Book on Cooperative Management Success

Management Success

SECRETSof Kenya’s Cooperative Movement

Conversations with cooperative managers on

their motivations, influences, management styles,

goals and achievements

Emma Muli www.investmentnewskenya.com

www.investmentnewskenya.com

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Management Success

SECRETSof Kenya‘s Cooperatives Movement

There is a growing realization all over the

world that cooperatives offer important ser-

vices and can play a major role in develop-

ment and equitable distribution of resources.

The challenge has been: How do you grow a

successful cooperative that serves its pur-

pose? This is what this book seeks to answer

by looking at the experiences of those who

have grown successful cooperatives


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Published by Investment News (investmentnewskenya.com) P.O. Box 20257-00100

Nairobi, Kenya

Copyright: Investment News Ltd 2010

ISBN: 996 67020 8


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Management Success

SECRETSof Kenya‘s Cooperative Movement


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CONTENTS

Foreword by the author page 7

Introduction by Moses Chebor, General Manager, Baringo

Teachers Sacco Society page 8

CHAPTER 1

Elly Oyugi, Chairman, Kenya Bankers Sacco Society page 10

CHAPTER 2

Nicholas Kangogo, Chairman, Baringo Teachers

Sacco Society page 14

CHAPTER 3

Shem Motuka, Chairman, Mwalimu


CHAPTER 4

Zuhura Rajab Ali, chairperson, Universal

Traders Sacco Society page 26

CHAPTER 5

Stanley Chemng‘orem, Chairman, Ukulima

Sacco Society Page 32

CHAPTER 6

Jeremiah Sirma, chairman, Kencom Sacco Society page 38

CHAPTER 7

Macloud Malonza, Chairman, Harambee Sacco Society page 44

CHAPTER 8

David Waruingi, chairman, 2NK Sacco Society page 50

CHAPTER 9

Lisalita Ambere, Chairperson, Jamii Sacco Society page 54

CHAPTER 10

Andrew Lang‘at, Chairman, Ndege Chai



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AUTHOR’S FOREWORD

The purpose of this book is not to tell the story of the cooperative move-

ment in Kenya. Its success and growth is well-known. In deed, Kenya is

among the top nations in the world with a vibrant cooperative movement.

The purpose here is however to bring together for the first time, the ex-

periences and foresights of those who actually manage cooperatives.

We have managers who started off cooperative societies literally from

scratch and have steered them to top positions. We have managers who

have taken over cooperatives that were fledgling under poor management

and have turned them around. They all talk to us about the visions they

hold for themselves and for their cooperatives and how they have been

able to actualize them.

Most of these stories were first published in Investment News—an online

and print business publication (www.investmentnewskenya.com). In the

magazine, the stories focused mainly on savings and credit cooperative

societies generally known as saccos. And so, in this book too, we are fo-

cusing mainly on saccos.

Saccos are a specialized type of cooperatives. They started off as workers

cooperatives where employees from one organization would pool re-

sources purely for the purpose of getting loans—thus the name savings

and credit. Today, however, saccos are complex organizations offering a

wide range of products and services. Some are as large as banks. Thus the

management has become complex, demanding greater skill to motivate

employees on the one hand, and to manage and motivate cooperators on

the other. How do you achieve this? It is what this book hopes to demon-

strate.

I am certain you will find the book immensely useful.

Emma Muli

Editor, Investment News (www.investmentnewskenya.com)


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INTRODUCTION

COOPERATIVES ARE

THE WAY OUT OF POVERTY

I feel honored to have been requested to intro-

duce this book. My view is that the cooperative

movement in Kenya is the ideal vehicle to bring

about faster development and to eradicate pov-

erty. Every community has the potential to form

a cooperative society and use it to improve their

standards of living. Poverty is a manmade phe-

nomenon created out of ignorance or intention-

ally to create dependency of some upon others

for political manipulation. If the people could

know what they can achieve on their own by put-

ting their resources together and using economies of scale, the situation

would definitely be different.

I can testify to this from my own experience. I worked with Tugen Hills

Farmers Cooperative Society Ltd in Baringo for four years, from 1982 to

August 1985. Through their cooperative, the farmers were getting regular

income from the sale of their milk, coffee, pyrethrum and cereals. Stores

for farm inputs and implements were full from Tenges, Kabarnet, Kabar-

tonjo to Bartolimo.

Lorries, tractors and small vehicles were busy carrying goods up and

down. All the societies were booming with business. Products of the

Mogoswok Beekeepers and Honey Refinery, were stocked in every super

market. The honey was, of course, the best. Fisheries in Lake Baringo

was doing well. Cotton in Kerio Valley improved incomes and educated

the children of the residents.


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Then leadership wrangles started and the societies collapsed. Today the

resources are still there, but the people of Baringo are among the poorest

in the country.

Nationally and internationally, calls are "Back to Basics". Communities

are being urged to form groups in order to be assisted. The truth is they

should first assist themselves by agreeing to come, reason and pool their

resources together before the government or a donor comes to their aid.

Those who have managed to stick together are better off economically

than those who are still struggling to put their houses in order.

The big challenge lies in finding and training managers for this vital

movement. Books should be written on the best management practices.

Best of all, we need to learn from those who have experience—those who

have built cooperatives from zero to large enterprises. This, I believe, is

the gap this book will fill.

Many of the people featured are managers who have been with the saccos

since inception and painstakingly grown them to become key players in

the Kenyan economy. Some like Harambee, Ukulima, and Kenya Bankers

to mention only a few are helping develop cities and towns by putting up

modern houses and generally becoming engines of development. How do

the managers do it?

Find the answer in this book. I am sure you will be encouraged to look at

cooperatives with excitement. Cooperatives are truly the way out of pov-

erty!

Moses Chebor General Manager, Baringo Teachers‘ Sacco Society


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Kenya Bankers Sacco Society is best known for its innovative ap-

proach to product design and management. It has its parentage from

the banking industry, and it has therefore adopted a banking struc-

ture

Elly Oyugi Chairman, Kenya Bankers Sacco Society Ltd

CHAPTER 1


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‘Most Innovative Products’

During the 2010 Cooperative Day celebrations popularly known as

Ushirika Day, the Kenya Bankers Sacco Society emerged the winner in

the category of the ―Most Innovative Products.‖

And it was well deserved. For the sacco has managed to build, in a record

two years, 46 housing units for their members in Nairobi‘s up market

South B estate at a cost of nearly a half of the going rate.

It has not stopped there. The sacco has embarked on Phase 2 in which it

will provide an equal number of members with houses, possibly at better

terms.

The sacco‘s chairman Mr. Elly Oyugi says, ―The success of Phase 1 of

the housing project has encouraged even the employers to consider better

facilities for their staff. This way the cost per unit will be much cheaper

and the sacco members will benefit greatly.‖

How did the Kenya Bankers Sacco manage to do it? According to Mr.

Oyugi, the sacco entered into a strategic partnership with a home devel-

oper and negotiated favorable funding terms from the Cooperative Bank

of Kenya..

The strategic partner signed a fixed contract to ensure prices remained as

agreed.

―The project was very demanding, but rewarding. The management had

to monitor the work progress as well as deal with suppliers who were paid

directly by the sacco.


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In terms on management, the sacco has adopted structures and attitudes of

the banking fraternity from which it draws its basic membership. Delega-

tion is the key word. It is practiced right from the board to the regional

representatives and then to the senior staff. In many ways, it runs more

like a bank than a cooperative.

―We try to adapt what is practiced in the banking industry. For instance

we have work stations in which staff may share telephone heads. The of-

fices are open, much like in a bank. The structure also is tailored after that

of the banks.

―The Finance Section is divided into two—accounts section which in-

volves reconciliations and clearing section which deals with remittances.

We also use software employed in many banks such as T-24.‖

The Credit Section is divided into retail and recovery sections. Retail sec-

tion deals with loans only.

―In line with the new Act, we have planned a new subsection of credit

called administration charged with the administration of bad debts.‖

Another section similarly tailored after banks is Customer Service. This

deals with registration, closure and change of address as well as Fosas.

And just like in the banks, they all report to an operations manager who

reports to the general manager. Like in banks, general managers and op-

erations managers are bankers by profession.

―It‘s easy for our senior staff to understand the demands of the sacco

members since they all have similar backgrounds in banking. It makes

work easier,‖ says Mr. Oyugi.

And because of the banking background, the staff ensure that there is al-

ways double entry whenever there is a transaction.

―The moment your accounted is debited, there should be a double entry to

ensure proper records are kept,‖ Mr. Oyugi emphasizes, noting that the


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practice seals a banking weakness which is often exploited by fraudulent

employees in saccos.

Kenya Bankers Sacco has a committee of nine. It also has branch leaders

and delegates.

Its members, totaling some 15,500 are drawn from financial institutions

around the country. Total member deposits total more than Shs 2.8 bil-

lion.

―We have been able to achieve al this through shared responsibilities. We

encourage delegation of duties and responsibilities. When you let people

do their work, you are telling them, you are responsible.‖

All approved loans are released through electronic fund transfer. Mr.

Oyugi says this makes it easy to counter check differences because all the

funds must go to an account before being withdrawn.

Future plans include an account that will be run in partnership with the

Cooperative Insurance Company, CIC.

The sacco also plans to get into asset financing to be operated in conjunc-

tion with employers.

Says Mr. Oyugi, ―I have a personal mission for the sacco: To establish a

stable, enlightened membership who will be a source of new ideas to

move the sacco.‖


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―We are today not only a big cooperative, but we are also ourselves land-

lords with large buildings in Eldama Ravine and Kabarnet,‖ Mr. Kangogo

told me with a deserved feeling of pride.

NICHOLAS KANGOGO Chairman, Baringo Teachers Sacco

CHAPTER 2


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People Skills that Work Wonders

Mr. Nicholas Komen arap Kangogo simply calls his philosophy "people

skills" but it has helped him to become and stay a darling of Baringo

teachers, even when the cooperative movement is filled with turbulence.

A chance diploma course in Britain on credit unions started arap Kan-

gogo on a new, long and successful career in cooperatives. ‗I consider

that I was very lucky because it was the course that introduced me to co-

operatives".

Mr. Kangogo was then a treasurer with the Kenya National Union of

Teachers (KNUT) in Baringo District. The course took nine months. That

was in 1975. The year is significant because the following year, savings

and credit societies swept the country like wildfire. Teachers all over the

country were among those in the lead in forming the societies that came

to be popularly known as saccos - the equivalent of British credit unions.

Teachers in Baringo were anxious too to set up saccos. But in the district,

only Mr. Kangogo had any knowledge about saccos. It was for this reason

that teachers made him the chairman of the sacco—the Baringo Teachers

Sacco Society—when it was formed latter that year. It is a society he has

literally steered and watched grow from a small group of teachers in a one

room rented office to a financial power house in the three districts of Bar-

ingo, Koibatek and East Pokot.

―We are today not only a big cooperative, but we are also ourselves land-


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lords with large buildings in Eldama Ravine and Kabarnet,‖ Mr. Kangogo

told me with a deserved feeling of pride.

All that time, Mr. Kangogo has been the society chairman—except only

for one year when the District Cooperative Officer in the area barred him

on a technicality. ―The teachers were anxious that I come back, and as

soon as they could, they put me back.‖

Mr. Kangogo was awarded a commendation by the President for being

the longest serving chairman of a cooperative in the country.

So what is his secret of successfully running a cooperative? For an an-

swer to that question, Mr. Kangogo looks far into his childhood where he

sees the seeds for what he is today.

His father died almost immediately he was born. "When he died, we were

steeped into poverty. I felt it most because I was the youngest of the two

children left behind—my brother and I. Growing up in such poverty

taught me two lessons. One, 1 learned never to expect more than I am en-

titled to. I expect to get only what I earn—what is rightfully mine.

"And two, I learned to respect other people and what is theirs. So when it

comes to running a sacco, I put these two lessons together. Because I do

not expect free things, I don't use my position in the sacco to take more

than what 1 am entitled to.

―Then I apply the second lesson- I respect other people and what is theirs,

so I give them what they are entitled to and no more."In a sacco, there are

some members who will try to break the rules, but if you set the same

rules for yourself, everyone will observe them".

A father of nine children, Mr. Kangogo is a simple man with nothing

more than what he needs. "I consider myself a happy man. I have a decent

house and I have been able to educate my children. I live well. What more

does a man need?" he tells me as he leaves to wait for public transport to

take him home.


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Mr. Kangogo retired from teaching five years ago but the teachers would-

n't let him quit his job as the chairman of their sacco. "They say they don't

care how long I stay. They just want their sacco to continue running prop-

erly and improving".

And that is what he has done for them for more than 31 years.

Mr. Kangogo started his teaching career in 1967 at Kiptoin in Koibatek

before moving to Kapkomoi. He became a religious education advisor for

the Catholic Church in 1978. In 1983, he became an assistant primary

school inspector. He has worked as an executive office with Kenya Na-

tional Union of Teachers (knut).


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Baringo Teachers Sacco plaza at Eldama Ravine. Below: Receiving a prize for excellent

work Facing Page: The award ceremony


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Shem Motuka Chairman, Mwalimu Sacco

Mwalimu sacco, one of the largest and most successful worker coopera-

tives in Kenya, has 48,000 members a majority of whom are secondary

school teachers. Others come from the TSC and related organizations.

This diversity, according to Mr. Motuka, is what makes Mwalimu Sacco

stand out. ―We have an enlightened membership who want things done

well and who demand accountability.‖

CHAPTER 3


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Making a Difference

When Shem Motuka joined Mwalimu Sacco Society as chairman in 2001,

the sacco was just a regular sacco with three ordinary products – develop-

ment, emergency and school fees loans. Armed with accountancy skills –

he‘s a senior auditor with the Teachers Service Commission (TSC) – he

set out to make Mwalimu a model sacco.

―As an accountant, I believed I‘d make a difference to the sacco – a dif-

ference that would enhance controls. An accountant knows how to man-

age and plan finances as well as investing.‖ He therefore set out to initi-

ate reforms in management style. It was not a walk over though, and he

needed the cooperation of all the players in the sacco.

―We organized for a retreat during which we discussed process analysis

of our systems. We discovered weaknesses such as loan delays, rudeness

of staff and insufficient funds among others.‖ They also went through in-

put and output of every process and realized for example that emergency

loans which used to take long could be released within three days. They

then came up with a service charter which details rights and obligations.

―Members need to support us by knowing their obligations to achieving

this.‖

Mwalimu sacco has 48,000 members a majority of whom are secondary

school teachers. Others come from the TSC and related organizations.

This diversity, according to Mr. Motuka, is what makes Mwalimu Sacco

stand out. ―We have enlightened membership who want things done well

and who demand accountability.‖

Another advantage of the quality of membership is that it brings in mixed


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skills. ―There are accountants, economists, lawyers etc. This is especially

beneficial for financial management.‖

Board members are also highly qualified. In fact they are certified by the

Institute of Directors, making them qualified to hold office anywhere in

the country.

The sacco was the first to institutionalize strategic planning in 2001 as

well as introduce a service charter. Best practices are so entrenched in the

sacco that the sacco reviews its strategic plan regularly.

In 2007, the sacco became the only cooperative to undergo performance

contracting. The performance contract is maintained quarterly. ―We don‘t

want to wait until the end of the year only to be told when it‘s too late that

performance was below planned targets.‖ For instance if a target to be

achieved involves mobilizing savings of a certain amount in the year, then

a quarter worth of savings should be met during the first quarter. If not,

then systems are reviewed and efforts enhanced to cover for the shortfall

in the second quarter.

Performance contracting at Mwalimu is at two levels. One is between the

board and members who select representatives to sign on their behalf. The

other is between the board and the chief executive officer who signs on

behalf of the staff. Objectives, strategies and targets are drawn from the

strategic plan. This is ascertained annually to see if there is a need for

amendment to meet dynamic changes and to ensure that the plan remains

relevant to realize its goals, mission and vision.

Out of this, the sacco came up with a service charter which stipulates

standards of service delivery. To achieve this effectively the sacco uses

technology for quick delivery. For instance, loans forms are send through

courier and acknowledged through telephone, short messages and email.

Members‘ queries are answered through email and sms. Loan forms are


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downloaded from the sacco‘s website. Members who require statements

can access these on line using their pass words.

Mwalimu sacco has an elaborate customer service centre with a service

area for clarifications and advice. Members can complain to complaint

section which analyses complaints and forwards them to relevant manag-

ers in charge for action and preventive measures.

In an effort to encourage productivity, the sacco has a reward system for

good performance which includes promotions and salary increments.

Staff prepare departmental operational work plans up to individual level

which is agreed between supervisor and employee and is appraised quar-

terly to see if the targets are met. If targets are not met, then there is need

to analyze the mitigating factors. When the factors are linked to skills,

training is facilitated.

The service charter is reviewed annually. Two weeks before the Annual

Delegates Meeting (ADM) the sacco sends out ADM documents such as

budgets and annual reports. Included also are proposals to delegates for

their approval. And again, one day before the ADM, delegates attend a

seminar to go through the documents and raise questions. The documents

must have proper notes so as to be easily understood.

Unlike other Annual General Meetings (AGMs), therefore, Mwalimu

Sacco‘s AGMs do not spend much time as they are merely for passing

resolutions.

Another unique feature of Mwalimu sacco is the board manual. This is

oriented by the chairman for the new members of the board to know how

to operate. It has a code of conduct.


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Despite the successes of Mwalimu sacco, its management is not resting

on its laurels. ―We are continually re-engineering our business processes.

This is critical to remove bottlenecks and enhance delivery. There is no

point in waiting for two years to identify processes which aren‘t value

adding.

Motuka tells me that they have benefitted greatly from their educational

trips. Most of their best ideas are also practiced in the developed coun-

tries. He believes in implementing the best lessons learned. ―Our vision is

to be a learning organization and a growing organization as well. We bor-

row the best practices for growth to be customer focused. Whatever we do

must add value.‖

The sacco started a marketing department two years ago. This was in re-

alization of the fact that some members don‘t patronize all the services of

the sacco because of lack of information of what is available. ―Our aim is

to be a one stop shop for financial services.‖

Mwalimu sacco has mainstreamed HIV Aids in the sacco as part of mem-

ber education. This assists them to learn how to boost immunity through

nutrients and positive living. They also do this through peer education in

collaboration with donors in every province. The result has been a dra-

matic reduction in Aids related deaths.

The sacco has a structured board which has agendas for central manage-

ment committees. There are subcommittees which are specialized. The

executive committee makes decisions on behalf of the board which are

then ratified at the board level. Then there is the credit committee. This

does not give loans but ensures that loan policy is followed. They do this

through sampling. Their role is also to look at differed cases and make

decisions. The human resources subcommittee looks at staff matters while

the front office subcommittee handles activities at front office. The

budget committee which is also the surveys board ensures that assets are

safeguarded and decides whether to dispose of non-performing assets.


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There is also a procurement committee, education committee, marketing

committee as well as audit committee which handles internal and external

audit reports as well as management reports.

The role of the executive is to ensure that all programmes such as per-

formance contracts are working through monitoring and evaluation. The

ADMs make business plans and budgets.

The reforms have made Mwalimu the number one sacco in Kenya and in

the whole of Africa. To sum up the achievements was the ISO certificate

in September 2009, again, earning the sacco another first in the coopera-

tive sector. Motuka has also been recognized for excellence by being

awarded a HSC in 2008 by the President. These facts best illustrate

Mwalimu sacco achievements: It is the best capitalized cooperative at

KShs 13 billion, best managed cooperative and sacco, lowest expenditure

sacco among other firsts during the Ushirika Day celebrations.

Products of Mwalimu are now many and varied. They include develop-

ment loans with a repayment period of 48 months, super loan of 60

months, vision loan of 72 months, bridging loan or top up as well as dis-

counting of commercial bank loans. The sacco has also brought in IR net

coop Kenya, a money transfer company in partnership with Kenya Bank-

ers Sacco Society and Woccu. This contributes to the funds of the sacco

in terms of commissions earned.

What is Motuka‘s legacy? ―Despite the reforms and achievements, I am

not saying we have arrived. I would want to see a situation whereby all

processes are automated including loaning becoming paperless. I would

also wish to see an automated registry whereby a file can be shared by

many officers at the same time.‖

His dream is to see Mwalimu become a bank - this he hopes can be real-

ized through the microfinance section which was started in 2007.


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ZUHURA RAJAB-ALI

Chairperson, Universal Traders Sacco Society

Universal Traders Sacco Society Ltd controls the business rhythm of the

fast growing Machakos town and the outlying areas from Kangundo to as

far as Wote in Makueni District. It is one of the few societies that don't

have backlogs of loan applicants because loans are given when applied

for.

CHAPTER 4


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Battling Prejudice with Good Deeds

MRS. Zuhura Rajab –Ali, the chairperson of the Masaku (now Universal)

Traders Sacco Society remembers with a mixture of pride and indigna-

tion, the day she walked into the Machakos branch of the Standard Bank

to negotiate her first business loan. She had only recently received her

first salary as a teacher with the Teachers Service Commission, bought

several tons of construction stone, and within a few short weeks raised up

the walls of some rental houses at a plot in Machakos town, which was

given to her by her mother as a university graduation gift.

She had run out of money just before roofing the houses and that is why

she was visiting the bank. "I went to the Standard Bank and requested to

see the manager. I had not anticipated any problem. But being a woman

—and a young girl at that- was something the bank was not prepared for.

I could feel the amusement when I told them I wanted a loan. I was flatly

denied access to the manager. But I didn't budge. I persisted and insisted

on seeing him.

"Luckily the manager, who was just then leaving his office, was attracted

by the tense atmosphere and asked what 'the young girl' wanted. To my

amazement and joy, when I told him that I wanted to see him, he just said

'Come in!' I walked out with a loan of Shs20,000,a lot of money those

days.'

But it was the confidence in her loan negotiation skills that Mrs. Rajab -

Ali was most happy about. The loan not only launched her into business,

she has constantly needed those skills to negotiate frequent business loans

with the same Standard Bank to expand her business.

"Now I own a good number of rental houses. Business is in my family


28

blood", says Mrs. Rajab-Ali who, as the Chairperson of the Masaku Trad-

ers Sacco, is entrusted with running a small but influential financial outfit.

The sacco which is said to control the business rhythm of the fast growing

Machakos town and the outlying areas from Kangundo to as far as Wote

in Makueni District has a membership drawn from all kinds of businesses.

Since April 2006, the sacco has been housed in its own premises, a 3 -

storey building in the heart of Machakos town. The area had been her

dream business location. "I had really wished to occupy these premises",

Mrs. Rajab Ali remembers pointing at a building close by. "I hoped to

shift my clothes business to these premises one day. This street has visi-

bility. It is up market and has many people passing by".

It was therefore not by chance that her first project as the chair person of

the Masaku Traders Sacco was to shift it from rented premises to its

building on the street. "It was an uphill battle, with many intrigues. I

came to realize that many other people had eyed the building as a strate-

gic place for business".

This was mixed with the ―usual prejudice.‖ "As the chairperson of the

sacco, I always say I have two major challenges. The first is that of being

a woman. Although many businesses in Machakos town are owned by

women - and in deed, the women membership in the sacco is a half that of

the men - not many women are interested in the politics of running the

sacco. In fact, we have only three women in the management.

"The result is that you are actually a woman in a man's world. And men,

unfortunately always feel challenged.

"Secondly, I am a Muslim woman in a Christian environment. You know

they would say a 'Mswahili' woman cannot run a sacco because they think

Swahili women only want happy and hustle-free lives.'

"I have fought these two prejudices with my motto of doing with perfec

tion whatever it is that I am doing. I always believe people will agree with

me when they see the good results.


29

"I remember one day I went to visit a town where the sacco wanted to set

up a branch. When I was introduced as the new chair person, the disap

proval was loud. Some could be heard wondering aloud: Are there no

more men left?

―We went ahead to successfully open the branch. And today, my staunch-

est supporters are from that branch.‖

Unlike employee saccos where members tend to know each other, this is a

complex sacco where the high and mighty meet with the lowly and hum-

ble. There are all kinds of experts too. So every idea you put forward is

weighed and critiqued and challenged by people with knowledge and

skills. Even people with vested interests, after all they are members of the

business community.

"For example when we were renovating the sacco premises here, men

who didn't know my background in the construction industry didn't at first

take my suggestions seriously. But, I am always aware that I am talking to

people who may have the expertise, vested interest or influence".

To demonstrate the economic influence of the sacco, Mrs Rajab Ali

quotes the example of the KenGen shares. The sacco had just shifted to its

current prestigious location in the town centre. "There were always peo-

ple filling our benches, waiting to buy shares. We sold the highest num

ber of shares in Machakos,‖ she says. In fact, the sacco led

with sales worth Shs 3.3 million followed by Kenya Commercial Bank

with Sh 1.8 million.

''One of the benefits of our new location has been a tremendous increase

in the confidence members have in the sacco,‖ says Mrs. Rajab-Ali. "I am

proud that the improvements I have made have contributed in confidence

building. I have ensured that the sacco has a five year strategic plan and

policy guidelines covering investments, human resources, IT, loans and

so on. These improvements have raised the morale of workers and the

sacco is now attracting some of the best personnel."


30

Among the products the sacco has introduced this year are a children's

account (unique in that both the child and the parent should sign for with

drawal) and a holiday account. The sacco has also introduced shares trad-

ing and a pay point service through which companies can pay their em-

ployees, a service that especially targets coffee societies.

The sacco has four branches in Tala, Tawa, Masii and Wote towns of both

Machakos and Makueni districts.

Mrs Zuhura Rajab Ali, who is also the Deputy Head Teacher of the

Machakos Girls High School, owns a variety of businesses in Machakos

town most of which have sprung from her basic involvement with hous-

ing.

For example, she supplies water in tankers to hotels and individual

homes, a business she started after she drilled a borehole for her domestic

water needs. And she is also into horticultural farming supplying her

products to supermarkets.

In deed, as she says, business is almost a natural part of her. When she

was a university student, she invested much of her allowances. It was her

business instinct that made her join the Mwalimu Sacco Society contrib-

uting Shs500 of her first salary as a teacher.

And it was because of her business needs too that she joined the Masaku

Traders Sacco Society. "I hesitated at first when I was asked by the pro-

moters to join the sacco at its inception in 1990. Few people, I believe had

faith that a sacco of traders would survive".

But in 1998, she had an urgent need for finances to expand her business.

While she was searching for funds, a friend suggested that she joins the

sacco, which she did. "I joined the sacco at a time it was expanding rap-

idly. It had just received funding from Messp, a European micro-credit

institution, and had moved to more spacious offices in order to launch its

banking services."


31

She was elected into the sacco's supervisory committee in 2001. And in

2004, she and her team joined the management committee in ―a rather un-

usual way.‖

"We made a very impressive report to the sacco‘s Annual General Meet-

ing and the meeting decided that the whole of my committee move to the

management committee." Her rise in the sacco management continued

when she become the Hon. Secretary. Then. finally, in a reshuffle, she

was elected the chairperson of the sacco.

Mrs. Rajab Ali who is a mother of four, believes in women leadership.

"The world would be better off if more women were in leadership posi-

tions. Women have special God-given leadership qualities that men lack.

For example in difficulties women are sober, more tolerant and have a

human heart.

"In many meetings, I watch with amazement as men squabble and abuse

each other, often forgetting the main question at hand. But women wait

patiently and speak from knowledge and understanding."

Mrs. Rajab-Ali feels that Africans lack the seriousness to run businesses.

In many cases, their businesses are overburdened with large overheads

where a more cooperative approach would be beneficial. For example,

similar businesses could share premises and cut down on rents and tele-

phones. "In Dubai, I saw many businesses where this approach was used

and they are quite successful."

The legacy she wants to leave behind? Mrs. Rajab Ali goes back to her

favorite investment line: "I spelt it out to the members in our last Special

General Meeting: I want every member to own a house", she says.


32

STANLEY CHEMNG'OREM Chairman, Ukulima Sacco Society

"We see the sacco itself as an investment for its members. We are therefore

urging them to reinvest their loans in income generating activities to improve

their lives." And in deed, many members are heeding the advice, with some

taking loans as high as Shs3 million for reinvestment

CHAPTER 5


33

‗The Landmark of Excellence’

Perhaps, no one is better placed to talk about the art of growing a sacco

than Stanley Chemng‘orem, the long serving Chairman of the Ukulima

Sacco Society. Chemng'orem took over the leadership of the Nairobi-

based, countrywide sacco when it was a fledgling in 1976 and has nur-

tured it to a wealthy giant and a forward-looking key player in the coop-

erative world. How did he do it?

His serious involvement with Ukulima Sacco Society came when he was

elected unopposed as the national vice chairman in 1974. Two years later,

he became the chairman of the sacco which by then had only one staff, no

office and practically no records. Today the sacco is housed in its own ultra

-modern, 11-storey, Ukulima House, right in the heart of Nairobi.

The building which is owned 75% by the sacco members and 25 per cent

by the sacco itself in keeping with cooperative investment regulations, has

three basements which can accommodate 60 cars. It is fitted with high

speed lifts and is, as Mr. Chemng'orem proudly puts it, "a land mark of

the existence of the Ukulima Sacco Society and an important contribution

to the economy of the country."

The society's membership, although it has climbed down from its peak of

51,664, due to a combination of external factors such as deaths, re

trenchment and government embargo on civil service employment, still

remains one of the highest at 26,129 in the country. It comes from 85 em

ployers, a record in itself, thanks to a change in the sacco bylaws that en-

abled the opening of the common bond.

"This has enabled the society to recruit members from virtually all minis-

tries, parastatals and reputable organizations from the private sector," says

Mr. Chemng'orem. The core ministries are those of Agriculture, Live-

stock Development, Fisheries Development, Water and Irrigation and re

lated parastatals.


34

"Our strategy is to grow the membership base by 10% every year," says

Mr. Chemng'orem. "The society has a lot of potential for growth with the

opening of the common bond. We have introduced new and varied prod-

ucts and services to attract and retain members," he adds.

Share capital has grown from a miserly Shs206, 330 in 1972 to an im

pressive Shs2.9 billion and is targeted to grow by 10% annually. To

achieve this, Mr. Chemng'orem is relying on the confidence members

have in the sacco and their propensity to save. "There are many high sav-

ers in the society whose share contribution exceeds one million shillings,"

he says. In deed, some of them have saved more than Shs2.4 million with

the cooperative.

By December 2008, the sacco's fixed assets stood at Sh361, 644,010. And

they include Ukulima Cooperative House, 46 residential houses in Eldoret

and Ukulima Towers plot in Nairobi.

The sacco has other investments also such as Shsl3, 778,430 worth of

shares in the Cooperative Bank of Kenya, Shsl,131, 500 worth of shares

in Kuscco, Sh683, 502 in the CIC and Shs 50,000 in Codic.

With this kind of growth rates and member support, Ukulima Sacco is in

a good position to offer better, varied and efficient products and services

to its members. In deed, it was this financial might that enabled the sacco

to come to the rescue of its members then locked out by commercial

banks through restrictive policies and unaffordable high minimum ac-

count balances in 1999. A front office activity was established to offer

banking services to the members. Now the Fosa constitutes an important

part of the big success story of the Ukulima Sacco.

"We see the sacco itself as an investment for its members. We are there-

fore urging them to reinvest their loans in income generating activities to

improve their lives." And many members are heeding the advice, with

some taking loans as high as Shs3 million for reinvestment.

The normal loan processing period has also been reduced to one month or


35

less. And the processing of emergency loans has been decentralized to the

sacco branches countrywide to save members time and money travelling

to the society's headquarters.

The essential outcome of this is excellent returns on investments for

members. In 2008, dividends and interests were paid at the following high

rates: main shares 8%, Ukulima Cooperative House shares 15% and El-

doret houses shares 5%. The total dividend paid for the year 2008 was

Shs243, 247,306 which represented an increase of 10.9 per cent over the

previous year.

The experience of building Ukulima Sacco Society has made Mr. Chem-

ng'orem come up with a 10-point sacco management principle of good

sacco leadership. According to him a sacco leader must be:

1. A person of unquestionable integrity, selfless, honest, transparent, ac-

countable, disciplined, efficient, dedicated and of good moral character.

2. A role model, leading from the front and ready to lead by example.

3. A person with the welfare of the society at heart, a desire to have it ad-

vance to greater heights and more prosperity.

4. Able to serve the society and members faithfully, without fear or fa-

vour.

5. Proactive, visionary and entrepreneurial oriented

6. Able to ensure safety and soundness of members' funds

7. A team player

8. Able to ensure that unity prevails in the society. A society full of

squabbles cannot prosper.

9. Able to encourage openness and dialogue with and among members.


36

Members should feel free to discuss and criticize when necessary.

10. Able to recognize the role of a supervisory committee as positive and

complementary. Supervisory committees play roles in building a strong

society. Everyone should be regarded as a member of a team working to-

wards the same goal— that of making the society a success.

It was because of this concern with improving management style that Mr.

Chemng'orem and his team introduced the annual delegates system and

scrapped the annual general meeting (AGM) system for the sacco. "It was

felt that the delegates system could improve members' participation in the

society's decision making," says Mr. Chemng'orem

With AGMs, it was only members from around Nairobi who could attend

and vote on issues. "Being a countrywide sacco, we felt this was unfair.

The sacco was being run only on ideas of members who were around or

in Nairobi. There was no input from the rest of the members around the

country."

Currently, the society has 95 branches spread throughout the country.

Each branch elects three delegates who represent their members during

the annual delegates meeting (ADM). The delegates elect 9 members to

form the Central Management Committee and three members to form the

Supervisory Committee. This is the group that's entrusted with the day to

day running of the sacco.

The management style requires an informed membership. And that is why

Ukulima Sacco has put member education as one of the priorities of the

sacco management. "Members need to be informed about their sacco's

operations, their rights and obligations, "says Mr Chemng'orem.

To fulfill this, the central management committee and managers regularly

hold meetings with members to educate them on various issues of inter-

est. Educational materials such as newsletters are also made available to

the members."

Members rights and obligations are further elaborated upon in a service

charter developed and adopted by the management. "The charter is to im-


37

prove service delivery. It articulates the members' rights and obligations.

It is firmly based on the sacco mission to provide quality savings, credit

and front office facilities that enhance members economic and social em-

powerment," says Mr. Chem-ng'orem.

Among the challenges Mr. Chem-ng'orem and his team have faced while

building the Ukulima Sacco was dealing with the initial prejudice among

potential members. "A large number of them at that time had the mistaken

idea that saccos belong to junior staff who have little money," he says.

The effect of this was that the saccos monthly share contribution was set

very low—at Shs 20 for every member per month. And, it remained like

that for long even when salaries had improved.

"This meant there was little money that could not, without much dili-

gence, satisfy the members' loan demand." Today minimum monthly con-

tribution has been raised to Shs800 per member.

Mr. Chemng'orem's achievements have been recognized far and wide. As

early as in 1985, he was appointed as one of the commissioners to revive

the Kenya Union of Savings and Credit Cooperatives, KUSCCO. He was

later elected as director and vice chairman of the apex organization, posi-

tions he relinquished in 2004. He has served as the deputy managing trus-

tee of the National Social Security Fund (NSSF) and was awarded the Or-

der of the Grand warrior of Kenya (OGW) by the president in 2001.

After graduating from Egerton College, Mr. Chemngorem joined the Min-

istry of Livestock Development in 1966 and worked in various districts

before becoming the head of artificial insemination department at the

Animal Health and Industry Training Institute, Ahiti, Kabete. He has trav-

elled extensively and attended many courses and seminars in the country

and abroad. He counts as his greatest achievement, the implementation of

Strategic Plans at the Ukulima Sacco Society

"A strategic plan is a tool for good governance, and a road map that helps

the society define its own preferred future," he says. With a strategic plan,

he adds, a society can quickly and effectively respond to the changing

needs and expectations of its members.


38

Kencom Sacco is one of the few saccos determined to pursue very clear

and well reasoned investment policies. The result has been not only a sat-

isfied and increasing membership, but also the satisfaction of knowing the

members are benefitting from their investments in the sacco. .

Jeremiah Sirma Chairman, Kencom Sacco Society Ltd

CHAPTER 6


39

Staying On Higher Financial Altitude

Fifteen years ago, Mr. Jeremiah Sirma and a few of' his colleagues de-

cided to start a sacco for members of the Kenya Commercial Bank. To-

day, the sacco that came to be known as Kencom Savings and Credit Co-

operative Society, is one of the most successful in Kenya.

"Members needed loan facilities. We believed that such loans could only

be provided efficiently and urgently by a sacco," Mr. Sirma, who is the

Sacco's chairman, says, explaining the reasons behind the formation of

Kencom Sacco in 1994. "We believed our own sacco would solve our

pressing financial needs."

The suitability of the idea is confirmed by the fact that Kencom Sacco has

stayed on a financial high altitude since its formation.

Statistics illustrate the story better. Its membership has increased to 3,000

despite heavy staff retrenchments in the banking sector in recent years. Its

share capital has increased to Shs 300 million while revenue has increased

to Shs 30.9 million in 2008, rising from Shs 21.3 million the previous

year.

Loans given to members have increased to Shs 78, 023,059, bringing the

total loan portfolio to Shs 231,327,446 as at the end of 2008. At the same

time share capital grew to Shs 121.2 million while total assets of the

sacco stood at Shs248,240,257 by the end of 2008, an increase of 36 per

cent.

As an investment, the Kencom Sacco has also continued to increase its

profitability to members as reflected in the high dividends and interest

rates on member deposits and shares.

According to Mr. Sirma, a key reason for sacco's success is that it tailors

its products to suit the needs of its members.


40

"For instance, there are members who don't need school fees because their

children are still young. They need different kinds of products. We there-

fore encourage such members to take loans to start and support businesses

such as real estate.

―We have members who have purchased tractors for farming businesses

and others who have started schools and colleges. "

In this way, says Mr. Sirma, Kencom Sacco is helping members and con-

tributing to the development of the country. In deed, he believes that sac-

cos have contributed immensely to the development of Kenya.

"If you look around, you will not miss to see a development which is

owned by a sacco or which has been set up using sacco funds. The

matatus on our roads are owned by sacco members. The tall, modern

buildings in our cities and towns are owned by saccos and their members.

And the beautiful homes all over the countryside have been put up using

sacco funds."

In deed, it is estimated that one in three of all working Kenyans are mem-

bers of an investment group, mostly saccos (saccos control more than

Sh150 billion orUS$1.7 billion while informal groups similarly patterned

control another Sh 35 billion, or US$469 million in savings).

And unlike the commercial financial institutions and businesses, Mr.

Sirma is convinced that saccos have the best governance structure, ena-

bling them to overcome many obstacles. He uses the case of the collapse

of US banks in 2008 to illustrate the point.

"Banks in the US had to be bailed out by the government. But saccos,

which are known as credit unions in the US, weathered the economic cri-

sis without government intervention. It is because the sacco governance

structure is transparent.

"Companies, including banks, are out to make a profit for their sharehold-

ers and to ensure they pay out huge salaries to their employees. When


41

they have a problem, rather than lose customers, they look for ways to

paint a good picture of their financial status. On the other hand, saccos

don't have high running costs and their transactions are open to mem-

bers."

That is why Mr. Sirma, who has steered the sacco as chairman since its

inception, believes that saccos are an excellent vehicle for development.

The government can help seal the small holes that encourage the tempta-

tion by managers to lend out money recklessly; it can ensure saccos have

a strong savings base - most often interfered with by employer reluctance

to remit funds and it can encourage mergers for societies that are too

small for efficient service delivery.

"That way saccos can be able to compete effectively with other financial

intuitions like banks that keep targeting sacco members," says Mr. Sirma,

adding that because of Kencom Sacco's strong financial base, effective

marketing strategies, and diversified , products, the sacco was not affected

by commercial banks' entry into the micro finance market.

"We don't see banks as our competitors. They have their niche and we

have ours. We offer products they cannot offer. For example, we have

products such as masaa loan which you can get in a few hours. Banks

cannot improve on that."And his dream is to expand the sacco to serve

members of the KCB based in branches in the Eastern Africa region and

to see the sacco play a greater role in assisting the government in its ef-

forts to alleviate poverty and to achieve its vision 2030.

Kencom Sacco has now developed an investment policy that emphasizes

real estate investments instead of stocks and shares. The policy is based

on ROI (returns on investment), ease of management and fewer risks.

"Real estate is easy to manage and it has good returns," Mr. Sirma ex-

plains. In addition, he continues, "Real estate doesn't depreciate."

Two years ago, the sacco bought 16 hectares of land in Kitengela and

subdivided it into 118 plots of half acres and quarter acres. The sacco then

sold the plots to members and made a profit of Shs7 million.

"This encouraged us to pursue this investment policy. The strategy is for


42

the sacco to source external funds, purchase a piece of land, subdivide it

into plots which are sold to members at a fair price. In this way members

benefit and the sacco benefits as well."

In the strategy, development of the plots is essentially left to individual

owners but the sacco ensures uniformity in the pattern of structures to

maintain a standard."

In pursuit of this investment policy, the sacco plans to buy land in most of

the major towns where their members are to be found.

"After completing the sale of Kitengela plots, we moved to Kisumu in

2009 where we now have 50 plots. Our next stop will be Eldoret before

moving to the Coast, Eastern and Central provinces.

"In this way, we will ensure sacco members who are outside Nairobi have

a chance to purchase property in urban areas that are accessible to them.

At the same time, the sacco will also be contributing to national efforts to

alleviate shortage of housing in outlying towns.

"The demand for land is always going up. And so are the prices. A plot

you bought for Shs 150,000 a few years ago, will be now nearly a half a

million shillings. And there isn't a moment it will ever come

down."

Regarding risks, the sacco chairman recounts the story of Safaricom IPO

(initial public offer). "Many saccos rushed to buy shares in Safaricom,

some even using borrowed funds. But it was a big mistake. And many of

these saccos have been plunged into difficult liquidity problems. We re-

gard ourselves as having been fortunate not to have bought the Safaricom

shares.

"As you are aware, saccos do not have funds for speculative investments

such as shares and stocks. We need sure and steady investments. Real es-

tate is one of these.


43

Kenco

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acco

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at

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in N

akuru


44

Macloud Malonza Chairman of Harambee Sacco Society Ltd

"We have delivered a balanced scorecard of growth and performance,"

says Mr. Malonza, outlining the performance of the giant society last

year.

CHAPTER 7


45

At the Harambee Savings and Credit Cooperative Society, National

Chairman, Macloud Malonza is leading his enthusiastic team of managers

and staff in a renewed interpretation and implementation of the coopera-

tive principles.

Service to the members has been placed on top, a clear proof of the old

statement that saccos are "not for charity but for service." Says Mr.

Malonza, "We sought opportunities for growth by putting our stake hold-

ers and members at the heart of the business and offering appropriate ser-

vices that delighted our members and exceeded their expectations."

The outcome has been increased profit— year after year— much to the

benefit of all concerned.

"We have delivered a balanced scorecard of growth and performance,"

says Mr. Malonza, outlining the performance of the society last year.

Speaking particularly of last year, he says, "In the year 2007, there were

many strategic decisions that we got right."

Those he notes include introduction of the new integrated computer sys-

tem and the connection of the Mombasa branch on line to head office

through Kenya Data Network. "This is a demonstration that the commit-

tee is committed to improving customer service and bringing services

closer to the members."

In this regard, the committee is planning to open Fosa offices in Nakuru,

Kisumu and Eldoret. "Tenders for the renovation work have already been

awarded and contractors are on site." In deed the Fosas are expected to be

operational by September this year.

Exceeding Expectations


46

Other areas are also earmarked for the expansion of the Fosa services.

"The expansion of the Fosas will make our services affordable and acces-

sible to all members."

The society's gross profit after tax was up by 42 per cent—from Shs 425

million to Shs 604 million. And that was despite a payment of a whoop-

ing Shs 113 million to staff declared redundant in a cost cutting exercise

that put the society back on the profit-making path.

The startling growth, Mr. Malonza says, reflects "well managed expenses

and significantly improved operating profits." The society reached

"billion shillings bench mark‘ at 1.2 billion during the last year.

"I am delighted... .It is my pride to be part of the Harambee society team

that delivered record financial results in the society's history. With this

achievement, we have demonstrated our ability to deliver on our prom-

ises. Performance has always been the top priority of the committee. This

year's results are evidence that, as we have always promised, the perform-

ance culture has taken root in the society...."

Change - positive change in an all inclusive and steady forward match of

the management, staff and members - has been the guiding principle ever

since Mr. Malonza took over the then loss-making, wobbly giant society.

He underpinned the key role of cooperatives - service to members - and

sought to increase and improve the number and quality of services

throughout the 148 branches of the society strewn all over the country.

"Customer service has remained a critical component in our performance

evaluation criteria. It has always been the aim of the committee to serve

customers with flexibility and convenience."

To this end, the Front Office Services Activity, FOSA, opening hours

were extended in Nairobi to start at 9 am and end at 4 pm. The society

also launched "Top Up" loans "to meet our members' expectations and in

line with the changing business environment and competitive forces. In

addition members were allowed to access the society's three loaning prod-

ucts at once.


47

The result was an increase in both membership and use of the society ser-

vices. Over 44,086 loans worth Shs 3.4 billion were given out in the back

office while the Fosa gave out 3087 loans worth Shs 1.124 billion. Thus

loans given out increased from Shs 6 billion to Shs 6.8 billion.

During the period, members' deposits increased from Shs 6.1 billion to

Shs 6.9 billion.

Other financial highlights include:

• The society gross income increased by Shs 349 million from Shs. 861

million in the year 2006 to Shs. 1.209 billion 2007. The society's income

accrues mainly from interest in member loans which has remained at a

minimum rate of 1 per cent per month on a reducing balance.

• The income accruing from the Fosa rose to Shs 526 million in the year

2007 up from Shs 170 million in the year 2006. This can be attributed to

the overwhelming demand for Fosa personal loan products.

• The society balance sheet capitalization grew from Shs8.7 billion in

the year 2006 to Shs 9.8 billion last year. This reflected the tremendous

progress the society has made on its journey of transformation. On this,

Mr. Malonza says, "We have built momentum and we have real confi-

dence in our strategic focus."

A great deal has to do with the strengthening of member loyalty to ward

off competitors, particularly from the commercial banks. The society initi

ated an aggressive campaign to market its products, so that when the

commercial banks decided to buy off sacco loans, Harambee Sacco mem-

bers did not find the need to jump into the fray.

Member loyalty depends on the society's continued look out for member

interests and ability to provide a level of service that is generally not

available at the other financial institutions.


48

Whether it is providing a loan to help a member pay for unexpected medi-

cal bills, giving a loan for an urgent school fees or for a funeral, commit-

ted saccos make a difference for their members.

These are the things that Mr. Malonza realized early as the Chairman of

the largest sacco in Kenya - in deed the largest in Africa and the eighth in

the world. It has repaid his efforts many fold. And that is why this year,

the committee has recommended dividends of 6 per cent, up from 4 per

cent last year.

He says, "All these improved performance indicators could not have been

possible without the confidence and trust that our members have in the

operation of the society. The high dividend rate is to thank them for this

support.‘ This was despite a 6% dividend payable that translates to Shs

413 million.


49

2N

K S

acco

lau

nches

its

West

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enya

route

. A

bra

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us

is i

nau

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n.


50

David Waruingi Chairman, 2NK Sacco

Its dream is to become the leading transport sacco in the country. And

with a new Business Plan as the road map, Nyeri-based 2NK Sacco has

embarked on a journey to improve the livelihood and incomes of its mem-

bers

CHAPTER 8


51

Turning Dreams Into Money-making Business

Its dream is to become the leading transport sacco in the country. And

with a new Business Plan as the road map, Nyeri-based 2NK Sacco has

embarked on a journey to improve the livelihood and incomes of its mem-

bers

It is over a decade since the founder of 2NK Sacco, Patrick Wanarua, mo-

bilized a group of matatu operators to form the sacco. His core objective

was to enable members to save money and borrow loans to improve their

businesses. Today, that dream has been achieved ten fold. The 2NK

Sacco, which now has a strong financial and asset base, has impact

throughout the country.

In 1994 the sacco kicked off its operations, with matatu owners on the

Karatina-Nairobi route. Soon they were joined by those operating on

Nyeri-Nairobi route. The membership has also grown from 60 at incep-

tion to 600.

The first challenge of the sacco was to create order at the Tea Room

matatu terminus where unruly manambas had taken charge of the Nairobi

stage. Maintenance of law and order, ethical conduct of business and pro-

fessionalism has earned 2NK Sacco respect since inception.

2NK Sacco operates several income generating projects. The sacco pro-

jects were born out of emerging reforms and liberalization in the public

transport sector. Liberalization of the market in 1998 posed a danger to

the matatu industry, the sacco's lifeline. The projects have however, not

diverted the sacco from its core objective of mobilizing savings and giv-

ing loans to members.

The sacco projects include parcel delivery service, two petrol stations, an


52

insurance agency, Nissan Matatus, 2NK Special Buses, FOSA and a pet-

rol tanker. The sacco has already acquired a plot near Ruringu shopping

center in the outskirts of Nyeri town for the construction of another petrol

station and an office complex.

Members own the projects through shares and earn dividends at the end

of the year. The Sacco members own about 600 Nissan Matatus which

operate along major routes in Kenya and have a major Matatu terminus in

Nairobi. A new office is already in operation at Tea-room in Nairobi to

enhance services.

Other 2NK Sacco stations are Nyeri, Nakuru, Eldoret, Karatina, Nyahu-

ruru and Thika. With the commissioning of 2NK Luxury Buses last year,

the Sacco opened an office in Mombasa with a manager and support staff.

The sacco's way forward is not to start new projects but to maximize prof-

itability of the on-going projects.

The Sacco projects have not only boosted the financial base of 2NK

Sacco but have also enhanced its image. The projects are also major job

creators. As they evolve over time, the projects have created additional

jobs in the market. The bus project, for example, created new opportuni-

ties for supervisors, clerks, drivers, loaders and many others.

2NK Sacco has developed a five year strategic plan focused on goals and

objectives to improve services and boost income for members. The strate-

gic plan was formulated by the sacco's management team, senior staff and

senior cooperative officers at a workshop facilitated by Co-operative

Consultancy Services—an arm of the Cooperative Bank of Kenya.

The strategic plan analyses the sacco operations, evaluates its strengths

and weaknesses and sets goals with time frame under which they are to be

achieved. Implementation of the strategic plan will take the sacco to the

future with confidence in the light of changes taking place in the

public transport sector.

It will enable the giant transport sacco to achieve its vision of becoming


53

the leading transport sacco in the country and go along way to improve

the livelihood of it's members by providing excellent services as stated in

the sacco mission.

Monitoring and evaluation of the strategic plan will be done continu

ously to access the degree to which the set objectives are being achieved.

The strategic plan, which runs up to year 2012, is a blue print of 2NK

Sacco's programmes designed on an achievable time table.

The strategic plan will enable the sacco attain quality governance stan

dards to cope with emerging demands of the industry. With adherence to

cooperate governance values, the sacco endeavors to maintain its leading

role with confidence despite challenges, both internal and external.

The need for enhanced customer care and adopting of IT standards is

taken care of in the strategic plan in addition to the need for a motivated

staff.

The chairman Mr. David Waruingi noted that 2NK Sacco has set the stan

dards for others. "We intend to retain our leading position and even do

better despite the challenges that have faced us over the years.

The hallmark of 2NK Sacco has been sanity and orderliness in all their

bays, a trademark that has differentiated them from other transport

groups.

‗No amount of pressure can make us break the rules. Instead 2NK will

continue to enhance the rules and remain a disciplined public transport.

I appreciate that commuters have remained faithful to 2NK Sacco despite

the unfair competition that has emerged in some of the matatu stages."


54

Lisalitsa Ambwere Chairperson, Jamii Sacco Society Ltd

Concern for the unbanked - women and youth groups is what gives the

Jamii Sacco Society its distinction. Its basic membership is derived from

the ministry of culture and social services.

CHAPTER 9


55

Burning Ambition to Help Youth and Women

As the chairperson of the Jamii Sacco Society, Anne Lisalitsa Ambwere

has one burning ambition—to help youth and women groups currently

being exploited by microfinance institutions. "Microfinance institutions

give these hard working people small loans at exorbitant rates. They are

impoverished instead of being helped".

Her concern with groups of women and youth — often referred to as the

unbanked— is long term. She has worked with them ever since she

started work with the Department of Social Services in 1975.

"We know these people very well. My pride would be to see the success

of a project to incorporate them into our sacco where they can get cheaper

loans".

Unlike other micro-financial institutions, Jamii Sacco draws its mem

bership from people who are familiar with the groups. "As a ministry, we

register and supervise these groups. So we know their weaknesses and

strengths". Ms Ambwere is herself the Commissioner of gender and so-

cial services, the government department with the responsibility to help

the disadvantaged.

"We have been studying other saccos such as the Kipsigis Teachers and

Maua Methodist where schemes to help women and youth groups have

been successfully started. We are convinced that the idea is feasible", she

says.

That however is not the only challenge for Ms Ambwere. She would like

to see more women included in the management of cooperatives.

"Generally, women make better managers", she says. "At Jamii Sacco, we

have recognized this and there are three women members in our manage-

ment".


56

She insists however that women must be educated to become even better

managers. "Education must be emphasized whether a person is a woman

or a man," she says. "At the final analysis, performance depends on how

enlightened you are. You may not be corrupt, but if you as a leader are

illiterate, others will take advantage of your ignorance and the result will

be mismanagement".

Ms Ambwere joined the management of the Jamii Sacco in 2000 and was

elected a member of the education subcommittee before being elected the

Chair person.

"We have a generally well managed sacco. What I have tried to do since I

took over was to cut costs. We have, for instance, reduced our regular

management committee meetings. We meet only when it is absolutely

necessary. Thus we have cut down on allowances. Procurement proce-

dures have also been streamlined to ensure that funds are not lost through

unnecessary purchases.

"I also set out to put up the IT systems because I felt it was of major con-

cern. We have an IT manager to ensure proper operations of the systems.

"We also needed to improve our product range".

Like other saccos in the public sector, Jamii Sacco has suffered because

of the government employment freeze coupled with retirements and re-

trenchments.

"We are in fact worried. Sacco membership is not growing, it is declining.

Unless something is done, this may become a real threat to the existence

of saccos in five or so years.

"We are also concerned about the low incomes of our members. Many of

our members earn very low salaries that cannot service big loans. Because

of this , our members become more dependent on loans and more loans.

And most of the loans go to unproductive expenses that put our members

into a vicious cycle." For her work, Ms Ambwere was awarded an MBS

by the President.


57

Ukulima Sacco Society House at the centre of Nairobi City: Sacco

owned buildings such as this are many in Nairobi and other towns.


58

Andrew Lang’at Chairman, Ndege Chai Sacco Society

Mr. Andrew Lang‘at is setting the pace as the new breed of educated, vi-

sion-led cooperative managers. He and his dedicated team of managers

have led the Kericho-based Ndege Chai Sacco Society to become one of

the most profitable cooperatives in Kenya. And in recognition of this,

President Mwai Kibaki honored him with a presidential commendation,

the first ever for a cooperative manager.

CHAPTER 10


59

Putting the Sacco Movement on the Map

Mr. Andrew Lang'at, the Chairman of the Kericho-based Ndege Chai

Sacco Society tells of his agony when he wanted to join the sacco as a

member. "I was hesitant because of the management. I didn't feel confi

dent with it". Little did he know that he was actually destined to become

the chairman, and therefore the top manager of the society he had learned

to view with a mixture of dread and admiration.

And neither did he imagine he would so radically change the management

techniques of the society such that Ndege Chai Sacco would not only be

the top cooperative society in the country but also bring him personally,

countrywide fame. For his work has now won him a rare presidential

commendation—in fact, the first in the cooperative sector- from President

Mwai Kibaki.

"All I wanted when I joined the cooperative management was to try to

improve things from within. I didn't take it as a great deal".

The award was hailed by the cooperative sector as a positive sign that the

movement's role in the economy was finally being recognized. "We see

this as a big step forward. It will encourage competence, hard work and

improvements in cooperative society management. And it will also lessen

corruption", says the General Manager of Kilifi Teachers Sacco Society .

When he took over the management of Ndege Chai sacco in 1999, the

society had only 4,700 active members. Now the society is counted

among the giants with over 14,389 active members.

"We mounted aggressive education and recruitment campaigns through-

out the estates and factories. Our current target is to reach 24,000 mem-

bers by the year 2008," says a confident Mr. Lang'at.


60

He relies on effective, open management to create confidence among old

and new members. And to him, good management is a hands-off style.

"We empower our people to do their work", Mr Lang'at told me. "We

have opened up the democratic space within our society. Members say

whatever they want to say without censorship or fear.

"We have sub-committees with specific roles and they plan individually.

The plans are then brought for discussion at the management level. If

there is consensus, the plans are implemented", he says.

Everything is however, done within a strategic plan, the new goal ori

ented management style. "In fact we go a step further — we carry out a

quarterly assessment to ensure that we are within our strategic plan".

On becoming the chairman of Ndege Chai Sacco Society, Mr. Lang'at

initiated procurement and credit policies to control expenditure and poten-

tial mismanagement. He however, focused on one goal as the determinant

of his management success — the control of liquidity of the sacco. In sac-

cos, this is the area of most discontent. "When I joined the sacco, you

waited for months to get a loan after application. I was determined to im-

prove on this. Now you can get your loan even in two days". And loans

are given out strictly on first come, first served basis.

"This has created confidence and trust among the members", he says.

Mr. Lang'at puts education and training in the forefront when it comes to

improving the management of cooperatives. "At Ndege Chai Sacco, eve-

rything is in black and white — written down — because every member

should read. Misunderstandings are therefore eliminated".

And in this regard, Mr. Lang'at leads by example. He has attended numer-

ous training courses both locally and abroad. He and his management

team have also traveled far and wide in order to learn from others. "We, at

Ndege Chai sacco, ensure that those of us who travel share with other

members the knowledge gained. We also implement what we can imple-

ment".

During a visit to the United States, Mr. Lang'at and his team realized that

saccos there improved their profitability and liquidity by not giving out

their entire surplus as dividends. They borrowed the idea. "As a result


61

dividends went down from 14 per cent last year to 10 per cent this year,

but liquidity improved.

"We also realized that saccos in the US — known there as credit unions

— are light years ahead of us. Loans are applied for and approved on line.

The saccos even have their own clearing house. And because of powerful

and effective lobbying, they have elaborate and strong government sup-

port", he told me.

The US saccos —or credit unions— Mr. Lang'at told me, are, unlike sac-

cos in Kenya, governed by an effective body of rules. For example there

are rules that govern mergers under which small, unprofitable credit un-

ions are encouraged to merge to attain efficiency and profitability"

These are some of the ideas that Mr. Lang'at hopes to share in the pro

posed monthly luncheons with cooperative leaders in Kericho district.

Next to illiteracy, Mr. Lang'at counts nepotism as another of the principle

impediments to progress and development of cooperatives in Kenya.

"Because of nepotism, people who should never have been leaders are put

in leadership positions. Even illiterates are given positions where ability

to read is basic!" he says. .

Mr. Lang'at's view is that cooperatives offer the best vehicle for

increased wealth distribution and poverty eradication. "Cooperatives have

the infrastructure for wealth creation and distribution in place. What is

missing is the government will and support", he says.

Cooperatives can also be the best vehicles for dispersion of community

funds as most Kenyans are connected to cooperatives in one way or an-

other. "The funds for HIV/Aids and youth could have certainly been bet-

ter entrusted to cooperatives than to MPs. But the government would have

to improve cooperative manager's accountability, management skills and

educational standards".


62

Mr. Lang'at horned his management skills in the 4K clubs in primary

school days where he was the chairman. Club members used to rear and

sell chicken and divide the profits at the end of the year. Later, as a sec

ondary school student at Maseno High School, Mr. Lang'at was the chair-

man of the Economics Club. But it is to his upbringing as a first born and

a Christian that Mr. Lang'at attributes much of his leadership skills. "As

the first born in a large family of eight, I needed much skill to account for

my position".

He was born in Bureti District in 1953.He studied at Kabianga High

School, Maseno High School and the University of Nairobi where he

graduated with a Bachelor of Education degree. But rather than go to the

classroom, Mr. Lang'at chose to join James Finlay, the well-known tea

farming estates , as an assistant manager at its Cheptabes Estate. In that

capacity, he worked in various estates of the company before being pro-

moted to a full manager in 1993.

Currently, he is the manager of the company's Kitumbe Factory. His life

with James Finlay has been an enthusiastic story of innovations and staff

motivation which have "improved the quality of factory products, cut

down on costs, minimized industrial accidents, improved conservation of

the environment and overall profitability".

Mr. Lang'at joined the Ndege Chai Sacco Cooperative in 1986 and was

elected to the team of managers in 1994.

About the Author

Emma Muli has extensive experience as

a writer, editor and researcher on

women related issues and business. She

has written influential columns and fea-

tures for the Standard and Nation news-

papers in Kenya. Her pioneering book,

Kenya: Investing in he Great Rift Val-

ley, has been widely used by the govern-

ment and parastatals to promote invest-

ing and business in Kenya. Her particu-

lar interest has been to promote the co-

operative movement as a viable vehicle

for wealth distribution and to encourage

investing and entrepreneurship in Kenya

by providing information on investment opportunities in the country.

She received a BA degree in Economics and Philosophy from the Nairobi

University and an MA degree in Media Studies from the same university.

She is currently an associate editor of Investment News

(www.investmentnewskenya.com), an online business magazine that pro-

motes investing in Kenya

Documents

Book on Cooperative Management Success