PITFALLS AND SUCCESS FACTORS FOR CO- OPERATIVES: THE INTERNATIONAL EXPERIENCE Presentation by: Isaiah Opiyo Friday, 19 th October 2018

Transcription

1 PITFALLS AND SUCCESS FACTORS FOR CO- OPERATIVES: THE INTERNATIONAL EXPERIENCE Presentation by: Isaiah Opiyo Friday, 19 th October 2018 Uphold public interest

2 Objectives Share best practice from international credit unions Identify factors for success for leading credit unions, Understand the pitfalls and causal factors.

3 CASE STUDY: Navy Federal Credit Union The World Biggest and Largest Sacco. Total assets: $ branch network. 15,000 employees. Membership: 7,542,010. Was incorporated in 1984.

4 Key Stats: Navy Federal Credit Union Year 2017 Membership: 7,542,010 Members Deposits: Loans: $63 billions $67.3 billion Total assets: $90.6 Total branches 311 No of employees 15,000

5 Uniqueness of Navy Federal Credit Unions 1.1 million new members, compared to Over 300,000 new members joined through digital channels. Mobile deposits accounting for 45% of all deposits Channels: Mobile apps, branches, online banking.

6 Comparative analytics Total members deposit ($63 billion) is slightly higher than Kenya's total public debt: Ksh5 trillion ($49.5 billion)!

7 Key Factors for Success Understanding your Membership Investing in innovation Enforcing Corporate governance /compliance. Proper Debt /delinquency management Optimise Returns on savings /deposits

8 1. UNDERSTANDING YOUR MEMBERSHIP Size of membership Category of members Behaviour of members Age of members

9 Size of Membership Saccos with small size of membership cannot enjoy the advantages of economies of scale. With a sizeable membership, saccos can be able to mobilize significant deposits.

10 Category of Members High savers Low savers Regular borrowers Non regular borrowers With no borrowing and saving, the sacco cannot grow /operate.

11 Category of Members--- Objective Regular Borrowers Non Borrowers High Savers Low Savers Cheaper Loans and returns Loans not linked to savings Returns (dividends) No savings goal

12 Category of Members--- Competition Regular Borrowers Non Borrowers High Savers Banks Investment cooperatives Low Savers Fintechs and mobile loan providers. Fintechs and mobile loan providers.

13 Category of Members--- Priority Regular Borrowers Non Borrowers High Savers Low Savers 1 st Priority Key pillar to the sacco. 3 rd Priority Potential mobile loan borrowers. 2 nd Priority Provide capital source. 4 th Priority Potential mobile loan borrowers.

14 Behaviour of members Members needs are dynamic Today s members are not loyal Members need convenience Members mindset: Access is better than cost.

15 2. INVESTING IN INNOVATION What can you learn from the following companies: Akamba VS Mpesa platform Kenya Charity Sweepstake VS Sportpesa Kenyan taxis VS Uber Platform Commercial banks VS Fintechs (Tala)

16 Failure to Innovate, You will Die

17 Disruption (Virtual Sacco Concept)

18 Virtual Sacco Concept Do you think virtual sacco concept is feasible? Do you think the sacco cannot survive with zero branches? What is the future of saccos in terms of disruption. What sacco processes cannot be automated?

19 Existing Impact of Disruption Loss of emergency loan opportunities to mobile loans, Loss of school fees loans to mobile loans Erosion of members loyalty Rollout of Lock savings options under Mshwari.

20 Future Survival Strategy Invest in research and innovation, Explore use of data and analytics Build fintech partnerships Upgrade your systems /digital lending capabilities. Rollout innovative products.

21 3. ENFORCE CORPORATE GOVERNANCE Corporate governance is still a challenge: Saccos are political in nature, Lack of transparency Laxity in enforcement of compliance to the regulation e.g for non deposit taking, No proper vetting /merit based recruitment.

22 Improving Corporate Governance Undertake regular audits Proper vetting before recruitment for board Enforcement of compliance to sacco bi-laws Training of sacco officials on corporate gov. Empower members to have a voice. Regular /routine inspections by regulator.

23 4. PROPER DELINQUENCY MANAGEMENT Most saccos still lend on Guarantorship model. It is a double-edged sword to saccos as it: 1. Safeguards the sacco from credit risks 2. Erodes the saccos growth potential: Loan books Members deposits Membership

24 Key Factors Failure of Saccos Pressure to expand Level of Membership Changing market dynamics Exit of senior citizen membership Subjective lending model.

25 Key Factors Failure of Saccos Rise of millennial membership. Disruptions (Virtual sacco concept) Retrenchments High delinquency for mobile loans

26 Thank You. Tel: