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 KILIFI TEACHERS SACCO

SOCIETY LTD.

DELEGATES SEMINARTEMPLE POINT RESORT, WATAMU

16TH – 17TH JUNE 2011

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 Areas to be covered

I. Introduction

☞ Definitions ☞How Saccos differ from other financial institutions 

☞ Need for finance 

II. Co-operative Finance☞ Sources ☞ Applications

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 Areas to be covered

(CONT 

III. Why Saccos experience

difficulties in raising adequatefinance

IV. Suggested way forward

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 introduction DEFINITIONS

CO-OPERATIVE

DEF I:is a business organization owned and operatedby a group of individuals for their mutual benefit

DEF II: [ICA’S DEFINITION STATEMENT (PRURAL)] 

As autonomous associations of persons united

voluntarily to meet their common economic, social, andcultural needs and aspirations through jointly ownedand democratically controlled enterprises

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DEF III: as a business owned and controlled

equally by the people who use its services

● SACCO/CREDIT UNION [SACCO – acronym for Savings

and Credit Co-operatives]: is a co-operative financialinstitution that is owned and controlled by itsmembers and operated for the purpose of promoting thrift, providing credit at competitiverates, and providing other financial services to itsmembers.

● FINANCE

In general terms, it is the task of providing thefunds for business activities.

INTRODUCTION (CON’T) 

- DEFINITIONS

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 INTRODUCTION (CON’T) 

HOW SACCOS DIFFER FROM OTHER FINANCIALINSTITUTIONS

￭Saccos represent people centered organizations,

as opposed to capital centered commercialcompanies.

￭In a Sacco, customers are also its owners . Inother firms, customers and owners are separated

￭In a Sacco, Price of share is fixed – not traded inan open market

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￭In a Sacco, objective is to benefitmember/customer by offering high qualitymember service. In other firms, primary

objective is to benefit owners by maximizingprofits

In a Co-op/Sacco, profit/surplus

generation is secondary: ought to be theresult of efficient operations

INTRODUCTION (CON’T) [how saccos differ] 

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NEED FOR FINANCE

￭Start-up capital for acquisition of fixed assets:buildings, furniture, equipment etc

￭Funds for operations to meet operating expenses

e.g stationery, rent, water, electricity, salaries etc￭Funds for Investments in core business: lendingin the case of Saccos and other profitablesecurities

￭Funds for Growth and Expansion in acquisition of 

new fixed assets e.g additional branches,modernization of processes (ICT improvement)

￭Business continuity: Retained earnings, reserves,inst capital

INTRODUCTION (CON’T) [need for finance] 

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 co-operative finance 

SOURCES AND APPLICATION OF FINANCEINTERRELATIONSHIP BETWEEN SAVINGS, CAPITAL AND INVESTMENT

SAVINGS INVESTMENT 

INCOME

CONSUMPTION

CAPITAL

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BORROWEDWNED 

CAPITAL

SHARE CAPITAL  RESERVES 

SHARE

CONTRIBUTION UNDISTRIBUTED 

SURPLUS 

ENTRANCE FEES 

GRANTS 

MEMBERS  GOVT  FINANCIAL 

INSTS. 

BUSINESS 

PARTNERS 

DEPOSITS  LOANS LOANS/

OVERDRAFTS

TRADE 

CREDITS 

SACCOS’ CAPITAL/FINANCIAL STRUCTURE 

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 WHY SACCOS EXPERIENCE DIFFICULTIES IN RAISING

ADEQUATE FINANCE

LIMITED AREA OF

OPERATION/CLOSED MEMBERSHIP

POOR SAVINGS CULTURE: CONCEPT OF NET

BORROWERS VS NET SAVERS

POOR RESERVE RETENTION

AND CAPITAL BUILD UP

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Poor image/branding

Poor pricing of products/low profitability

Distribution of dividends ignoringcapitalization concerns

WHY SACCOS EXPERIENCE DIFFICULTIES IN RAISING

ADEQUATE FINANCE

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 SUGGESTED WAY FORWARD 

•Long term savings products

•Liquidity retentionPRODUCT

DIVERSIFICATION

•Children and Youth Savings

•Create incentives for Net Saversvs Net Borrowers

ENCOURAGE

SAVINGS

•Take advantage of the newregulatory environment tobuild confidence

REGULATORY

ENVIRONMENT

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 SUGGESTED WAY FORWARD (cont) 

•Have a broader outlookof membership

•The larger themembership base, thelarger the capital base,ultimately the more thefinancial strength and

stability

AREA OF

OPERATION

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 END

THANK YOU

JUNE 2011

BY Daniel S.G.Masha – Chief Executive Officer, Kilifi Teachers Sacco

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