents reported to operating their businesses less than a kilometer away from Taqwa Sacco branches with 6.7% reporting to being stationed between 5-10km away. As to whether distance affects the way they transact with Taqwa Sacco 40% of the respondents confirmed that it did. However, 53.3% of Taqwa Sacco members said this factor did not influence their decision to becoming members. Religious reasons were ranked poorly as a prompt for choosing to become a member of Taqwa Sacco when compared to opportunity to save and invest, security from fraud, lower transaction costs that were ranked 1st, 2nd and 3rd respectively by the members. Depth of Outreach Taqwa Sacco Staff reported that 40% of their clientele were women while the youth represented 45%. Farmers and livestock farmers were reported to be 25%. The number of rural poor accounts held were 35%. With regards to the question of whether Taqwa Sacco targeting the rural poor, women, youth and farmers Taqwa Sacco members indicated that its products were not targeted at these segments of the population. The number of active borrowers was reported to be 2800 by Taqwa Sacco staff with the same number being voluntary saving members. It is important to note that 53.3% of Taqwa Sacco members reported holding both a savings and loan account; while 40% reported to holding only a savings account The ratio of outstanding deposits against loans as reported by Taqwa Staff was 1: 1.7 Taqwa Sacco was reported to not having enough capital to reach the required depth of outreach. No Government of Kenya or donor funding programme that could be beneficial to Taqwa Sacco in terms of increasing its core capital were however mentioned. Cost of Outreach 26
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Taqwa staff members indicated that Taqwa Sacco products and services were cheaper in comparison to conventional cooperatives and other Islamic Financial Institutions. This was in agreement to Taqwa Sacco member respondents who unanimously agreed that Sharia cooperative services were cheaper and less complicated than Islamic Banks products and services. 33.3% Taqwa Sacco members did however indicate that loan application process and requirements were not simpler than conventional cooperative processes and requirements. Taqwa Sacco staff reported that it was not expensive to send out information to attract new clients and they did acknowledge that Taqwa Sacco did get referrals from existing clients. As to the question of affiliation with other institutions was concerned – Taqwa Sacco was cited unanimously by its members and staff to have a need for beneficial affiliations that would improve technology and increase Taqwa Sacco product suite. On the other hand Taqwa Sacco Staff indicated that the institution did have an affiliation with KUSCCO. They also reported that Taqwa Sacco was regulated by the Ministry of Cooperatives, KUSCCO and SASRA and that these affiliations did not make their products and services more costly. No affiliation to Islamic Bank or mobile services provider was reported. However Taqwa Sacco staff members did indicate that sharia compliant providers were their main competitors. Therefore how and whether affiliations, strategic alliances as well as partnerships that are beneficial in terms of improvement in technology and increase in product suites can be put in place and executed with perceived competitors remains a question to be answered. Social Benefits As to whether income level had changed since joining Taqwa Sacco there was agreement from all the respondents that indeed it had changed with 93.3% and 86.7% of the Taqwa members claiming it had become more regular and that they now own more assets respectively. 30.8% of the respondents reported to purchasing business equipment, 23.1% vehicle, 30.8% - purchased stock and 7.7% a plot of land. Most importantly 84.6% of Taqwa Sacco members said they would not have been able to purchase these assets if they were not members of Taqwa Sacco. All the Taqwa Sacco members reported to starting a business as a result of being a member. The types of businesses are namely: shop (retail), gas supply and hardware selling construction materials. 66.7% of the respondents indicated that 27
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they would not have been able to establish these businesses either if they were not members of Taqwa Sacco. With regards to overall trust of the institution 73.3% of Taqwa Sacco members highly trusted the institution but 33.3% had low trust in the technology that is in use; 58.3% and 46.7% had average trust on 3rd party agents and security from fraud respectively. This could explain the fact that most Taqwa Sacco members seem to prefer undertaking their transactions within Taqwa premises. Taqwa Sacco was reported to not offer any training or technical assistance as reported by its members , who made a call during this study for training on investments, business and finance management ,Sharia and mobile banking. Taqwa Sacco staff did indicate however that there was a training policy in place which targeted Sacco Officials and staff only. This training TAKES advantage of the local cooperative education efforts. Taqwa Sacco staff also indicated that it would be beneficial if the Board of Directors undertook cooperative training. Taqwa Sacco staff reported that the current governance structure did effectively allow for information flow between its members and its board. Also, there is no newsletter in circulation. Major concern listed by Taqwa Sacco staff members was technology. The greatest social benefit of Taqwa Sacco as cited by its staff is financial empowerment of its members. (iii) Bilal Sacco Bilal Sacco was started 15 years ago. It has 4 branches in Mombasa, Kwale, Shimoni and Kibwezi. All its staff are on contract basis or hired on a need basis. Bilal Sacco has a special product for women called the ‘jiko plan’ which helps women to buy Jiko (cooking stove). The unique thing about Bilal Sacco is that it offers a return on savings which may Sacco’s do not do. Demographic Details 55.6% of the member respondents from Bilal Sacco were male with the same percentage and 94.4% being heads of their household and married respectively. The average age of the respondents was between 26 -45 years old. A total of 61.1% reported to having between 3-4 dependents. 33.3% of the respondents reported to being business persons and 66.7% livestock farmers. None of the respondents was a university graduate and 27.8% reported to not having gone to school at all.
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The average monthly income as reported by the Bilal Sacco members was said to range between Ksh 10,000 (USD 100) to Ksh 20,000 (USD 200). An indication perhaps that Bilal Sacco members do fall within portion of Kenya’s population that lives on less than USD 2 per day. Only 22.2% of Bilal Sacco members also confirmed to having accounts elsewhere. Interestingly they listed two conventional banks, namely: Equity Bank Ltd and Kenya Commercial Bank Ltd. None of whom are fully fledged Islamic Financial Institutions although Kenya Commercial Bank Ltd does have an Islamic Finance arm. Equity Bank was reported to be the alternative banker to 75% of the Bilal Sacco members. Scope of outreach 66.7% of the Bilal Sacco members learnt about the Sacco from family and friends, followed by Bilal Sacco marketing initiatives at 33.3%. Mosques were not reported by the respondents to be playing any role in the dissemination of Bilal Sacco information. No reports of the use of mass media and SMS Messaging service were made either. 44% of Taqwa Sacco members indicated that they prefer person to person interaction as a mode of the way Bilal Sacco communicates with them. SMS messaging service and community members was the preference of only 17% and 28% of the member respondents respectively. Telephone calls and print adverts were the least preferred mode of communication at only 6% each. 38.9% of the member respondents rated their knowledge of Bilal Sacco products and services as low while the knowledge of Bilal Sacco staff on the same was rated as average. Bilal Sacco was said to have by its staff the correct human resource and financial mix for it to achieve most of its goals. Bilal Sacco staff reported that products and services could be accessed through branch and phone call. All Bilal member respondents reported to being fully able to use mobile phone devices but 77.8% had issues with knowledge of the internet and its applications. 50% of the respondents reported to being able to use of the ATM machine but Debit card did not fare well at all. However a total of 50% of the Bilal Sacco respondent member were aware about agency banking. All Bilal Sacco members reported to undertaking transactions at the Sacco branch/bank teller. None reported making use of the mobile phone or agency banking was made. The types of transaction typically undertaken as listed by Bilal Sacco members were savings (38.9%) loan (33.3%), Chama (group) (16.7%) and school fees (5.6%). 29
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Advance against expected harvest or livestock produce and insurance products were not listed as transactions that could be undertaken at Bilal Sacco by its members. Bilal Sacco staff on the other hand listed loans- Emergency, Development and Education as components of the suite of products offered by Bilal Sacco. 83.3% of Bilal Sacco members reported that it takes 4 weeks for a loan application to be considered and approved while 11.1% said it took up to 5 weeks. However 5.6% of Bilal Sacco members indicated that loan approval takes a maximum of two weeks. The loan processing period was reported to be one month by Bilal Sacco staff members which is in line with the above response from a majority of its members. Bilal Sacco Staff indicated that the average loan amount was Ksh 500,000(USD 5,000)) which does not correspond to the Bilal Sacco member respondents who indicated amounts of between Ksh 1,000 (USD 10) and Ksh 20,000 (USD 200). The maximum loan amount to an individual was reported by Bilal Sacco staff members to be 3 times the shareholding of the member and there were no group loans. Bilal Sacco staff also indicated that the Sacco does require collateral to secure its loans, which is in the form of guarantors. Bilal Sacco member respondents reported to making monthly loan repayments of between Ksh 1,000(USD 10) to Ksh 5,000 (USD 50). None of the respondents reported to making monthly payments of above Ksh 20,000(USD 200). These loans were reported by the Bilal Sacco members to be used to purchase farm and livestock inputs (27.8%), household assets (22.2%) while starting a business, paying school fees, catering for emergencies and paying for medical expenses were 11.1% each. The typical maturity for the loan was said to be 1 month by 100% of the member respondents. Savings per month ranged from less Ksh 1000 (USD 10) –Ksh 5,000(USD 50) for 94.4% of the respondents. The typical savings amount per month as reported by Bilal Sacco staff was Ksh 1,500(USD 15) for individuals and there is no savings products for groups. These savings were reported to earn a return of less than Ksh 1,000(USD 10) by 50% of the Bilal Sacco member respondents while the other 50% reported earning between Ksh 1,000- 5,000 (USD 10- 50). With regards to new product offerings 43.8% of the Bilal Sacco member respondents asked for the introduction of mobile banking transactions, 25% each - ATM Machines and Agency Banking and 6.3% -Youth accounts. Bilal Sacco staff indicated that the Sacco was looking towards introducing piki-piki (motor bike) purchase plan, Mbuzi (Goats) and Ngombe (cattle) purchase plan, mobile banking and ATMs in the Town Centre. 30
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Worth of outreach 22.2% of the Bilal Sacco member respondents reported to operating their businesses between 2 – 4.9 kilometers away from Bilal Sacco branches with a total of 77.8% reported to being stationed 5 to over 10km away from the Branch. As to whether distance affects the way they transact with Bilal Sacco only 11.1% of the member respondents confirmed that it did. However for all the member respondents this factor did not influence their decision to becoming Bilal Sacco members. Bilal Sacco was said to have by its staff members to have the correct human resource and financial mix for it to achieve most of its goals. Religious reasons were ranked highest as a prompt for choosing to becoming a member of Bilal Sacco followed by wide acceptance, lower transaction costs and training, ranked 2nd, 3rd and 4th respectively by the members. Depth of outreach Bilal Sacco Staff reported that 60 of their clientele were women who represented 45.5% of the active accounts. The youth number to 36 representing 32.7% of the active accounts. Farmers and livestock farmers were reported to be 70%. The number of rural poor accounts held were 74.2%. With regards to the question of whether Bilal Sacco targets the rural poor, women, youth and farmers Bilal Sacco members indicated that its products were targeted at these segments of the population. The number of active borrowers was reported to be 110 by Bilal Sacco staff .It is important to note that 16.7% of Bilal Sacco members reported holding both a savings and loan account; while 33.3% reported to holding only a savings account The ratio of deposits against outstanding loans as reported by Bilal Sacco Staff was 4: 5 Bilal Sacco was reported to not having enough capital to reach the required depth of outreach. KUSCCO was listed as the organization that it borrows from. Cost of outreach Bilal Sacco Staff members indicated that Bilal Sacco products and services were fairly competitive in comparison to conventional cooperatives and other Islamic Financial Institutions. 38.9% of Bilal Sacco members did however indicate that the Sharia cooperative services were more expensive but 55.6% of the respondents indicated that they were less complicated than Islamic Banks products and services. More specifically 61.1% of Bilal Sacco members cited the loans were and 94.4% of the members cited that the application process to be simpler than that of the Islamic Banks. 31
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Further, 88.9% of the respondents acknowledged that it was not easy to access Bilal Sacco products and services. As far as pricing of services was concerned Bilal Sacco Staff indicated the challenge that some of their members were not able to differentiate between service charge and Riba. They recommended that members sensitization forums can be done in collaboration with other sharia Sacco’s. Bilal Sacco staff reported that it was expensive to send out information to attract new clients but they did acknowledge that they did get referrals from existing clients. They indicated that the expenses emanated from the facilitation of outreach event to attract members which includes the printing of brochures, member registration forms, mobilization costs etc.
As to the question of affiliation with other institutions was concerned – Bilal Sacco was cited unanimously by its members to have a need for beneficial affiliations. Bilal Sacco Staff indicated that the institution was affiliated and regulated by the Ministry of Cooperatives and KUSCCO. No affiliation to Islamic Bank or mobile services provider was reported; moreover Bilal Sacco staff indicated that there was no need for strategic alliances and partnerships at this point because the SACCO was still investing in the SACCO and its structures. Bilal Sacco staff members indicated that Yehu Sacco, KWFT and table banking institutions were its main competitors. Social Benefits As to whether income level had changed since joining Bilal Sacco there was agreement from all the respondents that indeed it had changed. However only 33.3% of the member respondents indicated that it had become more regular and that 83.3% now own more assets. 30.8% of the respondents reported to purchasing livestock, 38.5% household items, 23.1% - farm equipment and 7.7% business equipment. Most importantly all of Bilal Sacco members said they would not have been able to purchase these assets if they were not members of Bilal Sacco. 88.9% of Bilal Sacco members reported to starting a business as a result of being a member. The types of businesses are namely: shop (retail), hotel, farming and 32
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hardware livestock. All of the respondents indicated that they would not have been able to establish these businesses either if they were not members of Bilal Sacco. With regards to overall trust of the institution 44.4% of Bilal Sacco members highly trusted the institution and 61.1% had low trust in the technology that is in use; 61.1% and 55.6% had low trust on 3rd party agents and security from fraud respectively. This could explain the fact that most Bilal Sacco members seem to prefer undertaking their transactions within Bilal Sacco premises. Bilal Sacco was reported to offer training and technical assistance by its members. The training and technical assistance was said to be in asset management, how to make savings, how to manage a business and how to invest money. Bilal Sacco staff did indicate that there was a training policy in place which targeted Sacco members. This training was on how to run their business to prosperity and members rights. Bilal Sacco staff also indicated that it would be beneficial if the Board of Directors undertook training on design of lucrative products and investment. Bilal Sacco staff reported that the current governance structure did effectively allow for information flow between its members and its board. Members input was said to be an integral part of Bilal Sacco’s decision making processes. Bilal Sacco does not have a newsletter in circulation. There was no major concern listed by Bilal Sacco staff members with regards to current operations. The greatest social benefit of Bilal Sacco as cited by its staff is the Education loan product that has helped a number of children to stay in school. Thus, improving the levels of education in Bilal Sacco regions of operations.
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(iv) Ajewarji Sacco Ajewarji Sacco is said to have been in existence for 4 years. It has 2 branches both of which are located in the rural areas. It has 100 members. Demographic Details 100% of the member respondents from Ajewarji Sacco were female with 60% and 96.8% being heads of their household and married respectively. The average age of the respondents was between 46 - 60 years old. All the members reported to having five dependents. 54.8% of the respondents reported to being business persons while 45.2% farmers /livestock herders. None of the respondents was a university graduates with 48.4% reporting to not having any formal education. This implies that Ajewarji Sacco members targeted under this study was fairly illiterate. The average monthly income as reported by the Ajewarji Sacco members was said to range between Ksh 5,000 (USD 50) to Ksh 10,000 (USD 100). An indication perhaps that some Ajewarji Sacco members could fall within the portion of Kenya’s population that lives on less than USD 2 per day. All the Ajewarji members also confirmed to having accounts elsewhere. Interestingly they all listed to having an account with Robso Marketing and Savings. Scope of outreach 100% of the Ajewarji Sacco members learnt about the Sacco from the mass media (TV and Radio). No reports of the use of Mosques, Agents, family and friends as well as SMS Messaging service were made. 52% of Ajewarji Sacco members indicated that they prefer TV as a mode of the way Ajewarji Sacco communicates with them. Radio was the preference for 48% of the member respondents respectively. All of the member respondents rated their knowledge of Ajewarji Sacco products and services and that of Ajewarji Sacco staff as above average. Ajewarhi Sacco was said not to have by its staff members the correct human resource and financial mix for it to achieve most of its goals. Ajewarji Sacco staff reported that products and services could be accessed through branch offices. All the Ajewarji member respondents reported to being fully able to use mobile phone devices, internet, ATM machine, and Agency Banking and Debit card.
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The type of transaction typically undertaken as listed by Ajewarji Sacco members was savings. Loans, Chama (group) savings, advance against expected harvest or livestock produce and insurance products were not listed as transactions that were being undertaken by Ajewarji Sacco members. Ajewarji Sacco staff on the other hand listed loans, savings and Chama (group) savings as components of the suite of products offered by Ajewarji Sacco. There were no responses recorded from Ajewarji Sacco members with regards to the time it takes to process a loan request, maturity, and typical amount of repayment, application of loan amount and repayment method. The reason being that all the respondents targeted under this survey had never taken a loan .However Ajewarji Sacco Staff indicated that the average loan amount was Ksh 70.000(USD 700) with 7 days being the time it takes on average to process a loan request. They also indicated that the maximum loan amount to an individual and a group at any one time was Ksh 100,000 (USD 1,000) and Ksh 150,000(USD 1,500) respectively. Ajewarji Sacco also does require collateral to secure its loans, which is in the form of guarantor. Savings per month ranged from Ksh 1000 (USD 10) –Ksh 5,000(USD 50) for 100% of the respondents. The typical savings amount per month as reported by Ajewarji Sacco staff was Ksh 5, 000(USD 50) for both individuals and groups. The member respondents did not provide any information with regards to whether these savings earned any returns. With regards to new product offerings the Ajewarji Sacco member respondents asked for the introduction of emergency loans.
Worth of outreach All the respondents reported to operating their businesses more than 10 kilometers away from the Ajewarji Sacco branches. As to whether distance affects the way they transact with Ajewarji Sacco 100% of the respondents confirmed that it did not. And also this factor did not influence their decision to becoming Ajewarji Sacco members. Religious reasons were ranked highest as the prompt for choosing to become a member of Ajewarji Sacco followed by security from fraud, opportunity to save and invest, lower transaction costs, wide acceptance and Social support from members of the Sacco. Depth of outreach 35
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Ajewarji Sacco Staff reported that 30% of their clientele were women while the youth represented 45%. Farmers and livestock farmers were reported to be 90%. The number of rural poor accounts held were 89%. With regards to the question of whether Ajewarji Sacco targets the rural poor, women, youth and farmers Ajewarji Sacco members unanimously agreed that its products did target these segments of the population except they appeared noncommittal towards the targeting of the rural poor. The number of active borrowers was reported to be 25 by Ajerwarji Sacco staff and 60 being voluntary saving members. It is important to note that none of the Ajewarji Sacco members reported holding both a savings and loan account; 100% reported to holding only a savings account The ratio of outstanding deposits against loans as reported by Ajewarji Sacco Staff was 3: 1 Ajewarji Sacco was reported to not having enough capital to reach the required depth of outreach. No Government of Kenya or donor funding programme that could be beneficial to Ajewarji Sacco in terms of increasing its core capital was mentioned. However the option of borrowing from financial institutions was indicated.
Cost of outreach Ajewarji Sacco Staff members indicated that Ajewarji Sacco products and services were cheaper in comparison to conventional cooperatives and other Islamic Financial Institutions. This was in agreement to Ajewarji Sacco member respondents who unanimously agreed that Sharia cooperative services were cheaper and less complicated than Islamic Banks products and services. More specifically and interestingly (since none of the Ajewarji Sacco member respondents had reported taking a loan) 100% of them cited Ajewarji Sacco loans to be cheaper and the application process to be simpler than that of the Islamic Banks. Further, 100% of the respondents did acknowledge that it was easy to access Ajewarji products and services. Ajewarji Sacco staff reported that it was cheap to send out information to attract new clients yet that they did not get any referrals from existing clients. As to the question of affiliation with other institutions was concerned – Ajewarji Sacco was cited unanimously by its members to have a need for beneficial affiliations that would lead to its overall growth. Ajewarji Sacco Staff indicated that the institution did have affiliation with other institutions which were however not named. They also
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reported that Ajerwarji Sacco was regulated and again these institutions were not named. No affiliation to Islamic Bank or mobile services provider was reported; however Ajewarji staff members did indicate a need for strategic alliances and partnerships. Ajewarji Sacco staff members indicated that other non-sharia cooperatives were its main competitors. Social Benefits As to whether income level had changed since joining Ajewarji Sacco there was agreement from all the respondents that indeed it had changed; had become more regular and that they now owned more assets. 80.6% of the respondents reported to purchasing a vehicle, 12.9% - house and 6.5% livestock. Most importantly all the Ajewarji Sacco members said they would not have been able to purchase these assets if they were not members of Ajewarji Sacco. All the Ajewarji Sacco members reported to starting a business as a result of being a member. The types of businesses are namely: Transport, shop (retail), gas supply and hotel. All the respondents indicated that they would not have been able to establish these businesses either if they were not members of Ajewarji Sacco. With regards to overall trust of the institution 100% of Ajewarji Sacco members reported having average trust of the institution but had low trust in the technology, average trust on 3rd party agents and high levels of trust on security from fraud. Ajewarji Sacco was reported not to offer any training or technical assistance as reported by its members but who at the same time did not make a call for any type of technical support or training during this study. Ajewarji Sacco staff also did indicate that there was no training policy in place. They indicated that it would be beneficial if the Board of Directors undertook cooperative training. Ajewarji Sacco staff reported that the current governance structure did effectively allow for information flow between its members and its board. Also, there was no newsletter in circulation. The greatest social benefit of Ajewarji Sacco as cited by its staff is changing the lives of its members and community at large positively.
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(v) Della Sacco Della Sacco was established 2 ½ years ago. It has 6 branches two of which are in the rural area. It has 15 permanent staff members and 183 members Demographic Details 96% of the member respondents from Della Sacco were male with 64% being heads of their household and married. The average age of the respondents was between 26 45 years old. A total 60% of the respondents reported to having between 2-5 dependents. 28% of the respondents reported to being unemployed while 24% were employed by the government/public service. 32% of the respondents were university graduate however at the same time 36% reported to not having no formal education. The average monthly income as reported by the Della Sacco members was said to range between Ksh 20,000 (USD 200) to Ksh 50,000 (USD 500). An indication perhaps that Della Sacco members fall outside the portion of Kenya’s population that lives on less than USD 2 per day. Only 24% of Della Sacco members confirmed to having accounts elsewhere although names of these institutions were not provided. Scope of outreach All of Della Sacco members learnt about the Sacco from family and friends. No reports of the use of mass media, adverts, mosques and SMS Messaging service were made. 48% of Della Sacco members indicated that they prefer person to person interaction as a mode of the way Della Sacco communicates with them. Telephone calls and radio adverts were the preference of 32% and 20% of the member respondents respectively. All the member respondents rated their knowledge of Della Sacco products and services as high. The knowledge of Della Sacco staff on the same was also rated high. Della Sacco was said not to have by its staff the correct human resource and financial mix for it to achieve most of its goals. 38
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Della Sacco staff reported that products and services could be accessed through branches although they did indicate also that Della Sacco has a mobile channel. All the Della Sacco member respondents reported to being fully able to use the ATM and mobile phone devices but had issues with knowledge of the internet and its applications. The use of Agency Banking machine and Debit card did not fare well either. 100% of Della Sacco members reported to undertaking transactions via mobile phone. The types of transaction typically undertaken as listed by Della Sacco members were savings (60%), Chama (28%) and mobile phone transactions (8%). Della Sacco staff also listed loans, savings and Chama (group) as components of the suite of products offered by the Sacco. All the Della Sacco members reported that it takes 1 week for a loan application to be considered and approved. The loan processing period was also reported to be 1 week by Della Sacco staff members which is in line with the member response. Della Sacco Staff indicated that the average loan amount was Ksh 20,000(USD 200). This amount was reported to be between Ksh 5,000(USD 50) – Ksh 10,000(USD 100) by 16% of the Della member respondents but 8% indicated the amount to range between Ksh 10,000 (USD 100) to Ksh 20,000(USD 200). However it is important to note that 68% of Della Sacco members reported to never having taken out a loan. The maximum loan amount to an individual and a group at any one time was indicated to be Ksh 50,000 (USD 500) and Ksh 500,000 (USD 5000) respectively. Della Sacco was reported by its staff members to require collateral to secure its loans in the form of land, cattle, salaried employment and guarantors. Della Sacco member respondents reported to making monthly loan repayments of less than Ksh 1,000(USD 10). These loans were reported by the Della Sacco members to be used to pay for school fees, purchase farm or livestock inputs, pay medical expenses and to cater for emergencies. 11.1% of the member respondents reported to using the money to pay for day to day expenses. The typical maturity for the loan was said to be 2 months by all the member respondents. Savings per month ranged from less Ksh1000 (USD 10) for 52.6% of the member respondents to between Ksh 5,000(USD 500 – Ksh 10,000(USD 100) for 31.6% of the member respondents. The typical savings amount per month as reported by Della Sacco staff was Ksh 1,000(USD 10). These savings earned no return as reported by 100% of Della Sacco members. 39
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Della Sacco was reported by its members to be making advances against expected harvest and livestock produce. There was however no response with regards to new product offerings that Della Sacco member respondents would like to be introduced by the Sacco. Worth of outreach All the respondents reported to operating their businesses less than a kilometer away from Della Sacco branches. As to whether distance affects the way they transact with Della Sacco all the respondents confirmed that it did and that this factor did influence their decision to becoming Della Sacco members which is interesting considering that the option of mobile phone transactions has been reported to exist. Della Sacco was said not to have by its staff members the correct human resource and financial mix to achieve most of its goals. Della Sacco members ranked religion, security from fraud, opportunity to save and invest, lower transaction costs, social support, advances against harvest and livestock produce equally as reasons for choosing to become a member of Sharia cooperative. Depth of outreach Della Sacco Staff reported that 9% of their clientele were women while the youth represented 60%. Farmers and livestock farmers were reported to be 50%. The number of rural poor accounts held were 80%. With regards to the question of whether Della Sacco targeting the rural poor, women, youth and farmers Della Sacco members indicated that it did target these segments of the population. The number of active borrowers was reported to be 15 by Della Sacco staff with all members being voluntary saving members. It is important to note that 72% of Della Sacco members reported to holding a savings account; while 28% reported to holding only a Chama (group) savings account. None of the member respondents reported to having a loan account. The ratio of outstanding deposits against loans as reported by Della Sacco Staff was 7: 1. Della Sacco was reported to not having enough capital to reach the required depth of outreach. The County Government was cited by the staff as a possible avenue for funding. Cost of outreach Della Sacco Staff members indicated that the cost of its products and services were the same as those of conventional cooperatives and other Islamic Financial Institutions. 40
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This was in contrast to Della Sacco member respondents who unanimously agreed that Sharia cooperative services were cheaper and less complicated than Islamic Banks products and services. More specifically 100% of Della Sacco members cited the loans to be very cheap and the application process to be simpler than that of the Islamic Banks. Further, all the respondents did acknowledge that it was easy to access Della products and services. Della staff reported that it was expensive to send out information to attract new clients and that they did not receive any referrals from existing clients. They also indicated that most of their target clients do not have a formal education and were poor as such they required public education forums. As to the question of affiliation with other institutions was concerned – Della Sacco was cited unanimously by its members to have a need for beneficial affiliations that would increase Della Sacco’s product suite, enhance growth and facilitate training on specialized services. Della Sacco Staff indicated that the institution did not have any affiliations but was registered with the County Government. Della Sacco staff members indicated that local banks and other cooperatives were Della Sacco main competitors. Social Benefits As to whether income level had changed since joining Della Sacco there was agreement from all the respondents that indeed it had changed and had become more regular. 76% of the member respondents indicated that they were now able to own more assets. 53.3% of the respondents reported to purchasing livestock, 26.7% small scale business 13.3% shop and 6.7% clothing business. Most importantly 76.2% of Della Sacco members said they would not have been able to purchase these assets if they were not members of the Sacco. 82.6% of Della Sacco members reported to starting a business as a result of being a member. The types of businesses are namely: livestock trade, shop and small scale. All the respondents indicated that they would not have been able to establish these businesses either if they were not members of Della Sacco. With regards to overall trust of the institution 100% of Della Sacco members highly trusted the institution, the technology that is in use and security form fraud. But all the member respondents indicated that they had no trust in 3rd party agents. Della Sacco was reported to offer training or technical assistance by its members who have received training on livestock farming and disease control, rights as a 41
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member of the Sacco, benefits of Sacco membership and how to be a good Sacco member and savings training. Della Sacco members made requests during this study for training on how to start and manage a new business, livestock farming and business plan development. Della Sacco staff also indicated that there was a training policy in place on animal husbandry. This training does not advantage of the local cooperative education efforts. Della Sacco staff also indicated that it would be beneficial if the Board of Directors undertook training but were not specific on the type of training. Della Sacco staff reported that the current governance structure did effectively allow for information flow between its members and its board. Also, there is no newsletter in circulation. The greatest social benefit of Della Sacco as cited by its staff is it is possible to uplift even the poorest. (vi) Raymah Sacco Rayma Sacco has been in operation for 2 years. It has 5 permanent staff members, no rural branches and 60 members. Demographic Details 72.4% of the member respondents from Rayma Sacco were male with 65.5% and 55.2% being heads of their household and married respectively. The average age of the respondents was between 26 -45 years old. 28.6% reported to having more than 5 dependents and the same number reported to having no dependents at all. A total 41.3% of the respondents reported to being business persons, 10.3% each students and government/public service employees. 6.9% of the respondents were university graduates however at the same time 37.9% reported to not having received any formal education at all. The average monthly income as reported by the Rayma Sacco members was said to range between Ksh 5,000(USD 50) - 10,000 (USD 100) for 27.6% of the member responses; Ksh 10,000 (USD 100) – 20,000(USD 200) for 13.8% to Ksh 20,000(USD 200) - Ksh50, 000 (USD 500) for 31%. An indication perhaps that a majority of Rayma Sacco members fall outside the portion of Kenya’s population that lives on less than USD 2 per day. 80% of Rayma Sacco members confirmed to having accounts elsewhere although names of alternative bankers or Sacco’s were not provided.
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Scope of outreach All Rayma Sacco members learnt about the Sacco from family and friends, No mention of agent, adverts, mosques, SMS messaging services or mass media was made with regards to the dissemination of Rayma Sacco information. 53% of Rayma Sacco members indicated that they prefer person to person interaction as a mode of the way the Sacco communicates with them. Telephone calls were the preferred mode of communication for 47% of the member respondents. All the member respondents rated their knowledge of Rayma Sacco products and services as high. The knowledge of Rayma Sacco staff on the same was also rated as high. Rayma Sacco was said not to have by its staff the correct human resource and financial mix for it to achieve most of its goals. Rayma Sacco staff reported that products and services could be accessed through branches. 96.7% of the Rayma Sacco member respondents reported to being fully able to use mobile phone devices but 10.3%, and 96.7% reported to having issues with knowledge of the ATM machine as well as internet and its applications. The knowledge of using Agency Banking and Debit card were ranked the poorest by all respondents. The types of transaction typically undertaken as listed by Rayma Sacco members were savings (43.3%) , loan (10%), Chama (group) (26.7%) and mobile transactions (20%). Advance against expected harvest or livestock produce and insurance products were not listed as transactions that could be undertaken at Rayma Sacco by its members. Rayma Sacco staff on the other hand also included training to the above mentioned list of product offerings. All Rayma SACCO members reported that it takes 3 days for a loan application to be considered and approved. The loan processing period was reported to be 2-3 days by Rayma Sacco staff members which is in line with the above response. Rayma Sacco Staff indicated that the average loan amount was Ksh 50,000(USD 500) which corresponds to only 6.7% of the Rayma member respondents. 20% of the Rayma Sacco members indicated amounts of between Ksh 10,000 (USD 100) to Ksh 20,000 (USD 200) with 60% of the respondents reporting to not having taken any 43
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loans. The maximum loan amount to an individual and a group at any one time was indicated to be Ksh 50,000 (USD 500) and Ksh 200,000 (USD 2,000) for individuals and groups respectively. Rayma Sacco staff also indicated that the Sacco does require collateral to secure its loans, which is in the form of salaried employment, land and cattle. Guarantors to the loan are not required by Rayma Sacco Only 5.3% of Rayma Sacco member respondents reported to making monthly loan repayments of less than Ksh 1,000(USD 10). These loans were reported by the Rayma Sacco members to be used to start a business (23.1%), pay school fees, purchase livestock, medical expenses and construction (3.8% each). The typical maturity for the loan was said to be 3 months by 96.7% of the respondents however there were 3.3% of the respondents reported loan maturities of 6 months. Savings per month ranged from less than Ksh 1000 (USD 10) for 51.9% of the respondents with a total of 37% of the respondents reporting of between Ksh 1,000 (USD 10) and Ksh 10,000(USD 100). The typical savings amount per month as reported by Rayma Sacco staff was Ksh 2,000(USD 20). These savings earned no return as reported by 66.7% of Rayma Sacco members and less than Ksh 1,000(USD 10) as indicated by 33.3% of the respondents. With regards to new product offerings 40% of the Rayma Sacco member respondents asked for the introduction of Insurance, 25% training on livestock disease control, 10% on microfinance/banking, 5% each on asset financing, customer care and training on farming equipment.
Worth of outreach All the respondents reported to operating their businesses less than a kilometer away from Rayma Sacco branches. As to whether distance affected the way they transact with Rayma Sacco 96.75% of the respondents confirmed that it did. The same number of respondents said this factor did influence their decision to becoming Rayma Sacco members. Rayma Sacco was said to have by its staff members not to have the correct human resource and financial mix for it to achieve most of its goals. Religious, security from fraud, opportunity to save and invest, lower transaction costs, advance against expected harvests, technical input and training were ranked highly as the reason for becoming a Rayma Sacco member. 44
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Depth of outreach Rayma Sacco Staff reported that 19% of their clientele were women while the youth represented 50 -80%. Farmers and livestock farmers were reported to be 60%. The number of rural poor accounts held were 70%. With regards to the question of whether Rayma Sacco targets the rural poor, women, youth and farmers its members indicated that it did target these segments of the population. The number of active borrowers was reported to be 23 by Rayma Sacco staff with all the members being voluntary saving members. It is important to note that none of Rayma Sacco respondents reported to holding both a savings and loan account; while 56.7% reported to holding only a savings account The ratio of outstanding deposits against loans as reported by Rayma Sacco Staff was 2: 1 Rayma Sacco was reported to not having enough capital to reach the required depth of outreach. Loans from the County Government and members contributions were cited as possible avenues for increasing its core capital.
Cost of outreach Rayma Staff members indicated that the Sacco’s products and services were cheaper in comparison to conventional cooperatives and other Islamic Financial Institutions. This was in agreement to Rayma member respondents who unanimously agreed that Sharia cooperative services were cheaper and less complicated than Islamic Banks products and services. More specifically all Rayma Sacco staff members cited Rayma Sacco loans to be very cheap and the application process to be simpler than that of the Islamic Banks. Further, 100% of the respondents did acknowledge that it was easy to access Rayma Sacco products and services. Rayma Sacco staff reported that it was not expensive to send out information to attract new clients because they did get referrals from existing clients. As to the question of affiliation with other institutions was concerned – Rayma Sacco was cited unanimously by its members to have a need for beneficial affiliations that would improve technology , increase its product suite, enhance overall growth, offer training on specialized services and scholarships. Rayma Staff indicated that the institution did not have any affiliations but it was registered with the County Government of Wajir.
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Rayma Sacco staff members indicated that new and upcoming sharia cooperatives were its main competitors. Social Benefits As to whether income level had changed since joining Rayma Sacco there was a unanimous agreement from all the respondents that indeed it had changed with 100% and 71.4% of Rayma Sacco members claiming it had become more regular and that they now own more assets respectively. 56.3%% of the respondents reported to purchasing livestock, 12.5% each constructed a house and started a shop, with 6.3% each reported to starting a poultry farm, butchery and purchased a vehicle. Interestingly only 42.9% of Rayma Sacco members said they would not have been able to purchase these assets if they were not members of the Sacco. 67.9% of Rayma Sacco members reported to starting a business as a result of being a member. The types of businesses are namely: livestock trade, farming, shop, electrical shop, poultry farming, motor cycle taxi and normal taxi businesses. With regards to overall trust of the institution all Rayma Sacco members highly trusted the institution, 90% had average trust in the technology that is in use; 96.7% had low trust on 3rd party agents and 90% had high trust with security from fraud respectively. Rayma Sacco was reported to offer both training and technical assistance by its members, in the form of asset management, livestock farming, and livestock disease control, benefits of membership, rights and obligations of a member. Rayma Sacco staff did indicate that there was a training policy in place which incorporated the above mentioned training. This training does not take advantage of the local cooperative education efforts. Rayma Sacco staff also indicated that it would be beneficial if the Board of Directors undertook training but no specific training was discussed. Rayma Sacco staff reported that the current governance structure did effectively allow for information flow between its members and its board. Also, there is no newsletter in circulation. Major concern listed by Rayma Sacco staff members was the future of the cooperative. The greatest social benefit of Rayma Sacco as cited by its staff is making its members economically stable. 46
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Chapter 8: Impact Study Results Back Ground The oldest participating Sacco is Taqwa Sacco which has been in existence for 20 years. Della Sacco and Raymah Sacco have the highest number of clients served /permanent staff ratio while Crescent Takaful has the lowest active active account/total clients served ratio. (Table 2). Ajewarji and Raymah Sacco’s are the only ones that have rural presence only. Taqwa Sacco is based entirely in urban areas. (Figure 1) Table 2: Back ground information on participating Sacco’s SACCO
Number of years of existence
Number of permanent Staff
Total Number of Clients served
Active Accounts
Women served as a % of active clients
Youth Served as a % of active clients
Rural poor served as a % of active clients
Taqwa
20
4
3500
2800
40%
45%
35%
Farmers and Livestock Producers served as a % of active clients 25%
Crescent Takaful Ajewarji
3
9
1600
900
50%
20%
12.5%
10%
4
2
100
100
30%
45%
89%
90%
Raymah
2
5
60
60
19%
80%
70%
60%
Della
3
15
183
183
9%
60%
80%
50%
Bilal
15
0
140
110
55%
33%
95%
70%
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Number of rural branches as a percentage of total branches 100.0%
100.0%
100.0%
100.0% 90.0% 75.0%
80.0%
66.7%
70.0%
50.0%
60.0%
50.0%
50.0% 33.3%
40.0%
25.0%
30.0% 20.0% 10.0%
0.0%
0.0%
0.0%
Ajewarji
Raymah
0.0% Taqwa
Crescent Takaful
Urban branches
Della
Bilal
Rural branches
Figure 1: Number of rural branches as a percentage of total branches
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83.3% of the participating Sacco’s indicated not having enough capital or access to capital that would enable them to reach the depth of outreach they require. Figure 2 indicates the levels to which the seven International Cooperative Alliance (ICA) principles that the participating Sacco’s reported adhering to. (i) Voluntary and open membership, (ii) Education, training and information and (iii) concern for community were the highest ranked principles
Which of the seven International Cooperative Alliance (ICA) principles does your cooperative adhere to? 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
16.1%
16.1% 12.9%
12.9%
12.9%
16.1% 12.9%
Figure 2: Adherence to the Seven International Cooperative Alliance (ICA) Principles The issues that were most concerning to the participating Sacco’s were technology, inadequate capital and liquidity, the rate of growth and cost of operations. (Figure 3)
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What concerns most about current operations 28.6% 30.0% 25.0% 20.0%
14.3%
14.3%
14.3%
14.3%
14.3%
15.0% 10.0% 5.0% 0.0% Technology
Inadequancy of capital liguidity,
The rate at which we are getting more members
The society's future
Cost of operations
Not mentioned
Figure 3: What is most concerning about current operations Part A: Sharia Cooperatives, economic activities and incomes All the Sacco member respondents indicated that since joining the cooperatives their income levels had changed with 88% indicating that incomes had become more regular. 83.3% reported to being able to own more assets since joining the Sacco. Details of the types of purchased assets are listed in figure 4. 79.3% of the respondents said they would not have been able to purchase these assets if they were not members of the Sacco’s.
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Type of Asset bought 35.0%
31.7%
30.0%
25.0%
22.8%
20.0% 15.0% 10.0%
8.9% 5.9%
5.0% 5.0%
3.0%
5.9% 4.0%
2.0%
1.0%
1.0%
4.0%
4.0%
1.0%
0.0%
Figure 4: Details of Purchased Assets 88.5% of the Sacco member respondents reported to have been able to start a business since joining the Sacco with 76.3% indicating that they would not have been able to establish these businesses had they not been members of the Sacco. Figure 5 provides details of the established businesses as reported by the Sacco member respondents.
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Type of business started 40.0%
35.5%
35.0% 30.0% 25.0% 16.8%
20.0%
15.0%
15.0% 10.0% 5.0%
6.5%
7.5%
5.6% 0.9%
0.9%
3.7%
5.6%
0.9%
0.9%
0.0%
Figure 5: Type of Businesses established by Sacco members
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Part B: Sharia Cooperatives and offerings of credit, savings, training, technical assistance to its members. Table 3 provides details pertaining to the loans and savings products that are on offer from the participating Sacco’s. Bilal Sacco has the highest number of active borrowers and it is the only Sacco that was reported to be offering a return on savings yet interestingly it has the least number of voluntary savings accounts. Table 3: Details of Loan and Savings products SACCO
Number of borrowers as a % of active clients
Loan Time to Amount in process Ksh11 Loan
Maximum amount of Loan advanced to any one member in Ksh 2 weeks 1,000,000
Maximum amount of Loan advanced to any one group in Ksh
Loan Security Required
Typical savings per month per member in Ksh
Typical savings per month per group in Ksh
Returns on Savings
Yes
Number of Voluntary savings as a % of active clients 80%
1,000,000
10,000
7,000
No
1 week 1,800,000
1,000,000
Yes
50%
5,000
28,000
No
Taqwa
24%
600,000
Crescent Takaful
3.8%
300,000
Ajewarji
25%
70,000
1 week 100,000
150,000
Yes
60%
5,000
5,000
No
Raymah
38.3%
50,000
3 days 50,000
200,000
Yes
100%
2,000
No
Della
8.2%
20,000
1 week 50,000
500,000
Yes
100%
1,000
Bilal
78.6%
500,000
N/A
Yes
7.1%
1,500
Not indicated Not indicated N/A
11
USD 1 is approximately equal to Ksh 100
1 month 3 times the savings
No Yes
Figure 6 indicates the acceptable types of security for loans by the participating Sacco’s. Land, Pay-slip, guarantors and cattle were reported to be the most acceptable forms of security.
Acceptable type of security 16.7%
18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
16.7%
8.3%
8.3%
16.7%
16.7%
8.3%
8.3%
Figure 6: Acceptable types of security for Sacco loans 54.5% of the Sacco member respondents did indicate that their respective Sacco’s did provide training and technical assistance. Figure 7 provides a description of the type of training and technical assistance that was reported to have been received by the Sacco member respondents.
Type of training and technical assistance that members received from the Sacco 20.0% 15.0% 10.0% 5.0% 0.0%
18.5% 18.5% 14.8%
13.0% 13.0% 3.7%
5.6%
3.7%
5.6%
3.7%
Figure 7: Type of Training and Technical Assistance received by Sacco members Figure 8 provides details of the type of training and technical support Sacco members would like to receive. Livestock farming, mobile banking, investment and how to start and manage a new business were ranked highly.
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Type of training and technical assistance that members would like to receive from the Sacco 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
16.9%
10.2%
16.9%
10.2%
11.9%
13.6% 10.2% 6.8%
3.4%
Figure 8: Type of training and technical support Sacco members would like to receive.
Part C: The extent to which capital financing can enable sharia cooperatives to increase their impact. Figure 9 indicates how additional capital would be used to create impact in the community. The highest rated applications are expansion of outreach to the rural areas, increase of product suite and donations to the poor which can be interpreted as consumption support. 55
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How additional capital can be used to create impact in the community 16.7%
18.0%
16.7%
16.7%
16.0% 14.0% 12.0% 10.0%
8.3%
8.3%
8.3%
8.3%
8.3%
8.3%
8.0% 6.0% 4.0% 2.0% 0.0%
Figure 9: Application of additional capital to create impact for the community Part D: The extent to which Sharia cooperatives are helping to level the playing field between Islamic banks 75.2% and 21.8% of the Sacco members indicated that Sacco services and products are cheaper and less complicated than bank services and products. Only 3% of all the member respondents indicated that there was no difference. (Figure 10). 14% of the Sacco members reported that Islamic Bank loans were cheaper than Sharia Sacco loans.
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Do you think sharia cooperative services and products are 75.2%
80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
0.0%
21.8% 3.0%
0.0% Cheaper than More Less Bank Services expensive than complicated and products Bank Services than Bank and products Services and products
More Just the same complicated in price as Bank than Bank Services and Services and products products
Figure 10: Comparison of sharia cooperative Sacco services and products and Islamic Banks services and products
98.1% of the Sacco member respondents indicated that the loan application process and requirements for sharia cooperatives were simpler than those of Islamic Commercial Banks. 87.6% of Sacco members indicated that their Sacco did not have any strategic affiliations and partnerships although they did concur that this would be beneficial to their Sacco as indicated in figure 11.
How alliance/affiliation would be beneficial to the cooperative 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
46.2% 34.2%
8.5%
6.8% 1.7%
Improved technology
More products
More branches will be opened
1.7% Overall growth of Sacco
0.9%
Business Training on Offering expansion specialized education services scholarship
Figure 11: How would an alliance/affiliation be beneficial to the sharia cooperative Part IV:
Conclusion
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This study reveals that the greatest impact the sharia Sacco’s have had on the communities they serve is socio economic empowerment that is positively changing the lives of the Sacco members and the community members at large while improving education levels in the areas of operations. (Figure 12)
Cooperatives greatest impact on the communities it serves 50.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
33.3% 16.7%
Social economic empowerment
Changed lives of the members and community at large positively
Improving education levels in the areas of operations
Figure 12: Sharia Sacco’s greatest impact on the communities they serve. An important area for further research and implications for practitioners is a study on mutually beneficial linkage that have been successfully forged between sharia cooperatives and strategic partners such as Islamic banks and microfinance institutions; mobile phone operators government and international development partners.
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