UNITED NATIONS SACCO SOCIETY LIMITED · United Nations SACCO Society Limited • Your Financial Anchor vii STRATEGIC PLAN 2015 - 2017 T he United Nations Co-operative Savings and

UNITED NATIONS SACCO SOCIETY LIMITED

STRATEGIC PLAN 2015 - 2017

April 2015

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The UN SACCO has the mandate of providing financial services for the economic empowerment and social progress of its members. The SACCO intends to enhance this mandate by implementing this three year strategic plan, covering the period 2015-2017. Following the expiry of the strategic plan for the period 2012-2014, the board and management embarked on an all-inclusive process of developing a new plan for the period 2015-2017, taking into

account changes in the operating environment as well as the need to align the services with the membership financial needs.

Given the dynamic operating environment, emerging business trends and the determination to be the financial solutions provider of choice, the Board of Directors and the Management reviewed the SACCO’s operations structure and business focus in order to be competitive. They revised the Vision statement and retained the Mission Statements to benchmark with the market leaders in the financial services. The new Vision statement is “The financial solutions provider of choice”. The corresponding Mission Statement is “To uplift the social economic status of our members by offering them quality, affordable and diversified financial services”.

This plan has embraced the concept of the Balanced Scorecard performance management framework in its thematic areas to align our business activities and programs with the corporate objectives and strategies. The financial perspective has been addressed through focus on revenue growth, capital growth, loan book growth and cost optimization. The theme on customer service addresses membership growth, improved customer satisfaction, corporate image, new product development and improved information access by members. Internal business processes perspective focuses on improved operational efficiency, business processes automation, review of policies and procedure manuals, business continuity planning and increase in office space commensurate with business size. Finally, the learning and growth perspective focuses on enhancing the organizational capacity levels for members, board and staff. The plan therefore balances financial, human resource, business development and operational concerns.

The good aspirations of this Strategic plan can only be realized through an effective implementation. This will be facilitated through prudent talent management supported by appropriate systems and processes to offer quality service to our customers and ultimately enhance business growth.

I wish therefore to take this opportunity to emphasize the Board’s commitment to providing guidance and oversight role to ensure the goals of this strategic plan are realized. Finally, I take this opportunity to sincerely thank all those who participated in the development of this strategic plan. In particular, I acknowledge the valuable input of the Board, Supervisory Committee, the Ministry officials, Management and Staff.

Lastly we are highly indebted to the facilitative role and expert guidance provided by M/S Alpex Consulting Africa Limited during the preparation of this plan.

Samuel OlagoCHAIRMAN, BOARD OF DIRECTORS

FOREWORD BY THE CHAIRMAN

United Nations SACCO Society Limited • Your Financial Anchor

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PREFACE

The challenge that the Management faces is to ensure that this Strategic Plan is disseminated and owned by staff throughout the organization. Members of staff have the contributory responsibility of ensuring sustainable growth and prosperity of the SACCO. If we do not plan, we plan to fail .I am therefore happy to note that considerable time and resources have gone into developing this corporate road map. This Strategic plan takes cognizance of the changes

in the environment that are constantly impacting on the financial industry especially in the areas of technology, customer focus, and security and the critical need for sustainable growth.

In order to achieve our ambitious goals as set out in this strategic plan, our most important asset, human capital is expected to play a key role in developing an appropriate corporate culture that continuously embraces change based on dynamism in the operating environment. This will not only enhance productivity and facilitate radical improvements in the quality of customer service and corporate image but also improve shareholder value.

To enhance our mandate, customer/members are considered paramount and will therefore be a key area of focus during the strategic plan period. Processes and procedures will be streamlined and strengthened at all levels of the organization to ensure good corporate governance.

The Strategic plan targets improved financial performance through new revenue streams to expand the revenue base, outsourcing of non-core activities, cost management and institutionalization of risk management. Implementation of this strategic plan has been structured to ensure accountability at all levels with explicit expected deliverables for all activities within clear timelines. Sound performance targets have been set, backed with adequate budgetary provisions and supported by clear responsibility centres. For sustainable business growth, the plan will be implemented while continuously embracing our core values.

Monitoring and evaluation will be done at all levels of operation through a sound performance management system. Senior management will periodically review progress on the implementation of the plan while my office will submit quarterly reports to the Board of Directors.

I note with great expectation that the Strategic plan recognizes the integral need for deepening of partnerships with other service providers and also envisages closer collaboration with the regulator.

It is my conviction that with professionalism, teamwork, creativity, innovation and commitment during implementation and adequate support from all stakeholders, this 2015-2017 Strategic plan lays a strong foundation towards the realization of our Vision to be “The financial solution provider of choice”.

Clement Tongi,CHIEF EXECUTIVE OFFICER

iv United Nations SACCO Society Limited • Your Financial Anchor

Table of ContentsFOREWORD BY THE CHAIRMAN II

PREFACE III

LIST OF TABLES V

LIST OF ABBREVIATIONS VI

EXECUTIVE SUMMARY VII

1.0 INTRODUCTION 91.1 CONTEXT OF THE STRATEGIC PLAN .................................................................................................... 91.2 BRIEF PROFILE OF UNITED NATIONS SACCO LTD ....................................................................... 91.3 RATIONALE FOR THE STRATEGIC PLAN ...........................................................................................111.4 METHODOLOGY USED IN DEVELOPING THE STRATEGIC PLAN .......................................121.5 STRUCTURE OF THE PLAN .......................................................................................................................12

2.0 SITUATIONAL ANALYSIS 142.1 THE SACCO AND DEVELOPMENT IN KENYA .................................................................................142.2 IMPACT OF THE SACCO SOCIETIES ACT ON SACCO SOCIETIES OPERATIONS .........142.3 KENYA’S ECONOMY AND DEVELOPMENT OUTLOOK .............................................................172.4 PERFORMANCE OF SACCOS 2013 ......................................................................................................182.5 CHALLENGES IN THE MANAGEMENT OF SACCOS ...................................................................192.6 PERFORMANCE OF UN SACCO LIMITED .........................................................................................212.7 COMPLIANCE LEVELS FOR UN SACCO LIMITED ........................................................................222.8 CUSTOMER ANALYSIS ................................................................................................................................232.9 SWOT ANALYSIS OF UN SACCO LTD .................................................................................................232.10 STAKEHOLDER ANALYSIS .........................................................................................................................252.11 COMPETITOR ANALYSIS ............................................................................................................................282.12 RISK ANALYSIS .................................................................................................................................................28

3.0 STRATEGIC FRAMEWORK 303.1 INTRODUCTION .............................................................................................................................................303.2 VISION ..................................................................................................................................................................303.3 MISSION ..............................................................................................................................................................303.4 CORE VALUES ...................................................................................................................................................303.5 SUMMARY OF STRATEGIC THEMES ....................................................................................................30

3.6 SUMMARY OF STRATEGIC OBJECTIVES 31

4.0 IMPLEMENTATION OF THE PLAN 324.1 INTRODUCTION .............................................................................................................................................324.2 IMPLEMENTATION APPROACH .............................................................................................................334.3 IMPLEMENTATION MATRIX ......................................................................................................................34

5.0 FINANCIAL REQUIREMENTS 48

6.0 MONITORING AND EVALUATION 49

ANNEXES 49ANNEX 1: FINANCIAL TRENDS AND PROJECTIONS FOR 2015-2017 .............................................49ANNEX 2:: MONITORING AND EVALUATION FRAMEWORK .................................................................53

TABLE 1: UN SACCO PRODUCT PORTFOLIO 10

TABLE 2: PERFORMANCE TREND OF DEPOSIT TAKING SACCOS (KSHS ‘000,000) 17

TABLE 3: PERFORMANCE OF UN SACCO LTD 2011-2014 19

TABLE 4: COMPLIANCE LEVELS FOR UN SACCO LTD 20

TABLE 5: UN SACCO LTD SWOT ANALYSIS 21

TABLE 6: OPPORTUNITIES AND THREATS FOR UN SACCO 21

TABLE 7: UN SACCO STAKEHOLDER ANALYSIS 23

TABLE 8: COMPETITIVE ANALYSIS OF PLAYERS IN THE FINANCIAL SECTOR 25

TABLE 9: RISK ANALYSIS 26

TABLE 10: SUMMARY OF THEMES AND OBJECTIVES 29

TABLE 11: MEMBERSHIP GROWTH MATRIX 32

TABLE 12: BUSINESS GROWTH MATRIX 40

TABLE 13: CORPORATE GOVERNANCE MATRIX 44

TABLE 14: FINANCIAL REQUIREMENTS SUMMARY 47

List of Tables

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ADM Annual Delegates MeetingAGM Annual General MeetingBCP Business Continuity Plan BOD Board of DirectorsBSC Balanced Score CardCBR Central Bank RatesCCA Core Capital to Asset (Ratio)CCD Core Capital to Deposit (Ratio) CEO Chief Executive OfficerCRB Credit Reference BureauDTS Deposit Taking SACCOsEAC East African CommunityERP Enterprise Resource PlanningGDP Gross Domestic ProductHOC Head of CreditHODs Heads of DepartmentsHOF Head of FinanceHOM Head of MarketingICT Information Communication TechnologyIFRS International Financial Reporting StandardsKES Kenya ShillingKYC Know Your CustomerM&E Monitoring and EvaluationMFI Micro Finance InstitutionPESTEL Political Economic Social Technological Ecological, Legal (Analysis)SACCO Savings and Credit and Cooperative Societies SASRA SACCOsSocietiesRegulatory AuthoritySWOT Strengths Weaknesses Opportunities Threats (Analysis)ToR Terms of ReferenceUN United NationsIAS International Accounting StandardsSC Supervisory CommitteeNACOS National CooperativesFOSA Front Office Services ActivitiesBOSA Back Office Services ActivitiesUNFCU United Nations Federal Credit Union

LIST OF ABBREVIATIONS


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The United Nations Co-operative Savings and Credit Society (UN SACCO) was started in 1975 with the objective of providing a mechanism for United Nations (UN) employees in Kenya to save and borrow at low cost in order to meet the employees’ socio-economic needs. The UN SACCO membership has grown from 131 members in 1975 to above 4,700active members in 2014. In the same period, members’ deposits have grown from Kshs. 290,000 to Kshs7.10 billion.

The membership of the SACCO is open to all local and international staff of UN agencies. Therefore, as part of the effort to strengthen the performance of UN SACCO and continue to offer value to its members as well as respond to the ever changing socio-political and economic environment, there is need to develop a strategic plan to guide the growth and sustainable development of the institution in the SACCO’s competitive environment in Kenya.

Over the past three years the SACCO has seen great achievements that include but not limited to reduced turnaround time for loan processing; reduced costs and fraud incidences; Portfolio diversification; Increase membership from the Diaspora and Savings account balances doubled. Some of the challenges include Strict compliance requirements by SASRA; Short term nature of UN SACCO members employment contracts made management of loans difficult; Fraud Cases; Inadequate office facility; Drastic changes in Board and Management; Poor communication to members; Weak governance- interference of Board with day to day operations and Incomplete Know Your Customer (KYC) data making defaulter recovery difficult.

The SACCO embarked on a process to develop a new strategic plan that would ensure that the challenges are addressed and the opportunities in the market are exploited. The process was participatory and involved all the key stakeholders and the staff of UNSACCO.

The three year business plan is anchored on changing the business model of the SACCO to achieve three broad outcomes that include improved governance (and compliance), business growth and expansion and growth of membership of the SACCO.

The SACCO’s Vision is the financial solutions provider of choice while the mission is to uplift the socio-economic status of our members by offering them high quality, affordable and diversified financial services. The SACCO shall be guided by the values of Teamwork, Accountability, Customer focus and Integrity.

The strategic plan is anchored on four strategic themes of membership diversification; corporate governance; business growth and compliance. Several objectives have been developed for the achievement of the strategic themes.

Implementation of the strategic plan shall be through the Balanced Score Card approach. The various objectives under each of the BSC perspectives include:-

PERSPECTIVE OBJECTIVES

Financial Loan book growth;Grow deposit base;Revenue growth;Cost optimization; andGrowth of core capital

EXECUTIVE SUMMARY

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Customer Increase membership to 10,000;Enhance retention of members; and Improve customer satisfaction

Systems and processes New product development;Business process automation;Review Policy & procedure manuals;Creation of adequate office space;BCP (Business continuity) implementation; andImprove operational efficiency

Learning and growth Capacity building of staff, board and members;Ensure compliance with SASRA Ratios;Enhance information access for customers; andImprove Corporate image of the SACCO

Several strategic initiatives have been identified towards the achievements of these objectives. Implementation of the strategic plan shall use the Balanced Score Card Approach and the plan shall be cascaded downwards to individual employees to ensure there is a link between their day to day work and the organizational strategy. Implementation is expected to cost KES 1.123 billion over the three years. Over the same period the SACCO is expected to grow its revenues and capital by 15% and also increased investment opportunities for members. This will finally translate into higher returns for members while at the same time ensuring compliance with prudent standards.

EXECUTIVE SUMMARY


United Nations SACCO Society Limited • Your Financial Anchor 9


INTRODUCTION

1.0 INTRODUCTION

1.1 Context of the Strategic PlanSaving and Credit Co-operative Societies (SACCOs) are seen as vehicles for resources mobilization and gateways to economic prosperity for families especially those in the lower and middle-income categories. These enterprises handle large sums of member funds in the form of deposits, shares and interest. The management of SACCO funds is as such a topical issue in the co-operative movement and among policy makers. The SACCO sub-sector in Kenya has witnessed rapid growth in the last few years at the rate of about 25% per annum and currently boasts of a savings mobilization of over KES400 Billion and an asset base of over KES300 billion as at December 2013. The savings mobilized represent 48% of the national savings.

SACCOs have therefore played a key role in the mobilization of financial resources and are regarded as major players in the realization of Kenya’s development blue print, Vision 2030. The SACCO sub-sector therefore occupies a strategic position in the socio-economic development of Kenya. The Kenyan Co-operative sector is rated the best with the highest resource mobilization in Africa and seventh in the world according to a survey carried out by the International Co-operative Alliance (ICA). The co-operative values and principles have withstood the test of time and offer the best model for fighting poverty and inequality in society. Co-operatives are therefore the best vehicle for driving socio-economic development in the country.

The enactment of the SACCO Societies Act has made provisions for licensing, regulation, supervision and promotion of SACCO Societies through the establishment of the SACCOSocieties Regulatory Authority (SASRA). In addition, the Act provides for protection of members deposits by creating a Deposit Guarantee Fund. The Act is therefore intended to enhance transparency, accountability and good corporate governance in the management of SACCOs.

Therefore, as part of the effort to strengthen the performance of UN SACCO and continue to offer value to its members as well as respond to the ever changing socio-political and economic environment, there is need to develop a strategic plan to guide the growth and sustainable development of the institution in the SACCO’s competitive environment in Kenya.

1.2 Brief profile of United NationsSACCO Ltd

1.2.1 HistoryThe United Nations Co-operative Savings and Credit Society (UN SACCO) was started in 1975 with the objective of providing a mechanism for United Nations (UN) employees in Kenya to save and borrow at low cost in order to meet the employees’ socio-economic needs. The UN SACCO membership has grown from 131 members in 1975 to above 4,700active members in 2014. In the same period, members’ deposits have grown from Kshs. 290,000 to Kshs7.1 billion. The membership of the SACCO currently includes local and international staff of UN agencies, spouses and dependants of the staff of UN, Diplomatic staff and staff of International Organizations affiliated to the UN operating in Kenya.

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1.2.2 Mandate UNSACCO Ltd derives its mandate from the Co-operative Societies Act 2004 and the attendant Rules, the SACCO Societies Act, 2008, the SASRA Regulations and the SACCO’s Bylawswhichguides its operational management. These regulatory frameworks enable the SACCO to facilitate the promotion of economic and social interests of members, in accordance with the co-operative principles that include voluntary and open membership; democratic member control; economic participation by members; autonomy and independence; education, training and information; co-operation among co-operatives; and concern for community in general.

A SACCOis therefore organized to undertake the following functions: i) Encourage thrift among its members by affording them an opportunity to accumulatetheir

savings; ii) Create a source of funds at a fair and reasonable rate of interest; iii) Provide an opportunity for each of its members to improve the members respective

economic and social conditions; iv) Provide members with credit for purposes of providence or production or both; v) Offer to the members complementary savings and credit services and other financial products

as may be required by the members from time to time; vi) Ensure safety and soundness of the member’s funds through a risk management programme

or appropriate insurance coverage; vii) Ensure the progress of its members by educating them continuously on the proper use of

credit; and viii) Perform the functions and exercise the powers designated for savings and credit cooperative

societies under the applicable law for the benefit of the members.

1.2.3 Products and Services UNSACCO Ltd offers the following products and services to its members: Table 1: UN Sacco Product Portfolio

Loan Products Savings Products Other Services• Normal Loan • FOSA Savings Account • EFTs

• Premium Loan • Fixed Deposit • RTGS

• Education • Children’s account • MSACCO

• Emergency • Chama Account • Bankers cheques

• Instant • ATM services

• FOSA Salary Advance • Safe custody services

• Motor Vehicle Loan

• Secured Asset Loan

• Retiree Loan

• Settling down Loan

• Insurance premium financing

• Festive season Loan

INTRODUCTION




1.2.4 Achievements over the last three yearsThe SACCO made the following strategic achievements over the last plan period:-1. Reduced turnaround time for loan processing from 72 hours to 48 hours;2. Higher dividends to members;3. Reduced costs and enhanced control systems;4. Portfolio diversification;5. Increase membership from the Diaspora;6. Junior account growth;7. Critical business systems uptime maintained at over 95%;8. Savings account balances doubled;9. Commencement of implementation of a Document Management System; and10. Growth in interest on deposits

1.2.5 Gap AnalysisThe SACCO had planned to undertake some activities in the last plan period. The key activities that have not been implemented include:1. Automation of procurement processes;1. Increase in member education;2. Compliance in financial reporting;3. Construction of a UN SACCO Plaza;4. Formulation of policies to guide operations;5. Establishment of a salaries account;6. ICT Data recovery site;7. Customer Relationship Management System not yet established;

1.2.6 ChallengesThe following challenges and constraints were encountered during the plan period:1. Strict compliance requirements by SASRA;2. Short term nature of UN SACCO members employment contracts made management of loans

difficult;3. Incidences unethical practices;4. Inadequate office facility;5. Drastic changes in Board and Management;6. Poor communication to members;7. Incomplete Know Your Customer (KYC) data making defaulter recovery difficult.

1.3 Rationale for the Strategic PlanThe development of Strategic Plans is expected to result into the realization of the following benefits to SACCOs:1. Increased organizational effectiveness and efficiency resulting from the development of a clear

strategic direction through the formulation of corporate goals and objectives. This practice will thus allow for prioritization of resource allocation by making strategic choices;

INTRODUCTION

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2. Provides a framework for evaluating alternative strategies. Since the planning process includes participative discussions touching on all functional areas of the organization, the deliberations provide the planning team and participants with a clear understanding of the business key success factors and operational issues.

3. An improved mechanism for stakeholder participation and motivation. This is achieved through effective internal and external communication that is used during the strategy analysis, formulation, implementation, and evaluation. This therefore stimulates positive response from the various stakeholders of UN SACCO Ltd as it results into a feeling that they are part of a team that is focused on a specific purpose and mission.

4. Provides the functional managers and operational staff members with an opportunity to broaden their viewpoint and grow with the organization. This practice further helps to ensure sustainability of activities and allow for diffusion of strategic management mind set and culture in the organization.

5. Provides a framework for effective monitoring and evaluation of corporate, functional, and individual performance.

The development of a three year strategic plan for UNSACCO has been necessitated by the following factors: -1. Expiry of the 2012-2014 Strategic Plan;2. Changes in the operating environment that have been brought about by regulation, changes in

the economy, increased demand for SACCO services and the increased cost of doing business.3. Increased competition from banks, microfinance institutions and other SACCOs.4. Rapid Changes in technology meaning that the SACCO has to realign itself to the emerging

technological challenges.

1.4 Methodology used in developing the strategic planDevelopment of this strategic plan was inclusive and participatory and it entailed the following key activities;-1. Meetings with management to agree on the scope and methodology to the used in the process

of developing the plan.2. Meetings with top management to agree on strategic direction for the SACCO.3. Review of Documents including the SACCOs annual reports, strategic plan, SASRA reports,

Vision 2030 and other relevant publications.4. Use of questionnaire for the Board, Supervisory Committee, management and staff to capture

successes, challenges and lessons learnt. Proposed strategic direction for the SACCO was also captured using the questionnaires.

5. Three day strategic planning retreat for board and management to build consensus on SWOT, PESTEL, Strategic themes, objectives, performancetargets and indicators for the planning period.

1.5 Structure of the planThe strategic plan is divided into five chapters. Chapter one looks at the background of UN SACCO and the context within which the plan is developed including rationale and methodology. Chapter

INTRODUCTION




two looks at the operating environment for UNSACCO Ltd. Including an analysis of the macro-economic environment, regulatory environment, competitor analysis and the internal operating environment. Chapter three presents the strategic model for UNSACCO Ltd. Including the vision, mission, core values and the issues and strategic objectives for the next three years.Chapter four looks at the implementation framework which identifies specific actions to be taken to achieve the strategies, institutional arrangements(current and required), capacity development issues and financing of the plan. Finally chapter five looks and the monitoring and evaluation of the plan to ensure the desired goals are achieved.

INTRODUCTION

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SITUATIONAL ANALYSIS

2.0 SITUATIONAL ANALYSIS

2.1 The SACCO and Development in KenyaCo-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

The co-operative principles are guidelines by which co-operatives put their values into practice.

These are: 1. Voluntary and open membership: Co-operatives are voluntary organizations, open to all

persons able to use their services and willing to accept the responsibilities of membership with no discrimination against others.

2. Democratic member control: Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.

3. Member economic participation: Members contribute equitably to and democratically control the capital of their co-operative and allocate surpluses for developing the co-operative, benefiting members in proportion to their participation and contribution.

4. Autonomy and independence: Co-operatives are autonomous, self-help organizations controlled by their membership. They enter into agreements or raise capital on terms that ensure democratic control of their members.

5. Provision of education, training and information: Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives, and inform the public on the nature and benefits of co-operatives.

6. Co-operation among co-operatives: Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local and international structures.

7. Concern for the community: While focusing on member needs, co-operatives work for the sustainable development of their communities through policies accepted by their members.

SACCOs have played an important role in the development of the Kenyan economy that has led to the uplifting of the standards of living of the people. Through their SACCOs, members are able to access quality education and Medicare, funds for enterprise development, home purchase or construction and many other financial benefits. Due to the rapid growth, and the Government of Kenya’s commitment to established SACCO legislation and to implement international financial performance standards it begun supervision of SACCOs with the sole aim of providing the incentive for improvement of SACCO management and performance.

The critical role of SACCOs has been recognized under Vision 2030 as that of mobilization of savings for investments. It is therefore expected under the new SACCO legislation and adoption of prudential regulations growth of SACCOs will quickly improve. The SACCO movement has entrenched the culture of savings to Kenyans which is a pre-requisite for wealth creation. SACCO savings have also helped employees into their retirement. Like other co-operative societies, SACCOs are governed by





the Rochdale principles, which include democratic control by the members. The membership elects a Board of Directors which is responsible for managing the affairs of the SACCO.

According to SASRA, as at 31st December 2013 the total number of Deposit Taking SACCOs was 215 of which 135 had been licensed. 80 SACCOs were at various stages of analysis and processing. It should be noted that these Deposit Taking SACCOs were in operation prior to establishment of SASRA in 2009 and have applied to be considered for licensing as Deposit Taking business. The licensed Deposit Taking SACCOs that are spread across the Counties are distributed as follows:-Government based SACCOs 27, Farmers based SACCOs 44, Teachers Based SACCOs 32, Private institutions based SACCOs18, and Community based SACCOs14.

According to SASRA, membership grouping of DTS is changing due to the competitive pressure and the need to open new growth opportunities beyond traditional membership sources. The SACCO industry has seen the opening up of the common bond where for example a teacher’s based SACCO is serving farmers, business persons and other members of the society. Rebranding and change of names is accompanying this and so far a total of 47 DTS have changed names. However, opening up of membership introduces new business risks including the guarantee mechanism whose strength is anchored on social collateral becoming less effective. (Source: SACCO Supervision Report, 2013)

2.2 Impact of the SACCO Societies Act on SACCO Societies OperationsThe SACCO Societies Act 2008 has caused a paradigm shift in the way SACCO Societies perform their operations.1. It has created a regulatory mechanism where SACCO Societies areregulated under the oversight

of the SACCO Societies Regulatory Authority.2. SACCOs are recognized as formal and regulated entities 3. They are licensed, regulated and supervised by SASRA4. The deposits of the SACCOs will be guaranteed under a Deposits Guarantee Fund5. Committed to good governance and best practices 6. Well capitalized to withstand financial crises and to grow their business 7. Share credit information 8. Regulate dispute resolutions between SACCOs and SASRA 9. Ensure SACCOs invest in productive and core areas. (Investment Policy) 10. SACCOs shall be more effective and efficient by:

• Upgrading the Management Committee to Board of Directors • Developing policies like the Credit Policy, Human Resource Policy, Risk Management Policy,

etc. • Adopting Prudential Standards • Adopting International Financial Reporting Standards (IFRS)• Investing and more use of ICT in their operations • Pay for the cost of regulation

The SACCO regulations emphasize that in accordance with Vision 2030, the policy objective of establishing prudential regulation of deposit taking SACCO societies is to enhance transparency and accountability in the SACCO subsector. This is consistent with theon-goingreforms in the financial

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sector whose ultimate aim is to expand financial access,encourage efficiency and enhance financial stability of financial service providers in Kenya.

The Regulations require that SACCOs meet the following thresholds:-

1. Capital Adequacy (Reg. 9-12)The SACCO shall have a minimum of:Core capital of 10% of total assets; Core capital of 8% of total deposits; Institutional capital of 8% of total assets and The SACCO may not distribute surplus if capital adequacy ratio is not met

2. Liquidity and Asset/Liability Management (Reg.13-20)The SACCO shall formulate a liquidity policy; have 15% of its deposits maintained in liquid assets; Liquid assets not used immediately may be invested in call deposits in Banks, NACOS or SACCOs under the Act ; Board to prepare contingency liquidity plan; Average monthly balances report to be prepared weekly and a liquidity statement return shall be submitted to SASRA monthly.

3. Shares, Savings and Deposits (Reg. 21-27)The SACCO shall formulate a shares, savings and deposit policy; minimum shares;- The SACCO shall specify amount of shares to become a member; Shares are transferable but not refundable; Shares may earn dividends if surplus is made by the SACCO; Deposits shall be used to secure loans. May be refunded on withdrawal within 60 days; Savings disclosure; - Terms and conditions of operating accounts shall be disclosed. Additionally, Dormant Accounts;- Savings accounts not operational for six months; Abandoned savings;- Unclaimed dormant accounts deposits over six months and up to five years in the SACCO and Transfer to Public Trustee;- After five years abandoned savings are transferred to Public Trustee.

4. Credit ManagementThe SACCO shall operate a credit policy and loan`s granting manual; The policy shall describe loan granting and recovery procedures, eligibility, collateral, turnover appraisal e.t.c.

5. Approvals: - SACCOs shall seek approval on accepting deposits; Opening of new branches; Operating an agency business; Relocating business; Closure of business and Introduction of new products

6. Prescribed policy documents for SACCOs shall include; Credit policy; Savings policy; Business plans; Investment policy; Members register;Disaster preparedness plan; Information preservation policy and Record for dormant members

7. Prohibited business shall include: Foreign trade; Trust operations; Investing in enterprise capital beyond prescribed limits; Underwriting or placement of securities and Land acquisition other than for purposes of expanding business.





Additionally, after three years of implementation challenges have been identified and lessons learnt have been documented. To ensure efficiency and effectiveness in the sector, the SACCO Societies Regulatory Authority (SASRA) has proposed a raft of changes in the policy and regulatory environment. This will in the long run affect how SACCOs shall conduct their businesses. They include:-

a. Capital Adequacy: introduction of total capital and supplementary capital as a capital adequacy measurement in consistent with the Act. This will encourage innovation in raising capital by the DTS and also encourage making general provisioning for performing loans.

b. Equity Investments: proposes to amend regulation 48(4) pursuant to section 38 of the SACCO Societies Act to prescribe the maximum proportion for equity investments by a SACCO.

c. Investment property: remove limitations on investment in properties by providing a definition that incorporates IAS 40 such that the non-earning component of investment in land and buildings will be limited to the portion occupied by the SACCO for own usage.

d. Credit information sharing: amendments of the law to allow sharing of information with other licensed financial institutions including the sharing of full file information through licensed CRBs.

e. Development of a central liquidity system and participation in the national payment system to help SACCOs address short term liquidity borrowing needs in acost effective and sustainable manner.

f. Criteria for suitability of officers of SACCOs: amendments that seek to provide for minimum criteria for assessing the fitness and propriety of senior officers of SACCOs, which include members of the Board of Directors and senior management.

2.3 Kenya’s Economy and Development OutlookAccording to the Economic Survey, 2014, the world economy grew by 3.0% in 2013 against a revised projection of 3.1%. The lower performance was observed across most regions and major economic groups. However, the economy was expected to turn around in 2014. Growth in Sub-Saharan Africa and the East African Community (EAC) however remained relatively robust with real GDP estimated to have expanded by 5.0% and 6.1% respectively in 2013. This was due to an increase in trade and investment with emerging market economies.

Domestically, the country’s Gross Domestic Product (GDP) expanded by 4.7% in 2013 compared to 4.6% in 2012. The performance was supported by a stable macroeconomic environment; low and stable inflation supported by improved supply of basic foods; lower international oil prices and reduced costs of electricity; infrastructural development and the construction sector.

Overall, Kenya’s economy was resilient in 2013 despite elections with Agriculture, Transport and communications and manufacturing recording growths of 2.9 %, 6.0% and 4.8% respectively. Growth was also recorded in Financial Intermediation (7.2%), Construction (5.5%), wholesale and retail trade (7.5%) and electricity and water (5.9%). In the Financial sector, the annual average inflation rate declined to 5.7 due to largely availability of basic foodstuffs and stable domestic prices of petroleum products. Central bank interest rates reduced from 11.0 to 8.50 in the first half of 2013. The overdraft and maximum lending interest rates dropped by 1.28 and 1.16 percentage points, to 26.51% and 16.99% largely due to lower inflationary pressure and the Central Bank Rate (CBR) reduction.


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However, despite the growth, the performance was lower than projected. This was mainly due to : depressed performance of the rains that affected the agriculture sector; decline in exports; comparably higher interest rates; reduced spending by government agencies (transition period); risk aversion in the build up to the elections and insecurity concerns.

For 2014 and beyond, the macroeconomic stability is expected to prevail; operationalization of development budgets in counties will spur economic growth while private consumption is also likely to improve given the stable interest rates and low inflation regime. Additionally, recent discoveries of oil and natural gas are likely to trigger more foreign direct investments inflows. The manufacturing sector’s performance is projected to maintain its current growth path given the positive growth within the region. Similarly, the financial intermediation sector is likely to maintain its momentum on account of enhanced performance and innovations in the sectors. Investments in the construction industry is likely to remain robust against a background of stable interest rates coupled with ongoing government infrastructural projects and the private sector’s resilient participation especially in the real estate development(Economic Survey, 2014).

Implications on SACCOsCooperative financial institutions tend to be more stable in times of crisis, as their investment patterns use the capital of members in ways that best serve their long term needs and interests. They have a lesser tendency to invest in high risk financial markets compared to commercial banks. It is therefore thought that their comparative stability, under both average and extraordinary conditions, can help to mitigate crisis impact for members and clientele, especially in the short-term. However, since most SACCOs draw their membership from the formal sector, in times of economic downturn, the functioning of the SACCO can be undermined if member’s incomes are destabilized by volatility in the economy. This may lead to reduction of members’ savings and an increased demand for loans. SACCOs have reported increase in demand for loans, but have exercised caution in responding to requests.

SACCOs are generally guided by a conservative lending philosophy that places member needs ahead of institutional profits. This restricts them from engaging in high risk lending practices, distinguishing them from other financial institutions and has shielded them from financial upheavals that continue to face the commercial banking sector.

2.4 Performance of SACCOs 2013According to the SACCO Supervision Report 2013, the number of licenseddeposit taking SACCOs (DTS) grew to135 with a membership of 2.6 million. Deposits grew to KES 172 billion while total assets grew to KES 241 billion. It is expected that the number of licensed deposit taking SACCOs will grow considering that there were 80 applications that had not yet been approved. This shows that despite increased competition from other players in the financial markets, the sector has remained resilient and has continued to register growth.

The report further states that DTS sustained efforts to attract deposits through sustained aggressive marketing, new products and innovations such as partnerships with banks to offer cheques and other value adding services to members. All licensed DTS are now connected to SACCO Link, automated





teller machines by Cooperative Bank while 11 DTS had integrated mobile financial services to their core SACCO Systems.

It is also important to note that external borrowing relative to the assets declined indicating shifting funding strategies by DTS in line with prudential norms. There was also increase in capital through issuance of shares and retention of surplus.

Overall, DTS constitute over 72% in key financial indicators of the entire industry in terms of membership, assets, loans, deposits and capital an indication of the soundness of the entire SACCO industry. The subsector remains relatively financially stable as supported by compliance with the minimum prudential requirements in capital, liquidity, improved asset quality and overall earnings. (Source: SASRA, 2014)

The table below shows the performance trends for the period 2012-2013.

Table 2: Performance Trend of Deposit Taking SACCOs (Kshs ‘000,000)

Performance Item 2013 2012 % Change

Total Assets 241,622 207,291 17%

Deposits 172,526 149,169 16%

Total Capital 31,156 23,886 30%

Loans 184,539 28,403 17%

Turnover 33,715 28,403 19%

Membership 2.6 2.3 13%

Source: SACCO Supervision Report 2013

2.5 Challenges in the Management of SACCOs

2.5.1 At Board Level The Board oversight and management operational responsibilities are inadequately defined in the by-laws. The major concerns include: • Some of the elected board members would frequently be non-professional volunteers yet they

assume highly technical responsibilities such as loan analysis and disbursement, budgeting and financial expenditure control.

• Lack of clear guidelines on where, for example the Credit Committees authority ends and where the Executive Committee begins, and where the staff members authority begins hence delayed decision making.

• Board members succumbing to political pressure from external forces to implement activities that counter the management ethics and standards.

• Unrealistic office tenure that ends up being costly in mainstreaming governance interventions in respect of training and instilling professionalism


20


• Board members and Supervisory Committee may collude to protect one another’s interests, e.g. insider loans and high managers’ salaries.

2.5.2 At Staff Level • Weak terms and conditions of service leading to job insecurity and poor performance • Unprofessional process of recruitment that encourages favourism, tribalism, and nepotism

sometimes attracts incompetent personnel • Absence of appropriate personnel, administration and accounting policiesand procedures,

human resource manual, job descriptions, specifications, and performance appraisal tools compound the problems of governance.

2.5.3 At Member Level • Inadequacy of resources and lack of Education and Training force members to exert pressure on

the Board members to implement issues in a manner that abuses thespiritof good governance• Salaries for the staff are not as competitive as those paid to other financial institutions because

members reject offering salaries that appear higher than what they earn from their employers. This makes attracting and retaining better-qualified managers difficult.

• During periods of phenomenal growth of the SACCO, members fail to look closely at the prudential actions of their Board members.

• The one member one vote principle at times undermines the genuine concerns of the minority. The academic and patronage criteria are at times overlooked in favour of other minor considerations.

2.5.4 ICT ChallengesIntense competition, reduced margins and increased customer expectations have largely compelled MFIs to adopt new technologies. Technology cannot be ignored any longer as it is sweeping through the financial services industry. Its adoption has largely improved the outreach by Micro- finance institutions, improved efficiency and brought about flexibility in operations. Most SACCOs have introduced mobile money transfer platform as one of their products and are thus thinking on how to use the facility to enhance their Microcredit operations. The benefits resulting from the adoption of technology include enabling SACCOs to: Offer more services; establish and strengthen the relationship with its customers; develop new products in response to the changing market needs that are a key factor in retaining customer loyalty; diversify delivery channels; enable better management of risks; provide online real-time customer information which is available throughout and any change is reflected throughout the SACCO immediately; provide customer delight - customers are provided with a quick, unified view of their account information and achieve higher employee productivity.

2.5.5 Capital Adequacy• Most SACCOs cannot meet the minimum capital requirements and ratios• Lack of separation between capital and members deposits• Difficulties in comprehending constitution of the core capital and subsequent calculation of

the capital ratios





2.5.6 Liquidity Ratios• Overdependence on short term external borrowings• Lack of good systems to enable submission of liquidity returns• Unwillingness to disengage from prohibited business

2.5.7 Credit Management• Lack of comprehensive loaning policy that conforms to requirements• Inability to generate member statements as required• SACCOs have surpassed the regulatory requirement of minimum external borrowing of 25% of

the total assets• High level of non-performing loans

2.5.8 Investments• Too much focus on investment in properties and buildings• Investments have gone beyond regulatory requirements• Unwillingness to divest and focus on core business of serving members• Acquisition of large parcels of land that are not being utilized• Engagement in foreign trade

2.6 Performance of UN SACCO LimitedThe performance of UN SACCO Limited for the last three years is summarised in the table below:-

Table 3: performance of UN SACCO Ltd 2011-2014

Performance Area 2011 2012 %

Change 2013 % Change 2014 %

Change

Active membership 3,944 4,088 4% 4,387 7% 4,731 8%

Total Assets 5,610,570,727 6,547,006,193 17% 7,553,609,809 15% 8,820,121,311 17%

Deposits 4,724,584,873 5,374,384,513 14% 6,231,636,509 15% 7,158,079,069 15%

Loans 4,832,582,691 5,840,225,640 21% 6,453,383,482 10% 7,019,226,729 9%

Investments 11,036,250 14,626,214 33% 6,318,326 -57% 9,562,738 51%

Core Capital 255,602,169 392,364,230 54% 465,587,345 19% 1,000,814,506 115%

Share Capital 139,773,843 216,095,197 55% 260,024,554 20% 461,253,733 77%

Institutional Capital 115,828,326 176,269,033 52% 205,562,791 17% 539,560,773 162%

Total Revenues 775,932,543 960,941,197 24%

1,057,257,016

10% 1,231,177,970 16%

Employees 10 19 90% 17 -11% 19 12%


22


From the table it is evident that between 2011 and 2013 the Society has been able to record significant growth in membership, loans, deposits which has in turn resulted into a large surplus that gives an opportunity for investment.

2.7 Compliance levels for UN SACCO LimitedAs indicated earlier, the SACCO Regulations have identified key areas that SACCOs are required to comply with to make them viable businesses and provide required benefits to members.

Loans and advances to total assets ratio stood at 80% for the year 2013 compared to 90% for the year 2012. The loans and advances constitute the largest portion of the SACCO assets. However, the growth patterns exhibited by the loans and advances indicate a decline from 20.53 in 2012 to 10.54 in 2013. Further, interest income from loans declined from a growth rate of 20.13 in 2012 to 15.48 in 2013. This is a direct effect of having a huge portion of net savers. However, SASRA observes that these category demands for huge returns on savings while the SACCO is not generating sufficient interest on loans to meet this demand because of low uptake of loans. There is therefore need to review strategies and policies that will ensure an appropriate balance while fully complying with regulatory requirements. Secondly, the regulator notes that the SACCO pays high interest rebates and this is heavily burdening the SACCO leading to a decline in the growth of the Core Capital. This, the regulator notes is because the capacity to generate sufficient capital is linked to the ability to retain adequate earnings as an efficient, competitive and sustainable business strategy.

On capital adequacy, the table below shows the performance and compliance of UN SACCO:

Table 4: Compliance levels for UN SACCO ltd

Performance in KES

Particulars Stds 2010 2011 2012 2013 2014 Remarks

Core Capital 10m 203.7 m 255.6m 392.4m 465.6m 1.00 B Compliant

Core Capital to Assets Min. 10% 4% 5% 6% 12% 14% Compliant

Core Capital to Deposits Min 8% 5% 5% 7% 8% 14% Compliant

Institutional Capital to Assets Min 8% 2% 2% 3% 3% 6% Non- Compliant

From the performance listed above, the SACCO is yet to comply on capital adequacy, one of the key prudential requirements. Regulation 84(1)(c) on transitional provisions provides that a SACCO shall build up its core capital of not less than 4% of the total assets which shall graduate to 10% by the fourth year. The performance of the SACCO indicates that the SACCO is still at 7.4% which is way below the required standard. One of the key contributors to the above is the lack of the required policies that would ensure all the financial ratios are met as required by law.





2.8 Customer AnalysisThe UN SACCO draws its membership mainly from the staff and spouses of members of staff of the different UN Agencies located in Kenya and beyond. The membership draws from both international and local staff. Generally speaking therefore, the SACCO serves members with relatively good incomes. Operations of the SACCO are however currently restricted to the office located within the UN complex in Nairobi, Kenya. The SACCO membership is also open to staff of diplomatic missions and staff from international organizations affiliated to the UN and operating in Kenya. However, there is need to reach out into this huge market that remains largely unexploited.

2.9 SWOT Analysis of UN SACCO LtdThe Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis of UN SACCOLtdare analysed below:

Table 5: UN SACCO Ltd SWOT Analysis

STRENGTHS WEAKNESSES

• Clear demarcation between the board and management roles

• Poor communication between Board and staff

• Lateral coordination between staff and CEO • No succession plan in place for Board and Management

• Efficient ERP system • No clear career progression for staff members

• Document Management System in progress • Inadequate ICT staff capacity

• Open office set-up which allows for consultations

• Lack of an Enterprise-wide Risk Management Framework

• Staff Roles well defined • Execution and monitoring of Board resolutions is ineffective

• Skilled manpowerr • Inadequate Staff Motivation

• Secure location • skills mix at board level missing

• Well defined market • Inadequate of adequate sector exposure for board and management staff

• High liquidity • Non compliance in key indicators

• Shared Values • Inadequate communication to members

The Opportunities and threats were drawn from the PESTEL analysis where potential opportunities and threats to UN SACCO were identified.


24


Table 6: Opportunities and Threats for UN SACCO

ISSUE OPPORTUNITIES THREATS

ECONOMIC

High Inflation • Increases investment in government papers hence high income returns.

• Reduces savings• Reduces demand in loans.

Low Inflation • Stability in the market especially in expenditure when doing large and long investment.

• More savings due to more disposable income.

• Reduced income from alternative investments e.g. government papers.

Fluctuating Currency • Lending in dollar denominated currenc

• Lose of members who may opt to deal with other credit unions for example UNFC

Global economic changes

• Positive growth increases funding to UN agencies hence more members for recruitment.

• Negative growth affects funding to UN agencies hence less employment and members for recruitment

POLITICALPolitical instability • More borrowing by locals for

resettlement• Relocation of UN offices to

other countries

• Increased borrowing on assets due to enhanced property value in the county towns and ease of charging process.

• Increased investment opportunities in the counties open avenues for partnerships.

• Up take of loans for investments in devolved towns.

• Laws in different counties can affect operations

SOCIAL

Member preferences • New market opportunities for membership and products uptake.

• Failure to keep pace with changing member needs can lead to member attrition

Insecurity • Partnerships with reputable security firms to offer services to members

• Reduces demand for investment hence borrowing

Religious groups • Opportunity to develop religious based products e.g. Islamic products

• Complex product management requirements which may not be compatible with regulatory requiremen





ISSUE OPPORTUNITIES THREATSTECHNOLOGICALTechnology • New products and services e.g.

alternative banking solutions hence alternative income streams, Social Media Marketing

• Improved member communication

• Enhanced service delivery• Automation hence reduced

operation

• Cyber crime• Keeping up with rapid

changes in technology• High initial acquisition cost

ENVIRONMENTAL Environment • Secure environment within the

complex• Opportunity to improve

environment by going paperless.• Relying on platform that’s

regulated by Host• Availability of a large pool

members to use for penetration• Customer base is beyond the

catchment in Kenya-allowed to get members from all over the world/ Diversity to recruit members in other towns and countries

• Goodwill created by the brand name enables easier member recruitment

• Limited accessibility to the SACCO by the members outside the complex.

• Not able to expand due to limitation in office space

• Overreliance on host platform could pose a threat to innovation and data security

LEGAL AND REGULATORYSASRA and Government Ministries.

• SASRA regulations are improving governance and controls.

• Increased confidence and stability to the sector

• Some SASRA laws threaten the business. When we struggle to comply we may have capital flight through withdrawals.

• Compliance costs in terms of taxes.

• Limitations in product development.

• Over regulation from SASRA/ Ministry limiting the speed of decision making and implementation.

2.10 Stakeholder AnalysisUN SACCO limited works with various stakeholders to achieve its business objectives. Table7 below identifies some of the key stakeholders highlighting what they provide and what the SACCO can provide for them.


26

Tabl

e 7:

UN

SA

CCO

Sta

keho

lder

Ana

lysi

s

Nam

e of

st

akeh

olde

rRo

le o

f sta

keho

lder

/m

anda

te o

r fun

ctio

nEx

pect

atio

n of

sta

keho

lder

sO

blig

atio

n o

f the

SA

CCO

to

the

sta

keho

lder

Ex

pect

atio

n of

the

SACC

O fr

om th

e st

akeh

olde

rsM

embe

rsSa

ving

s and

bor

row

ing

as

the

key

man

date

of t

he

SACC

O

• Sa

fegu

ardi

ng o

f SAC

CO b

usin

ess

• Effi

cien

t and

effe

ctiv

e cu

stom

er

serv

ice

• Eff

ectiv

e Co

mm

unic

atio

n•

Cont

inuo

us in

nova

tion

for t

he

busin

ess t

o re

tain

a c

ompe

titiv

e ad

vant

age

• Be

tter

inve

stm

ent o

f mem

bers

de

posit

s to

ens

ure

max

imum

re

turn

on

inve

stm

ent

• Co

mpl

ianc

e w

ith re

gula

tory

re

quire

men

ts to

safe

guar

d bu

sines

s

• G

ood

lend

ing

polic

ies a

s pe

r the

law

• W

orld

cla

ss c

usto

mer

se

rvic

e•

Clea

r and

tim

ely

com

mun

icat

ion

• Co

ntin

uous

inno

vatio

n fo

r th

e bu

sines

s to

reta

in a

co

mpe

titiv

e ad

vant

age

• Be

tter

inve

stm

ent o

f m

embe

rs d

epos

its t

o en

sure

max

imum

retu

rn o

n in

vest

men

t•

Com

plia

nce

with

re

gula

tory

requ

irem

ents

to

safe

guar

d bu

sines

s

• At

tend

ing

mee

tings

and

taki

ng p

art

in d

ecisi

on m

akin

g•

Repa

ying

loan

s adv

ance

d to

them

or

guar

ante

ed b

y th

em p

rom

ptly

• Co

mpl

ying

with

by-

law

s, ru

les,

acts

an

d ge

nera

l mee

ting

reso

lutio

ns•

Show

ing

good

coo

pera

tive

spiri

t•

Brin

g ou

t pro

blem

s affe

ctin

g th

e So

ciet

y an

d pa

rtic

ipat

e in

look

ing

for

solu

tions

Boar

d of

D

irect

ors

Stra

tegi

c pl

anni

ng a

nd

Polic

y fo

rmul

atio

n fo

r the

SA

CCO

• St

rate

gy im

plem

enta

tion

by m

anag

emen

t to

ensu

re

mem

bers

enj

oy re

turn

for t

heir

inve

stm

ents

• Im

plem

enta

tion

of p

olic

ies

• En

surin

g su

cces

sful

im

plem

enta

tion

of

the

stra

tegi

c pl

an a

nd p

olic

ies

to e

nsur

e m

embe

rs g

et

valu

e fo

r the

ir in

vest

men

ts•

Safe

guar

ding

of t

he

mem

bers

inte

rest

s•

Effici

ent c

usto

mer

serv

ice

• Pr

ovid

ing

lead

ersh

ip to

the

Soci

ety

• En

surin

g bo

ard

disc

ussio

ns a

nd

reso

lutio

ns a

re in

line

with

cor

pora

te

stra

tegy

• O

bser

ving

in a

ll th

eir t

rans

actio

ns th

e Ac

ts, R

ules

and

By-

law

s and

pru

dent

bu

sines

s pra

ctic

es

Regu

lato

ry

Auth

oriti

es

e.g.

SAS

RA

• En

sure

com

plia

nce

of

the

busin

ess w

ith th

e re

gula

tions

in p

lace

• Co

ntin

uous

mon

itorin

g an

d re

view

of t

he

regu

latio

ns

• Co

mpl

ianc

e w

ith th

e re

gula

tory

re

quire

men

ts•

Feed

back

from

the

SACC

Os o

n th

e im

pact

of t

he re

gula

tions

to

thei

r bus

ines

ses

• En

surin

g co

mpl

ianc

e w

ith th

e re

gula

tory

re

quire

men

ts to

safe

guar

d th

e bu

sines

s

• G

uidi

ng th

e So

ciet

y in

the

impl

emen

tatio

n of

regu

latio

ns

• Be

ing

resp

onsiv

e to

feed

back

giv

en

by th

e So

ciet

y to

enh

ance

bus

ines

s gr

owth

• Ti

mel

y ap

prov

als f

or a

ny m

atte

rs

requ

iring

regu

lato

ry a

ppro

val f

or

exec

utio

n




Nam

e of

st

akeh

olde

rRo

le o

f sta

keho

lder

/m

anda

te o

r fun

ctio

nEx

pect

atio

n of

sta

keho

lder

sO

blig

atio

n o

f the

SA

CCO

to

the

sta

keho

lder

Ex

pect

atio

n of

the

SACC

O fr

om th

e st

akeh

olde

rs

Vend

ors

• Su

pply

of g

oods

and

se

rvic

es to

ena

ble

runn

ing

of b

usin

ess

• Su

ppor

t and

m

aint

enan

ce

• SA

CCO

to h

ave

clea

r sp

ecifi

catio

ns o

f the

goo

ds a

nd

serv

ices

they

nee

d fro

m v

endo

rs•

Tim

ely

paym

ent f

or g

oods

and

se

rvic

es d

eliv

ered

to S

ACCO

sa

tisfa

ctio

n•

Goo

d cu

stom

er re

latio

nshi

p-ho

nest

y

• D

eliv

ery

of g

oods

an

d se

rvic

es a

s per

sp

ecifi

catio

ns a

nd/o

r SLA

s•

Tim

ely

vend

or su

ppor

t w

here

app

licab

le•

Com

pete

ncy

on th

e si

de

of th

e ve

ndor

• H

ones

ty o

n th

e sid

e of

the

vend

or

• Su

pply

of q

ualit

y go

ods a

nd se

rvic

es

• Ad

here

nce

to su

pply

leve

l ag

reem

ents

Busin

ess

Part

ners

Valu

e ad

ditio

n se

rvic

es e

.g.

Mot

or V

ehic

le in

sura

nce,

M

-Pes

a Se

rvic

es, M

ortg

age

prov

ision

, ATM

serv

ices

, Le

gal s

ervi

ces,

Valu

atio

n se

rvic

es

• Pr

ovisi

on o

f nec

essa

ry

infra

stru

ctur

e an

d re

sour

ces f

or

serv

ice

prov

ision

• Co

mpl

ianc

e an

d ex

ecut

ion

of a

gree

men

ts•

Tim

ely

paym

ent f

or th

e se

rvic

es re

nder

ed

• Ti

mel

y ex

ecut

ion

of a

gree

men

ts

Insu

ranc

e•

Com

pens

atio

n fo

r los

s in

curre

d by

the

SACC

O

as p

er th

e co

ntra

ct

signe

d be

twee

n th

e tw

o pa

rtie

s

• Cl

ear u

nder

stan

ding

of t

he

cont

ract

/pol

icy

signe

d w

ith th

e in

sura

nce

• Co

mpl

ianc

e w

ith th

e co

ntra

ct/

polic

y re

quire

men

ts•

Hon

esty

from

the

SACC

O

• Sp

eedy

sett

lem

ent o

f an

y lo

ss a

s per

the

polic

y•

Hon

esty

on

the

part

of t

he

insu

ranc

e•

Advi

sory

serv

ices

to

safe

guar

d bu

sines

s

• Ad

herin

g to

the

term

s and

con

ditio

ns

of th

e in

sura

nce

polic

ies

UN

SAC

CO

Staff

• Ex

ecut

ion

of th

e SA

CCO

ope

ratio

ns a

nd

activ

ities

• G

ood

wor

king

env

ironm

ent

• Pr

oper

rem

uner

atio

n an

d te

rms a

nd c

ondi

tions

of

serv

ice

• D

ilige

nce,

Inte

grity

and

har

d w

ork

Supe

rviso

ry

Com

mitt

ee•

Ove

rsig

ht o

n th

e Bo

ard

of D

irect

or•

Prud

ent m

anag

emen

t of S

ACCO

Aff

airs

• Pr

ovid

e ad

equa

te

info

rmat

ion

• G

uida

nce

and

advi

se

Nat

iona

lG

over

nmen

t•

Prov

idin

g a

cond

uciv

e en

viro

nmen

t for

bu

sines

ses t

o th

rive

• Ad

here

nce

to th

e po

licie

s, la

ws

and

regu

latio

ns•

Com

plia

nce

with

law

s and

re

gula

tions

• Pr

ovid

e co

nduc

ive

polic

y en

viro

nmen

t

Coun

ty

Gov

ernm

ent

• Re

gula

tor o

f Co

oper

ativ

es a

t the

co

unty

leve

l

• Ad

here

nce

to th

e po

licie

s, la

ws

and

regu

latio

ns•

Com

plia

nce

with

law

s an

d re

gula

tions

• Pr

ovid

e co

nduc

ive

polic

y en

viro

nmen

t

28


2.11 Competitor AnalysisIn its quest to provide services to its members and remain profitable as a business venture,UNSACCO is faced with a lot of competition from other financial institutions. The table below presents the institutions that UN SACCO Competes with highlighting generic strengths and weaknesses of each of the institutions.

Table 8: Competitive Analysis of players in the financial sector

Category of Competition

Strengths Weaknesses

Banks • Presence of a clearing house• High liquidity• Higher individual loan amounts• No shares/savings for the loans• Prompt issue of loans? • High marketing strategy• Technology• High staff motivation • Diversified product portfolio• Good governance structures thus

more goodwill from customers• Wide branch network hence easy

accessibility of services

• High and volatile interest rates

• Hidden charges • High security requirements,

SACCOs • Stable and predictable interest rates• Location and accessibility of the

banking premises • Better and spacious banking halls• Advanced and stable investment co-

operatives• Delegates governance system for

faster decision making• More ATM channels e.g.PesaPoint

• Low liquidity – have limits in lending

• Loan queuing• Low investment in

technology

Micro finance Institutions

• Diversified products• Prompt issuance of loans• Marketing and follow-up• Tight loan repayment schedule

closely monitored• Liquidity is high

• High interest rate• Loan decision making is

centralized in Nairobi for most

• Issuance of cheques• High default rate

2.12 Risk AnalysisUN SACCO is exposed to risks in terms of threats to service provision and potential of lost opportunities. The risks which are likely to affect business have been identified, as summarized in Table 9 below, and their attendant mitigation measures considered in the formulation of this Strategic Plan. Risks have been categorized depending on their potential impact as high, medium and low. The summary identifies risks that were classified as high and medium and the mitigation measures therein.





Table 9: Risk Analysis

Type of risk Description of risk from SACCO’s perspective

Rate the level of risk (High,

medium, low)

Mitigation of risk

Credit risk Default in loan repayments High Adequate credit policies and procedures

Operational risk Lack of appropriate policies and procedures

High Ensuring adequate policies and control procedure in all business processes

Technological risk

Failure to keep up with rapid changes in technology leading to unstable core banking system

High Investing in modern technological innovations e.g. mobile banking

Market Risk Risks due to fluctuations in the money and investment market

High Make sound investment decisions that are backed by adequate data

Legal and Regulatory Risk

Risks of Non-Compliance could lead to penalties

High Ensuring compliance with all the laws and regulations

Liquidity Risk Risks due to the depreciation of the KES, inflation and interest rates

High Ensuring most of the cash is used in lending and investments

Reputation Risk Loss of reputation in the SACCO sector

High Ensure that there is a proper crisis communication system in place

Financial Risk Debt; penalties High Ensure all financial obligations are fulfilled in good time


30


3.0 STRATEGIC FRAMEWORK

3.1 IntroductionThis chapter presents the strategic direction that UN SACCO limited seeks to pursue in the next four years and beyond. The strategic direction is based on the analysis of the current performance, the operating environment including the economic outlook, stakeholder analysis, customer profiles, competitor’s analysis and a SWOT analysis. In this chapter, the main issues are identified and corresponding strategic goals and objectives are developed based on the Vision and Mission developed.

3.2 Vision“The financial solutions provider of choice”

3.3 MissionTo uplift the socio-economic status of our members by offering them high quality, affordable and diversified financial services.

3.4 Core ValuesIn all our services to members and customers we shall be bound by the following values: -1. Integrity by: upholding the highest level of integrity in our dealings including acting in a

transparent and professional manner;2. Accountability by: accountable to our members and the general public;3. Customer Focus by: ensuring that the customer is at the centre of all our work; and4. Team Work working as a team to deliver results and value to our members

3.5 Summary of Strategic Themes1. Membership diversification2. Corporate Governance3. Business Growth4. ComplianceThese are discussed below:-

1. Membership diversificationDespite being in existence for over three decades, the SACCO has not attracted majority of the employees within the UN agencies. The current membership only represents a paltry 43% of the total potential within the UN agencies. Additionally, the SACCO is yet to recruit other category of members including spouses and children of UN staff, staff of the diplomatic missions and staff of international organizations affiliated to the UN and operating in Kenya. The slow growth in membership affects the ability of the SACCO to build more capital as well as reduces the loan uptake since the current membership is saturated with different products. A growth in membership will definitely see an increase in revenues as a result of uptake of the different products.

STRATEGIC FRAMEWORK




2. Corporate GovernanceThe success of any institution largely depends on the governance structure it adopts and the subsequent decisions therein. The good governance enables the SACCO to prevent risks such as governance challenges that may restrict membership participation; increase the risks of fraud; poor investment decisions; wrong business decisions; poor quality of staff; reduce productivity and increase instances of maladministration. In the long run the SACCO may lose money through fraud; fail to comply with statutory and legal requirements and may record reduced growth. There is therefore need to improve governance through amendments to the by-laws to provide for a leaner and efficient governance structure; set criteria for board members appointments; adopt and ADM system as opposed to an AGM system; develop a new organizational structure for the secretariat; acquire new office premises; develop appropriate policies and procedures and provide for delegation of responsibilities and authority.

3. Business Growth Business growth for the SACCO prevents it from recording reduced business growth rate in all its financial indicators including loan book, deposits, revenues, costs and core capital. There is an urgent need to ensure growth in these key indicators. This can only be achieved through increasing customer service, diversifying the range of products available, improving internal systems and processes and developing staff capacity.

4. ComplianceCompliance has been a big challenge for UN SACCO since the coming into effect of the SACCO Regulations. While the SACCO has managed to achieve compliance in some indicators such as core capital requirements and core capital to deposit ratios. According to SASRA, the non-compliance with capital norms is mainly due to a non-sustainable business strategy of paying interest rebates way above the industry average. There is therefore need for the SACCO to review its business strategy to ensure an approach that addresses the needs on the savers by paying realistic but sustainable returns, while retaining a reasonable amount of earnings for the SACCO’s long term competitiveness and prudential compliance. Other areas that require compliance include the development of the requisite policies as well as governance.

3.6 Summary of Strategic ObjectivesFrom each strategic theme, strategic objectives were identified that would drive the SACCO into productivity and increased growth. These are summarized below:-

Table 10: Summary of Themes and Objectives

STRATEGIC THEME OBJECTIVES

Membership 1. Increase membership to 8,000 members2. Enhance retention of members

Business Growth and operational excellence

1. Loan book growth2. Grow deposit base

STRATEGIC FRAMEWORK

32


3. Revenue growth4. Cost optimization5. Growth of core capital6. Improve customer satisfaction 7. Customer retention8. Product improvement9. Business process automation10 Review Policy & procedure manuals11. Create office space12. BCP (Business continuity)13. Capacity building of staff, board and members

Corporate Governance and Compliance

1. Ensure compliance with SASRA Requirements2. Enhance information access for customers3. Improve Corporate governance of the SACCO4. Improve operational efficiency5. Improve organizational capacity levels

4.0 IMPLEMENTATION OF THE PLAN

4.1 IntroductionImplementation of the plan is also dependent on key Strategic Plan implementation enablers which include:-a. Have enhanced ICT based Systems in place. This includes developing an interactive website

and email accounts for all staff and Board. Installing tailor made software for operations and management.

b. Management and Financial Information System: An MIS that has a communication module and supports publications for the SACCO. Financial Information Systems that incorporate accurate financial reports arising from implementation and monitoring of SACCO activities. Monitoring and Evaluation Systems for specific projects and for operations which should be developed and reviewed regularly.

c. Human Resource: The SACCO should aim to have a human resource base that is informed, motivated and results driven. For this to take root, an aggressive capacity building strategy and training programmes should be adopted and coordinated in areas such as:i. ICT skillsii. Performance management skillsiii. Project planning, implementation and M&E skillsiv. Training for personal development

d. Funds: The SACCO’s aim should be to attain funding sustainability through resource diversification and mobilization approaches.

e. Accountability: The key to successful implementation of the plan is anchored on three factors;i. Efficient Mobilization of Resources

STRATEGIC FRAMEWORK




ii. Timely Execution of Programmesiii. Effective Monitoring and Evaluation of the entire process

4.2 Implementation ApproachThe SACCO has undertaken to use the Balanced Score Card approach in the implementation of the strategic plan. BSC is an Integrated Strategic Planning and Performance Management System for establishing and communicating an organization’s vision, mission and strategy to stakeholders and employees and for aligning day-to-day work to the strategy. It serves as both a management and a communication tool. It also uses performance measures to monitor progress, provide guidance in budgeting, and better inform strategic decision making. A balanced scorecard should reinforce the objectives of the organization by measuring the things that are important to achieving strategy – not just the ones that are easy to measure. BSC enable companies to link corporate strategy with key performance indicators (KPIs) at the divisional, departmental, and employee level, and communicate them across the enterprise”.

In the BSC, the organization strategies and goals are viewed from four perspectives which are the Customer perspective; the Financial Perspective; the Systems and Processes perspective and the Learning and Growth perspective. The diagram below summarizes the perspectives under the BSC:-

From the strategic themes identified, objectives were then categorized into the various perspectives. The specific measures and targets were then identified as well as the corresponding initiatives that would be undertaken in achieving the objectives. Areas of responsibility for each initiative were identified and specific costs to each initiative were also attached. This is summarized in the implementation matrix in 4.3 below.

STRATEGIC FRAMEWORK

34

4.3

Im

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ARCH

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e 12

: Bus

ines

s G

row

th M

atri

x

GO

AL:

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ines

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and

inte

rnal

pro

cess

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duct

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t e.

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OSA

HO

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HO

FOSA

2015

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ew e

xist

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ings

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licy

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2015

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ady

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gs a

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Tabl

e 12

: Bus

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s G

row

th M

atri

x

GO

AL:

Impr

ove

Corp

orat

e G

over

nanc

eBU

DG

ET

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pect

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ecti

veM

easu

reTa

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re C

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%In

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tain

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M in

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00M

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Inst

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GO

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ead

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Incr

ease

in

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inde

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Form

ulat

e re

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te st

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nd

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20

14

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250,

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dequ

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Impl

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t bus

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Lear

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D

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Amen

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oint

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oard

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Form

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e an

d im

plem

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adeq

uate

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D m

anua

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Ann

ual w

ork-

plan

, BO

D R

ules

of p

roce

dure

, BO

D C

hart

er (M

anua

l), T

ORs

fo

r BO

D c

omm

ittee

s, BO

D

mee

tings

cal

enda

r of e

vent

s, BO

D &

AG

M re

solu

tions

tr

acke

r

BOD

Form

ulat

e an

org

aniz

atio

n st

ruct

ure

with

requ

isite

no.

of

dep

artm

ents

, pos

ition

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job

desc

riptio

ns, s

ucce

ssio

n pl

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ng.

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Und

erta

ke m

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r edu

catio

n on

the

impo

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ng th

e go

vern

ance

sy

stem

to a

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egat

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re c

ompl

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hica

l sta

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t in;

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nce

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s by

the

Ethi

cs C

omm

issio

n,

Confi

dent

ialit

y re

quire

men

ts

BOD


48


5.0 FINANCIAL REQUIREMENTSTo implement the strategic plan, the SACCO requires approximately 1.123billion over the next three years. This however excludes any recurrent expenditure since a strategic plan is a development document and focuses mainly on development expenditure. The costs are summarized in the table below:-

Table 14: Financial Requirements Summary

STRATEGIC THEME OBJECTIVES BUDGET

Membership Increase membership to 10,000 43,900,000.00

Enhance retention of members 14,600,000.00

Business Growth and operational excellence

Loan book growth 3,300,000.00

Grow deposit base 1,500,000.00

Revenue growth -

Cost optimization -

Growth of core capital -

Improve customer satisfaction 500,000.00

Customer retention -

New product development -

Business process automation 18,000,000.00

Review Policy & procedure manuals 2,500,000.00

Create office space 1,000,000,000.00

BCP (Business continuity) 1,500,000.00

Capacity building of staff, board and members 22,767,855.00

Corporate Governance and Compliance

Ensure compliance with SASRA Ratios -

Enhance information access for customers 2,000,000.00

Improve Corporate image of the SACCO 1,000,000.00

Improve operational efficiency 7,000,000.00

Improve organizational capacity levels 2,350,000.00

TOTAL BUDGET 1,120,917,855.00




6.0 MONITORING AND EVALUATIONMonitoring, evaluation and reporting will form a critical feature of the implementation of this strategic plan. The plan will be implemented by the respective departments. The effective monitoring of the implementation of programmes, projects and activities within the strategic plan period shall make use of participatory monitoring, evaluation, and learning approaches. These approaches include: provision of a feedback system on progress, awareness of impacts, transparency and accountability. An M&E framework (in Annex 2) will have the main purpose of focusing on those responsible for implementing various projects and programmes on the anticipated outcomes and or results.

The Strategic Plan activities will be monitored and evaluated during the plan period through the annual work plans to gauge the extent of achievement of the intended results. The evaluation will be useful and will be used to inform a mid-term review of the plan. An implementation framework will be developed to assist in the tracking progress of the implementation.

50

STRA

TEG

IC P

LAN

FY13

AFY

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3,55

444

2,48

3,08

251

9,16

3,81

658

9,02

2,18

5

2LI

ABI

LITI

ES

Curr

ent L

iabi

litie

s &

Pro

visi

ons

FY13

AFY

14A

FY15

PFY

16P

FY17

P

In

tere

st o

n m

embe

rs' d

epos

its80

5,61

0,17

562

6,59

3,52

270

6,94

9,38

288

0,92

4,70

01,

134,

002,

202

Tr

ade

and

othe

r pay

able

s23

,359

,747

31,2

20,3

9433

,060

,676

35,0

09,4

3237

,073

,058

M

embe

rs' s

avin

gs a

ccou

nts

341,

101,

769

485,

609,

655

582,

731,

587

728,

414,

483

910,

518,

104

Ta

x pa

yabl

e0

3,41

3,82

032

,489

,977

42,2

36,9

7057

,442

,279

To

tal C

urre

nt L

iabi

litie

s &

Pro

visi

ons

1,17

0,07

1,69

11,

146,

837,

391

1,35

5,23

1,62

11,

686,

585,

585

2,13

9,03

5,64

3

Non

Cur

rent

Lia

bilit

ies

Sh

are

capi

tal

260,

024,

554

461,

253,

733

553,

852,

301

664,

622,

761

797,

547,

313

AN

NEX

ESA

nnex

1: F

inan

cial

Tre

nds

and

Proj

ectio

ns fo

r 201

5-20

17



M

embe

rs d

epos

its5,

890,

534,

740

6,67

2,46

9,41

37,

539,

890,

437

8,52

0,07

6,19

49,

627,

686,

099

To

tal N

on C

urre

nt L

iabi

litie

s6,

150,

559,

294

7,13

3,72

3,14

68,

093,

742,

737

9,18

4,69

8,95

410

,425

,233

,412

Shar

ehol

ders

’ Equ

ity

Re

tain

ed e

arni

ngs

119,

554,

578

376,

351,

850

638,

087,

569

942,

648,

162

1,28

0,94

1,35

7

St

atut

ory

rese

rves

86,0

08,2

1316

3,20

8,92

425

1,70

5,54

035

5,53

8,30

447

3,34

2,74

1

O

ther

rese

rves

00

To

tal S

hare

hold

ers'

Equ

ity

205,

562,

791

539,

560,

774

889,

793,

109

1,29

8,18

6,46

51,

754,

284,

098

Tota

l Lia

bilit

ies

& S

hare

hold

ers'

Equ

ity

7,52

6,19

3,77

68,

820,

121,

311

10,3

38,7

67,4

6812

,169

,471

,005

14,3

18,5

53,1

52

ASS

ETS

Curr

ent A

sset

sFY

13A

FY14

AFY

15P

FY16

PFY

17P

O

pera

ting

leas

e0

00

00

Lo

ans t

o m

embe

rs1,

613,

345,

870

1,75

4,80

6,68

22,

018,

027,

684

2,34

0,91

2,11

42,

750,

571,

734

Re

ceiv

able

s and

pre

paym

ents

16,3

69,9

1739

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,803

39,2

60,1

2039

,429

,162

39,5

98,9

32

Ca

sh a

nd c

ash

equi

vale

nts

1,04

0,84

4,11

71,

734,

542,

871

2,17

4,93

8,12

82,

724,

374,

955

3,24

2,95

5,50

2

Am

ount

due

from

rela

ted

part

ies

00

Ta

xatio

n4,

013,

720

0

To

tal C

urre

nt A

sset

s2,

674,

573,

624

3,52

8,44

1,35

64,

232,

225,

933

5,10

4,71

6,23

16,

033,

126,

168

Non

Cur

rent

Ass

ets

O

pera

ting

leas

e 0

00

00

Lo

ans t

o m

embe

rs4,

840,

037,

611

5,26

4,42

0,04

66,

054,

083,

053

7,02

2,73

6,34

28,

251,

715,

202

Bo

nd p

rem

ium

00

00

0

Equi

pmen

t4,

495,

361

11,8

60,8

1523

,383

,769

19,8

40,4

7315

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,327

52

Inta

ngib

le a

sset

s76

8,85

35,

836,

355

18,5

55,7

0210

,607

,046

5,33

5,45

1

4,

845,

301,

825

5,28

2,11

7,21

66,

096,

022,

524

7,05

3,18

3,86

18,

272,

698,

980

Inve

stm

ents

6,31

8,32

69,

562,

738

10,5

19,0

1211

,570

,913

12,7

28,0

04

Tota

l Ass

ets

7,52

6,19

3,77

68,

820,

121,

311

10,3

38,7

67,4

6812

,169

,471

,005

14,3

18,5

53,1

52

FY13

AFY

14A

FY15

PFY

16P

FY17

P

3CA

SH F

LOW

(CO

ND

ENSE

D)

Surp

lus b

efor

e ta

x77

,246

,671

40

8,22

0,27

0 47

4,97

3,05

9 56

1,40

0,78

6 64

6,46

4,46

4

Net

cha

nges

in w

orki

ng c

apita

l-2

,558

,381

-1

0,56

2,70

2 30

,748

,121

11

,526

,708

17

,099

,165

Adju

stm

ents

802,

282,

094

536,

507,

318

686,

172,

982

850,

545,

379

1,08

8,26

6,57

2

Net

incr

ease

in lo

ans t

o m

embe

rs-6

13,1

57,8

42

-565

,843

,247

-1

,052

,884

,009

-1

,291

,537

,718

-1

,638

,638

,480

Net

incr

ease

in m

embe

r dep

osits

764,

235,

644

781,

934,

673

867,

421,

024

980,

185,

757

1,10

7,60

9,90

5

Cash

flow

from

ope

rati

ons

1,02

8,04

8,18

61,

150,

256,

313

1,00

6,43

1,17

61,

112,

120,

912

1,22

0,80

1,62

7

Cash

flow

from

inve

stin

g ac

tiviti

es7,

727,

095

-14,

884,

457

-36,

912,

150

-1,4

17,6

00-3

,400

,000

Cash

flow

from

fina

ncin

g ac

tiviti

es-6

64,5

34,6

03

-441

,673

,101

-5

29,1

23,7

70

-561

,266

,486

-6

98,8

21,0

79

Net

cas

h flo

w37

1,24

0,67

769

3,69

8,75

544

0,39

5,25

754

9,43

6,82

651

8,58

0,54

8

Cash

bal

ance

Ope

ning

bal

ance

669,

603,

440

1,04

0,84

4,11

71,

734,

542,

871

2,17

4,93

8,12

82,

724,

374,

954

Net

cas

h in

flow

371,

240,

677

693,

698,

755

440,

395,

257

549,

436,

826

518,

580,

548

Clos

ing

bala

nce

1,04

0,84

4,11

71,

734,

542,

871

2,17

4,93

8,12

82,

724,

374,

954

3,24

2,95

5,50

2



FY13

AFY

14A

FY15

PFY

16P

FY17

P

4RA

TIO

AN

ALY

SIS

Capi

tal a

dequ

acy

Core

cap

ital/T

otal

ass

ets

6%11

%14

%16

%18

%

Core

cap

ital/T

otal

dep

osits

7%14

%18

%21

%24

%

Inst

itutio

nal c

apita

l/Tot

al a

sset

s3%

6%9%

11%

12%

Gro

wth

tren

ds (%

)

Tota

l inc

ome

10%

16%

21%

21%

22%

Inte

rest

inco

me

15%

8%20

%20

%20

%

Oth

er in

com

e-3

6%14

3%30

%29

%35

%

Tota

l ass

ets

15%

17%

17%

18%

18%

Loan

por

tfolio

10%

9%15

%16

%18

%

Mem

ber d

epos

its15

%13

%13

%13

%13

%

Savi

ngs a

ccou

nts

37%

42%

20%

25%

25%

Surp

lus a

fter t

ax-1

8%43

6%15

%17

%13

%

As

a %

of t

otal

inco

me

Inte

rest

inco

me

94%

88%

87%

86%

84%

Oth

er in

com

e6%

12%

13%

14%

16%

Staff

cos

ts5%

6%7%

7%6%

Dire

ctor

s cos

ts1%

2%2%

2%2%

Inte

rest

on

depo

sits

76%

45%

47%

49%

51%

Inte

rest

on

mem

ber s

avin

gs

1%1%

1%1%

1%

Adm

inist

rativ

e co

sts

8%13

%10

%9%

9%

Tota

l ope

ratin

g co

sts

93%

67%

68%

69%

71%

54

Ann

ex 2

: Mon

itori

ng a

nd E

valu

atio

n Fr

amew

ork

KEY

PERF

ORM

AN

CE

IND

ICAT

OR

DEF

INIT

ION

How

is it

ca

lcul

ated

?

BASE

LIN

EW

hat i

s th

e cu

rren

t val

ue

TARG

ETW

hat i

s th

e ta

rget

val

ue (3

Ye

ars)

DAT

A S

OU

RCE

How

will

it b

e m

easu

red?

FREQ

UEN

CYH

ow o

ften

will

it

be

mea

sure

d?

RESP

ON

SIBL

EW

ho w

ill

mea

sure

it?

REPO

RTIN

G

Whe

re w

ill it

be

repo

rted

?

Goa

lAc

hiev

e an

ov

eral

l bus

ines

s gr

owth

of 4

0%

%ag

e gr

owth

in

afte

r tax

surp

lus

414,

770,

663

80,6

78,9

28Co

mpu

tatio

n of

ann

ual

stat

emen

ts o

f ac

coun

ts

Annu

ally

CEO

Boar

d Re

port

to

the

AGM

Out

com

esIn

crea

sed

mem

bers

hip

%ag

e in

crea

se in

th

e nu

mbe

r of

activ

e m

embe

rs

4,73

18,

000

Com

puta

tion

of

new

mem

bers

be

ing

recr

uite

d

Mon

thly

H

oMM

onth

ly re

port

s to

the

Boar

d

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nced

m

embe

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p re

tent

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Num

ber o

f act

ive

Mem

bers

4,

731

7,50

0N

umbe

r of

mem

bers

that

re

mai

n ac

tive

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rter

lyH

oMQ

uart

erly

repo

rt

to th

e Bo

ard

Loan

boo

k gr

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%ag

e in

crea

se in

th

e lo

an b

ook

7,01

9,22

6,72

911

,002

,286

,936

Com

puta

tion

of

Gro

wth

in lo

ans

Mon

thly

HoC

Mon

thly

repo

rts

to th

e Bo

ard

Gro

wth

in

depo

sits

%ag

e in

crea

se in

de

posit

s7,

158,

079,

069

10,5

38,2

04,2

03Co

mpu

tatio

n of

Gro

wth

in

depo

sits

Mon

thly

HoM

Mon

thly

repo

rts

to th

e Bo

ard

Reve

nue

Gro

wth

%ag

e gr

owth

in

reve

nues

1,23

1,17

7,97

02,

208,

046,

544

Com

puta

tion

of G

row

th in

re

venu

es

Mon

thly

HoF

Mon

thly

repo

rts

to th

e Bo

ard

Cost

O

ptim

izat

ion

Tota

l Ope

ratin

g Co

st a

s a %

age

of

the

tota

l inc

ome

67%

65%

Com

puta

tion

of th

e co

sts V

s In

com

e an

alys

is qu

arte

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Qua

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lyH

oFQ

uart

erly

Rep

ort

to th

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ard

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cap

ital

grow

thG

row

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Cor

e

capi

tal r

elat

ive

to

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ts

11%

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Com

puta

tion

of

Capi

tal g

row

thM

onth

lyH

oFM

onth

ly R

epor

t to

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Boar

d

Gro

wth

in C

ore

ca

pita

l rel

ativ

e to

D

epos

its

14%

24%


KEY

PERF

ORM

AN

CE

IND

ICAT

OR

DEF

INIT

ION

How

is it

ca

lcul

ated

?

BASE

LIN

EW

hat i

s th

e cu

rren

t val

ue

TARG

ETW

hat i

s th

e ta

rget

val

ue (3

Ye

ars)

DAT

A S

OU

RCE

How

will

it b

e m

easu

red?

FREQ

UEN

CYH

ow o

ften

will

it

be

mea

sure

d?

RESP

ON

SIBL

EW

ho w

ill

mea

sure

it?

REPO

RTIN

G

Whe

re w

ill it

be

repo

rted

?

Gro

wth

in

Inst

itutio

nal

capi

tal r

elat

ive

to

Asse

ts

6%12

%

Impr

oved

cu

stom

er

satis

fact

ion

Cust

omer

Sa

tisfa

ctio

n In

dex

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%Cu

stom

er

Satis

fact

ion

Surv

ey

Qua

rter

ly

HoM

Qua

rter

ly R

epor

t to

the

Boar

d

New

pro

duct

s de

velo

ped

Num

ber o

f N

ew P

rodu

cts

Dev

elop

ed

-3

Num

ber o

f N

ew p

rodu

cts

deve

lope

d an

d la

unch

ed

Qua

rter

ly

HoM

/HoF

OSA

Qua

rter

ly R

epor

t to

the

Boar

d

Revi

ew o

f Ex

istin

g pr

oduc

tsRe

pack

age

and

re-la

unch

ex

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g pr

oduc

ts

-4

Num

ber o

f pr

oduc

ts

repa

ckag

ed a

nd

laun

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Qua

rter

ly

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/HoF

OSA

Qua

rter

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Boar

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Busin

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auto

mat

ion

Num

ber o

f bu

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s pr

oces

ses

auto

mat

ed

-10

Com

puta

tion

of b

usin

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proc

esse

s av

aila

ble

on

an a

utom

ated

pl

atfo

rm

Qua

rter

ly

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rter

ly R

epor

ts

to th

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ard

Revi

ewed

Pol

icie

s an

d pr

oced

ures

m

anua

ls

Num

ber o

f po

licie

s and

pr

oced

ure

man

uals

deve

lope

d

-20

Com

puta

tion

of p

olic

ies a

nd

proc

edur

e m

anua

ls av

aila

ble

Mon

thly

CE

OM

onth

ly R

epor

ts

to th

e Bo

ard

Addi

tiona

l Offi

ce

Spac

e ac

quire

d%

age

incr

ease

in

the

area

ava

ilabl

e fo

r offi

ce sp

ace

1,90

0 Sq

Mtr

s50

0 Sq

Mtr

sCo

mpu

tatio

n of

the

new

are

a av

aila

ble

for U

N

SACC

O O

ffice

s

Qua

rter

lyCE

OQ

uart

erly

Boa

rd

Repo

rts

Busin

ess

Cont

inui

ty P

lan

in P

lace

Com

plet

ion

of

the

Busin

ess

Cont

inui

ty P

lan

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0% b

y 20

15%

age

com

plet

ion

of th

e BC

PM

onth

lyH

oAud

itM

onth

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epor

ts

to th

e Bo

ard


56

KEY

PERF

ORM

AN

CE

IND

ICAT

OR

DEF

INIT

ION

How

is it

ca

lcul

ated

?

BASE

LIN

EW

hat i

s th

e cu

rren

t val

ue

TARG

ETW

hat i

s th

e ta

rget

val

ue (3

Ye

ars)

DAT

A S

OU

RCE

How

will

it b

e m

easu

red?

FREQ

UEN

CYH

ow o

ften

will

it

be

mea

sure

d?

RESP

ON

SIBL

EW

ho w

ill

mea

sure

it?

REPO

RTIN

G

Whe

re w

ill it

be

repo

rted

?

Capa

city

bui

ldin

g fo

r Boa

rd a

nd

Staff

Num

ber o

f Ca

paci

ty b

uild

ing

activ

ities

for

Boar

d an

d St

aff

-18

Com

puta

tion

of th

e nu

mbe

r of

act

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es

unde

rtak

en

tow

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cap

acity

de

velo

pmen

t

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erly

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Repo

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Com

plia

nce

with

SA

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Ratio

s/

Requ

irem

ents

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e co

mpl

ianc

e w

ith

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A Ra

tios

90%

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Com

puta

tion

of

mon

th to

mon

th

com

plia

nce

Mon

thly

CEO

Mon

thly

Rep

ort

to th

e Bo

ard

Enha

nced

In

form

atio

n ac

cess

by

mem

bers

The

prop

ortio

n of

mem

bers

ac

cess

ing

info

rmat

ion

on

the

SACC

O

50%

100%

Info

rmat

ion

acce

ss su

rvey

am

ongs

t the

m

embe

rs

Qua

rter

ly

HoM

Qua

rter

ly re

port

to

the

Boar

d

Impr

oved

Co

rpor

ate

Imag

ePe

rcep

tion

of

Stak

ehol

ders

on

the

SACC

O

-75

%Co

mpu

tatio

n of

th

e st

akeh

olde

rs

perc

eptio

n in

dex

in a

surv

ey

Annu

ally

CEO

Annu

al R

epor

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in

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Com

pute

the

staff

pro

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ivity

in

dex

in y

ear 1

an

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ally

to

mea

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incr

ease

Annu

ally

CEO

Annu

al R

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t

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or

gani

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n Ca

paci

ty

Org

aniz

atio

n Ca

paci

ty l

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Org

aniz

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n Ca

paci

ty

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ssm

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ally

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al R

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