Earlier this month, at the Eswatini Association of Savings and Credit Cooperatives Conference, I was invited to share my thoughts on how Savings and Credit Cooperative Organisations (Saccos) can leverage technology for sustainable growth, drawing from lessons in Kenya.
I opined that adoption of technological tools is not elective, if at all an organisation is keen in achieving good returns, diversifying its product offering, enhancing customer engagement and experience and responding to competitive pressures.
However, the approach should be tailored to the needs and peculiarities of the industry and its customers, while addressing the risks that abound in a digital-first world.
According to the 2023 Saccos Supervision Annual Report by SASRA, the sector regulator, 368 entities have implemented USSD, mobile apps or internet solutions to enhance service delivery. Unfortunately, an almost equal number, 346, have not.
The fact that Saccos are not integrated in the national payment system infrastructure continues to pose a challenge by impeding real-time transactions of large amounts of money.
This explains Saccos partnerships with commercial banks to offer ATM services, Pesalink connectivity and cheque clearance.
It is disheartening that, according to the aforementioned report, 35.63 percent of deposit-taking Saccos still do not provide ATM services to their members. Only 14.29 percent have integrated their systems with Pesalink for settlement and clearance of funds.
In an environment where Saccos are facing stiff competition from digital credit providers, commercial banks, money market funds, Government papers and coupled with the depressed economic environment that has cut member deposits, we all need to wake up and harness technology to remain relevant, competitive and secure long-term growth.
For example, at the Kenya National Police Deposit-Taking Sacco Society, our mobile banking platform, M-Tawi, facilitates members to remotely secure loans, transact and settle utility bills. Members should not have to physically visit branches to conduct business.
It is encouraging to note that 156 deposit-taking Saccos have mobile and internet connectivity, with 74.3 percent offering digital credit services. This is a marked improvement from the 64.1 percent recorded in 2022.
However, if you rope in non-deposit taking Saccos, then just half of all regulated entities have rolled out this key product offering.
Digitisation unlocks operational efficiency and transparency. Manual record-keeping is outdated and prone to errors that erode members’ trust in the system, inevitably occasioning withdrawals and exits.
Routine tasks like dividend calculations, loan processing and account management should be automated to enhance accountability and reduce administrative costs.
Saccos that have adopted digital platforms report up to an 80 percent increase in revenues and a 40 percent reduction in operational costs.
In addition, Saccos should explore automation as a substitute to brick and mortar offices which, due to the high cost of construction and evolving stakeholder behavior, are becoming less feasible as an expansion strategy.
To increase reach and accessibility of services, Saccos must invest in the aforementioned technologies and augment it with cloud computing solutions.
Moreover, leveraging data analytics enables us to better understand member needs and tailor products accordingly, ensuring that financial services remain accessible and affordable for all segments of society.
Digitisation is fraught with risks especially from cyber criminals who actively seek to exploit system deficiencies. We must invest in robust infrastructure that secure members’ data and deposits, while ensuring maximum system availability.
To this end, Saccos should equip their ICT teams and staff, with the relevant skills and tools and invest in continual capacity building.
To address the challenges of digitisation such as lack of adequate resources, expertise, or even resistance to change, Saccos should deepen their partnerships with FinTechs and commercial banks, and share best practices within the industry.
We should remain vigilant, especially when collaborating with third party vendors, noting that all the cyber-attacks perpetuated on Saccos have been through these channels, according to SASRA.
The writer is CEO of the Kenya National Police DT Sacco.
