WILL SACCOs DIE IN THE DEVOLVED GOVERNMENTS ERA?

We are still in a situation where the National Government has halted a crisis from occurring by stating that they will continue with the function of paying civil servants salaries. This is until such a time when County Governments have put up the necessary infrastructure and systems that will handle salary payments. The National Government has just saved Saccos!!!!

Backwards?

Saccos under the various Ministries otherwise referred to as countrywide Saccos, functioned effectively under the National Government. These Saccos received employees deductions from the main line ministries not from numerous fragmented sources...read County Governments, as it is going to be. These Ministries remitted the same to Saccos within seven days as required by the Co-operative Societies Act Cap 490 Section 35. This particular section give us clue when sums deducted should be remitted and the consequences of not doing so within the stipulated time. In the 90's, many Saccos under the Local Authorities i.e. the county councils and municipal councils, collapsed or were rendered almost incapable of providing services to their members. The various councils and municipalities, used to deduct from salaries of their employees and never remitted to their respective Saccos. Instead these municipalities and county councils used the monies (which are salaries) to carry out other activities of those municipalities and county councils!! Some of the membership of these Saccos have not been refunded their Sacco contributions to date!!

Tick Tock Tick Tock!!

Will it work with Saccos?

All Saccos that are under Ministries of Health, Co-operatives Development and Marketing, Agriculture, Environment etc or any devolved "Ministry" may be affected. The main line Ministries all made sure that Saccos received members contributions together with loan repayments and the interests due within stipulated period. Will County Governments deduct and remit the same within the period required? Will instances like one viewed in some Counties e.g. Kiambu (missing a deadline!!) affect and ultimately kill these Saccos? What would be the situation like where County Governments will be required to deduct from employees salaries and remit monies to hundreds of Saccos within stipulated time given some counties are far removed from some services e.g. certain banks? Should the membership of these Saccos start withdrawing membership and seek refunds before things go haywire?

Tick Tock Tick Tock!!

Let us paint a picture here. In a County Government, their would be members of various countrywide Saccos (Wakulima Sacco, Shirika Sacco, Afya Sacco, Jamii Sacco, etc.). These County Governments would have of course budgeted for recurrent expenditure though probably despite the politics and greed like we just witnessed. The salaries would be paid through the County Governments to civil servants who work in the devolved systems. Also deductions will have to be effected by the County Governments from these workers to be remitted to their respective Saccos within seven days. There would be hundreds of Saccos waiting for their members deductions. Cheques will be written and deposited to these Saccos accounts or send all the way from Mandera, Lodwar, West Pokot, etc. The magnitude of these activities are overwhelming to say the least. Some County Governments probably will view this activity (deducting and remitting) as not a "priority". It will be a disaster too if salaries will delay, if County priorities will be as we just witnessed, if certain activities in a county have been underfunded and employees deductions seem easy way out, if corruption will intensify,etc.

Tick Tock Tick Tock!!

More information is needed!!

Then again are these Saccos placed to collect their members deductions from the 47 Counties? Do these Saccos know where their members are and how many are to be affected? Do these Saccos have a way of monitoring remitted deductions and notifying its membership of any failure by County Governments to do so? Will the Ministry or department at County Government responsible for co-operative societies have the muscles to effectively enforce Section 35 or shoot itself? Under which County will be these countrywide Saccos be? Nairobi? Will Nairobi County (if it is) have the manpower and even the mandate to enforce Section 35 to a County or Counties that failed to remit sums deducted?

We all know most people that have been employed by the County Governments are political or were employed for political reasons or tribal, nepotism, etc reasons. What will prevent them from doing shoddy jobs? What will motivate them to ensure Saccos don’t die? What will prevent them from punishing members of a certain Ministry within the County by holding their deductions and even salaries?

Tick Tock Tick Tock!!

Transcend your reality.

I say that co-operatives should have never been devolved. Devolve health, agriculture etc. but not co-operatives. Co-operatives have political bearing as they have elections and sometimes these elections are highly contested and attract politicians who influence it their way. What motivation will a co-operative officer have to stop such interference? What motivation will a co-operative officer have to enforce Co-operative Societies Act despite it being unpopular and being against County Government officials?

Tick Tock Tick Tock!!

WHEN AND HOW DO YOU CEASE BEING A MEMBER OF A SACCO?

When do you cease/stop being a member of a Sacco/Co-operative? Many By-Laws state that membership in the society shall cease or deemed to have ceased in regard to any member from the date of:

DON'T STOP BELIEVING IN SACCOs!!

(i) Death

(ii) Withdrawal

(iii) Expulsion

(iv) Being certified to be of unsound mind.

(v) Transfer of shares to another member.

(vi) Failure to remit share contributions and loan repayments for a continuous period of six months without valid reasons or leave of the society.

(vii) Ceasing to hold qualification for membership as specified in these by-laws provided that members who have lost the common bond may retain their membership.

SUSPENSION AND EXPULSION OF MEMBERS OF A SACCO

The committee may suspend a member subject to the decision of the general meeting to expel who:

a) fails to fulfill his/her obligations to the society whether stated in these by-laws, general internal regulations, a resolution of the general meeting or in contravention of any other legal document, provided such a member has been called upon to do so but has failed,

b) Is convicted in a court of law for a criminal offence involving dishonesty or fraud or is, imprisoned for a period of three months or more,

c) Is a member of another society having similar objects,

d) Acts in any manner prejudicial to the interests of the society.

Provided that, no member shall remain in suspension for a period of more than 12 months.

PROCEDURE OF SUSPENSION AND EXPULSION

a) Upon formal and written proof that a member has committed a violation punishable by expulsion, the committee shall serve a thirty (30) days written notice to the member stating the reason(s) for the proposed expulsion and requiring him/her to file a defense.

b) Upon the expiry of the 30 days and taking into consideration the member’s defense if any, the committee shall initiate administrative inquiry and make a decision on its findings within 15 days. The Committee may;-

i. Suspend the member pending expulsion by the General Meeting or

ii. Impose any other punishment as provided for in the applicable law.

c) The suspended member may appeal to the supervisory committee if not satisfied with the decision of the committee.

d) The committee and supervisory committee shall present their findings to the next General meeting which may either lift the suspension or expel the member.

e) A member who is expelled from the Sacco society shall have the right to appeal to the tribunal.

CO-OPERATIVE LAWS IN KENYA

The three main sources of co-operative laws applicable to the co-operatives in Kenya are:

• The Co-operative Societies Act (Cap 490 of the Laws of Kenya)
• The Co-operative Societies Rules 2008
• The Sacco Society Act 2008
• The Sacco Societies Regulations
• The registered By-laws of the co-operative society

Other sources include government policies issued from time to time in form of circulars (commissioners circulars) and resolutions passed by members in validly convened and conducted general meetings.

The co-operative Societies Act

This is an Act of Parliament relating to the constitution, registration and regulation of co-operative societies. It is the supreme law relating to the operations of the co-operative societies. Like any other law, the provisions of the Act do not in any way conflict the constitution of Kenya.

The Act is one of the documents that should be available in every co-operative society office and should be thoroughly understood and referred to by the officials from time to time in the conduct of the society business.

The Co-operative Societies Act provides the following areas

• registration of co-operative societies
• privileges of a registered co-operative society
• rights and liabilities of members
• duties of co-operative societies
• amalgamation and division of co-operative societies
• rights and obligations of co-operative societies
• property and funds of co-operative societies
• inquiry and inspections
• surcharge
• dissolution
• settlement of disputes
• offence under the Act, the rules and penalties

The Act has broad provisions and does not specify how certain issues shall be implemented. Section 91 of the Act therefore gives the Minister power to make rules for the better carrying out of provision and purpose of the Act.

The Sacco Society Act, 2008

This Act of Parliament makes provision for the licensing, regulation, supervision and promotion of Sacco societies, to establish the Sacco Society Regulatory Authority and connected purposes. This Act is divided in seven parts as follows:

• preliminary
• the Sacco Societies Regulatory Authority
• licensing of Sacco societies
• regulation Act and supervision of Sacco societies
• the deposit guarantee fund
• miscellaneous
• schedule-conduct of the affair of the board

The Co-operative Societies Rules

The rules are subsidiary legislation made by the Minister. The Minister derives powers to make rules under Section 91 of the Act. The current rules were made and became effective from November  2004. Being subsidiary legislation, the Rules do not conflict with the Act.

The rule is another document that society should keep in the office and should be referred to and used by the society officials from time to time.

Important provisions in the rules

• the procedures and forms used in the registration of co-operatives
• the procedure for making and amending the by-laws of co-operatives
• the procedure for admission of members in the co-operative societies
• the procedure of general meeting of members and powers of members
• the appointment, suspension and removal of committee members
• the formation and maintenance of reserve fund
• the procedure for appeals to the Minister
• the returns to be submitted by the co-operative societies
• the procedure to be followed in liquidation of societies

The Act and the Rules cannot give adequate details on how each individual co-operative society should be internally governed. Internal regulations are made by each society, because not all aspects are the same in all societies. The rules therefore provide for every society to make by-laws to serve as internal regulations (Rule 7).

The registered By-laws of co-operative societies

The By-laws are internal regulations made by each co-operative society to bind and govern its members. The By-laws are only effective if they are registered by the Commissioner for Co-operative Development. Important areas covered in the By-laws include:

• name and postal address of the society
• area of operation and membership common bond
• the objects for which the society is formed
• the purpose for which its funds maybe applied
• the disposal of accumulated funds
• the qualifications for membership, the terms and mode of admission
• the withdrawal and expulsion of members
• the rights, liabilities and obligations of members, including minimum shareholding
• the transfer of shares or interest of members
• the manner of raising funds
• the procedure and quorum of general meetings
• the appointment, suspension and removal of members of the committee
• the duties of the management and supervisory committee
• the period of its financial year
• the authorization of officers to sign documents
• the settlement of disputes
• the condition for issuing of loans

By-laws maybe amended by members in a validly convened and held general  meeting. At least fifteen (15) clear days notice of the proposed amendment must have been given to all members.

Any amendment of the by-laws of a co-operative society shall only be valid if the amendment is registered with the Commissioner of Co-operative Development. When Commissioner registers an amendment of the by-laws of a co-operative society, he issues to the society a copy of the amendment certified by him as evidence that the amendment of the By-laws has been registered. This copy should be kept in the society office for use.

The By-laws of a co-operative society are subordinate to the Act and Rules. They should not contradict any of the above.

Copies of the registered By-laws should be acquired by each member of the society so that they are conversant with each provision there-in. This can be through suitable arrangement with the society officials.

The by-laws binds only members of the respective co-operative society. They bind all members irrespective of when they joined the society. They should therefore be obeyed by all members and be observed by the society officials in the conduct of all business of the society.

Government Policies/Commissioners Circulars 

The government issues policy circulars from time to time. Such circulars are normally issued by the Commissioner for Co-operative Development and are meant to be implemented and their purpose is to assist in the growth and development of the societies, and in the administration of the provisions of the Act and rules.

General Meeting Resolutions

Members do pass resolutions in general meetings. These resolutions, as long as they are passed in validly convened and conducted general meetings and do not contradict any of the By-laws of the society, form part of the society’s internal rules and regulations. Once the resolutions have been passed by the required majority, they bind all members whether they were present or not, and whether they voted in favor of the resolution or not.

Any resolution passed  in a general meeting should have a proposer and a seconder. Where there is division, the issue should be decided by vote and the majority vote is recognized. Resolutions passed in a general meeting should not contravene any provisions in the Act, Rules and the society By-laws. However a special resolutions requires 2/3 majority of the members present and voting at duly convened general meeting.

THE DEPARTMENT OF CO-OPERATIVE DEVELOPMENT AND MARKETING – RANGE OF SERVICES AT SUB-COUNTY (DISTRICTS)

(i) Education and Training

We will conduct education and training to members, management committees and staff of the movement in collaboration with stakeholders. We shall use resources allocated by the Government and the movement will chip in from education budgeted resources. We shall give other extension services pertaining to administration and management of Co-operatives.

(ii) Co-operative Policy and Implementation

We will attend leaders meetings, Special/Annual general meeting of Co-operative Societies and shall at all times give appropriate advice. We shall also articulate the Government policy on Co-operative management.

(iii) Co-operative Financial Policy

We will at all time advice the societies in prudent financing, Credit and Banking Services policy aimed at improving the welfare and interests of the members of the movement.

(iv) Co-operative Governance

We through Co-operative Education and Training will endeavor to insist on good management practices among the Co-operative leaders aimed at good Co-operate Governance. We shall also annually ask the Co-operative leaders to declare their assets and liabilities and file indemnity bonds as required by law.

(v) Settlement of Disputes

We will at all times arbitrate on co-operative disputes outside the court system and for those cases beyond, we will advice complainants to file disputes in the Co-operative Tribunal. The clients will be advised on the filing fees.

(vi) Co-operative College

We will advise the movement on courses offered by the Co-operative College and update them on regular basis.

(vii) Co-operative Marketing Including Value Addition Processing.

We will at all times articulate the Government Policy on Marketing of Agricultural produce, value addition and other Co-operative ventures.

(viii) Promotion of Co-operative Ventures.

We will at all times advice the Co-operative movement on general aspects of investments to create wealth in Co-operatives.

(ix) Inquiries and Inspections.

We will advise on inquiry/inspection processes where necessary and we shall conduct inspections within the Sub-County as need arises. The inspections will be presented to management committee for appropriate action in accordance with the law.

(x) Surcharge

We will undertake to enforce surcharges and inquiry report as recommended by inquiry officers.

(xi) Rule of Law

We will at all times operate within the provisions of the Co-operative Societies Act, the Rules and the By-Laws of co-operative societies and policy documents issued from time to time by the Commissioner of Co-operative Development.

(xii) Audits

We shall ensure that audits are carried out and presented as stipulated in the Act in accordance with International Accounting Standards and Co-operative Societies Act.

(xiii) Monitoring and Evaluation.

To monitor and evaluate all Co-operative activities in the Sub-County.

(xiv) The Sub-County Co-Operative Officer will Advise and Support Co-Operative Officers.

To give advisory services to Co-operative officers and others staffs to enable them perform their duties efficiently.

(xv) Financial Resources

A thief broke into my house last night looking for money, so I woke up and started searching with him :-)

To ensure that all financial resources allocated to the Sub-County are utilized for intended purposes and in accordance with the Government accounting procedures and procurement regulations.

(xvi) Visitors and Delegations

To ensure that all delegations to the Sub-County Co-operative Office are attended to promptly.

OBLIGATION OF CO-OPERATIVE MOVEMENT

1)    To observe and operate within provisions of the Co-operative Societies Act, Rules, Society By-law and the various policy documents.

2)    Operate within the budget, and avail the Trial Balances and Economic reports to the respective Government offices.

3)    To provide efficient, timely and quality services to their members.

4)    The members have obligation to elect leaders who are transparent and accountable.

5)    Committee have obligation of providing minutes of Management, Special and Annual General Meetings to the Sub-County Co-operative Officer at all times.

6)    The committees have an obligation to invite the Co-operative Officers to all their meetings.

7)    The society has an obligation to provide accurate, timely and up to date information to the Sub-County Co-operative Officer.

8)    The society has an obligation to pay audit and supervision fee to the Ministry of Industrialization and Enterprise Development Department of Co-operative Development and Marketing.

MERGERS OR AMALGAMATION OF CO-OPERATIVES

The Sacco Societies Regulatory Authority (Sasra) has asked 65 co-operatives to merge so as to raise their capital levels to 10 million as required by law so as to continue offering Front Office Savings Activities (FOSA). Amalgamation is a complicated process and more so as the said Saccos some were mismanaged and probably some are still refunding past members their deposits or have other debts. Saccos should not rush to have FOSAs and should concentrate on back office services until such a time they have the membership and financial capabilities to do so.

The following is an excerpt from the Co-operative Societies Act Cap 490 on amalgamation/mergers of co-operative societies:-

Section 29 Amalgamation of co-operative societies

(1) Any two or more co-operative societies (hereinafter referred to as amalgamating societies) may, by special resolution (in this section referred to as the preliminary resolution), resolve to amalgamate as a single society
(hereinafter referred to as the amalgamated society).

(2) A copy of the preliminary resolution shall be sent to all the members and creditors of each of the amalgamating societies, and to all other persons whose interests in any of the amalgamating societies will be affected by the amalgamation.

(3) Any member of any of the amalgamating societies may, notwithstanding any by-law to the contrary, by notice in writing given to his society at least one month before the date specified as the date of amalgamation, intimate his intention not to become a member of the amalgamated society.

(4) Any creditor of any of the amalgamating societies may, notwithstanding any agreement to the contrary, by notice in writing given to such society at least one month before the date specified as the date of amalgamation, intimate his intention to demand the payment of any money due to him.

(5) Any other person whose interest will be affected by the amalgamation may, by notice in writing given to the concerned amalgamating society, not less than one month before the date specified as the date of amalgamation, object to the amalgamation unless his claim is satisfied.

(6) Not less than three months after the date of the meeting at which the preliminary resolution is passed, a further special general meeting of each of the amalgamating societies shall be held to consider the preliminary resolution and any notices received under this section.

(7) At the special general meeting held under subsection (6) provision shall be made by a further resolution of the society (in this section referred to as the secondary resolution) for—
(a) the repayment of the share capital of any member who has given notice under subsection (3);
(b) the satisfaction of any claims by creditors who have given notice under subsection (4); and
(c) the satisfaction of the claims of such other persons who have given notice under subsection (5) securing of their claims in such manner as determined or directed by the Commissioner. Provided that no member or creditor or other person shall be entitled to such repayment or satisfaction until the preliminary resolution is confirmed as provided in subsection (8).

(8) Each amalgamating society may, by further resolution passed by a two thirds majority of the members present and voting, confirm the preliminary resolution.

(9) (1) If, within such time as the Commissioner considers reasonable, the Commissioner is satisfied that the secondary resolutions of each of the societies amalgamating comply with the provision of this section, he may register the amalgamated society and its by-laws and thereupon—
(a) each of the amalgamating societies shall stand dissolved and its registration cancelled;
(b) the registration of the amalgamated society shall be a sufficient conveyance to vest the assets and liabilities of the amalgamating societies in the amalgamated society;
(c) the remaining members of the amalgamating societies shall become members of the amalgamated society and will be subjected to its bylaws;
(d) any share holders of the amalgamating societies or any other persons who have claims against the amalgamating societies and whose claims were not satisfied in accordance with the secondary resolution, may pursue such claims against the amalgamated society.

(10) Where the Commissioner refuses the amalgamation of the amalgamating societies under subsection (9) such societies may appeal against such refusal to the Minister.

THE FUNDS OF THE SACCO SOCIETY

Sources of funds consist of:

(i)    An admission fee which may be reviewed from time to time by the General Meeting.

(ii)    A re-admission fee which is payable by individuals who withdraw and reapply for admission and which may be reviewed from time to time by the General Meeting.

(iii)  An unlimited number of shares whose value and minimum amount may be revised from time to time by the General Meeting.

(iv)  Deposits or loans from members and/or non-members.

(v)   Any surplus resulting from operation of the Society.

(vi)  A reserve fund as provided under the Act, and any other reserve approved by the management.

(vii)  Any donations grant or gifts from other bodies, organizations or individuals.

(viii) Deposit Protection Funds.

(ix)  Funds obtained from fines and/or penalties as may be prescribed by the management from time to time as authorised by the Authority.

(x)   Funds obtained from other lawful miscellaneous sources.

(xi)  Income from interest, fees and charges and commissions as authorized.

(xii)  Liabilities, which include deposits from members and borrowings from other sources.

GUIDELINE ON MARKETING IN CO-OPERATIVES

PURPOSE

The marketing management guideline provide minimum standards that co-operative societies should have in order to create or change the perception of a product or service in the eyes of the target audience by making use of research and communication media. Each co-operative should however, formulate its own detailed marketing policies that take into account its special needs and circumstances.

SCOPE

The guidelines provides practices in marketing management.

RESPONSIBILITY

It is the responsibility of the board to ensure that the co-operative society develops policies that would lead to best practice in marketing function. Marketing policies include areas such as:

MARKETING RESEARCH

Co-operative societies require detailed and objective understanding of their own business and market in which they operate, in order to make fact based decisions regarding their operations. This means that the co-operative societies need to invest in research to collect the data required to perform accurate market analysis. As the marketers employ a variety of techniques to conduct market research, the small co-operatives should pool resources to enjoy research benefits.

MARKETING STRATEGY

Co-operative should use information obtained from market research to make key strategic decisions and develop a marketing strategy designed to maximize the market share, revenues and profits. By selecting target segments the co-operative would subsequently allocate more resources to acquire and retain customers in the target segment(s). Some of the other innovative strategies that a co-operative could pursue include:-

Market Niche

The co-operative could identify market niches. A market niche is defined as an area of consumer need that is not being completely satisfied and is often too small for larger businesses to pursue. A co-operative could pursue niche opportunities in the area of:

• Product differentiation and certification. The co-operative emphasizes the product/service’s characteristics which are different from competition such as organic, pesticides free, certified among others.
• Value-added processing. The co-operative adds value to raw products to create new product or product use based on consumer demand.
• Encourage partnership between the consumer and the co-operative. The partnership could take the form of contract for products and prepayments.

Promotion Strategies

The co-operative should adopt promotion strategies that ensure that it reaches the target consumers and develops relationships with them to encourage use of product or services. Some of the promotion strategies that a co-operative could apply include.

• Purchasing media advertising (newspaper, radio, TV, yellow pages, etc.)
• Organization direct mailing of announcement flyers, coupons, newsletters among others, to current consumers and other target consumers.
• Posting signs or posters in areas frequented by target consumer.
• Participation in or hosting community or regional special events.
• Participation in public interest events- events with community groups which builds a relationship and reputation as a generous and involved community member.
• Utilizing the internet

MARKETING PLAN

After the co-operative identifies its strategic objectives, selects the target market, determines the desired position for its product or brand, a marketing plan should be developed. The marketing plan specifies how the chosen strategy will be executed and the set objectives achieved. The content of marketing plan includes:

• An executive summary.
• Situation analysis to summarize facts and insights gained from market research and marketing analysis.
• The co-operative’s mission statement or long-term strategic vision.
• A statement of the co-operative’s key objectives, often sub-divided into marketing objectives and financial objectives.
• The marketing strategy the business has chosen, specifying the target segments to be pursued and the competitive positioning achieved.
• Implementation choices for each element of the marketing mix (4Ps).
• A summary of required investments (in people, programs, ICT systems, etc.)
• Financial analysis, projections and forecasted results.
• A timeline or high-level project plan.
• Metrics, measurements and control processes.
• A list of key risks and strategies for managing identified risks.

MARKETING INFORMATION SYSTEM

The co-operative will need to design marketing management system that provides cross-functional leadership for various marketing activities. This system should provide pertinent information for decision making, feedback and monitoring and evaluation.

FEEDBACK AND CONTROL SYSTEMS

The co-operative society shall design various control systems, such as sales forecasts, sales force and reseller incentive programs, sales force management systems, and customer relationship management (CRM) tools to measure progress against objectives. It is the responsibility of marketing managers to ensure that the execution of marketing programs achieves the desired objectives and does in a cost-efficient manner.

(Excerpt from Chapter 7: Co-operative Society Management and Prudential Guidelines Manual Template-Developed by VAS Consultants Ltd)