History of Saccos in Kenya

A Savings and Credit Cooperative is a type of cooperative whose objective is to pool savings for the members and in turn provide them with credit facilities (UN-HABITAT, 2010). The general objective of SACCOs is to promote the economic interests and general welfare of its members.
The ICA Statement on the Co-operative Identity defines a cooperative as an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.
Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. Co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others (Bibby & Shaw, 2005).
The 1995 ICA Congress also reformulated seven principles of co-operatives.
In summary, they are:

Voluntary and open membership
Democratic member control
Member economic participation
Autonomy and independence
Education, training and information
Co-operation among co-operatives
Concern for the community

Different SACCOs provide a number of products which include but are not limited to credit services, deposit and savings facility, cheque clearing, bankers’ cheques, standing orders, safe custody, and salary advances.
History of SACCOs
The pioneers of modern cooperation emerged in working- class environments in European Industrial cities of the 19th Century. In the 1840s,the first to industrialize countries (Great Britain and France),pioneers of co-operative invented models of the consumer cooperative and the labor cooperative to defend and promote the interests of working-class families in the face of the social disasters caused by industrial revolution.

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The second generation of the pioneers of modern cooperation emerged, in certain European rural environments in the late 19th century. In the 1860s, these pioneers created the models of agricultural cooperatives and savings and credit cooperatives inspired by the success of the consumer cooperatives formula in Great Britain and based on old traditions of rural solidarity aimed to meet the primary economic needs, which went unsatisfied. Agricultural cooperatives then enabled families of farmers and livestock raisers to organize their own supply systems of agricultural inputs and market their products and no longer depended on merchants and businessmen in the cities. The SACCOs helped them to stop depending on moneylenders and to find the credit necessary to modernize their agricultural cooperatives (Mwakajumilo, 2011) .
SACCOs in Africa
In Africa, the idea was brought by a Roman Catholic priest, in Jirapa, a town in Ghana, in 1955. Father John McNulty from Ireland had studied in Canada where he learnt about savings and credit co-operative societies.
Father McNulty helped the Jirapa villagers to form a Savings and Credit Co-operative. The co-operative assisted the members to address their financial problems which they couldn’t individually. Father McNulty trained about 60 people, who were the first successful savings and credit co-operative pioneers on the African continent.
The success of Jirapa savings and credit co-operative spread throughout Ghana and by 1968, the savings and credit co-operatives throughout the country came together to form the Credit Union of Ghana , which was set up to promote, organize, service and co-ordinate the activities of savings and credit co-operative in Ghana. (Alila & Obado, 1990).
According to the World Council of Credit Unions (WOCCU) 2011 statistical report, there are
51,013 credit unions in the world, having a total of 196,498,738 members and a total penetration of 7.8% Penetration rate which is calculated by dividing the total number of reported credit union members by the economically active population age 15-64 years old (World Council of Credit Unions (WOCCU) , 2012).
The largest markets in Africa by number of members as of December 31st 2011 are Kenya (4,183,220), Senegal (2,231,117), Ivory Coast (1,705,712), and Benin (1,597,233) (WOCCU, 2012).
History of SACCOs in Kenya
SACCOs in Kenya are currently among the leading sources of the co-operative credit for socio-economic development (Alila & Obado, 1990).Cooperatives in Kenya were started in 1908 and membership was limited to white colonial settlers. The first cooperative was established at Lumbwa, present day Kipkelion area. In 1944 colonial officers allowed Africans to form and join cooperatives (Gamba & Komo, 2012).
The initial attempt to encourage African farming co-operatives was initiated by the need to implement the recommendations of the ‘Swynnerton Plan’ of 1953. The Swynnerton Plan was formulated to improve African farming, specifically the growing of cash crops and is recorded to have encouraged the progress and growth of African cooperatives (Alila & Obado, 1990).
It was at this point that the recommendation that a registrar of cooperatives be appointed was made. In 1945, a new Cooperative Societies Ordinance was enacted which allowed African participation in the cooperative movement. In 1946, a department of cooperatives was established and a registrar of cooperatives appointed. By 1950 most colonial civil servants began to support and encourage the development of cooperatives and by 1952, about 160 cooperatives had been registered (Alila & Obado, 1990).
The post-independence era saw the rapid increase the in number of producer organizations and consolidation of the ones that already existed. At this time, the government saw the cooperative movement as a means for African socialism, and strengthening common ties between the people from different regions of Kenya. In 1963 there were about 1000 cooperatives, which rapidly grew in number since then.
Today, the co-operatives are an integral part of the Government economic strategy aimed at creating income generating opportunities particularly in the rural areas. The co-operative movement has been recognized by the Government as a vital institution for the mobilization of human and material resources for various development progress particularly in the rural areas where the majority of people reside, earning their livelihood mainly from agriculture.
The co-operative movement now contributes well over 45 per cent of Kenya’s GDP and it is estimated that at least one out of every two Kenyans directly or indirectly derives his/her livelihood from the co-operative movement. Over the years, the co-operative movement remained predominantly agriculturally oriented. However, in the recent past, the co-operative movement has experienced significant diversification in activities and interests notably savings and credit. Other non-agro-based co-operatives have also emerged and ventured into areas such as housing; “Jua-Kali”, building and construction, handicrafts, transport, small scale industries, etc. (Alila & Obado, 1990).
SACCOs are one of the leading sources of rural finance and in many rural areas the local SACCO is the only provider of financial services. While the exact number of SACCOs operating in Kenya is not known, estimates range from almost 4,000 up to 5,000 (Financial Sector Deepening (FSD), 2010).
Kingdom SACCO Limited
Kingdom SACCO Society Limited was started by the Life Reformation Centre in 1999 with the aim of improving the economic livelihood of its members. It was registered in 21st January, 2000 under the Cooperative Societies Act No.12 of 1997, and it is governed by the SACCO Societies Act of 2008 and its by-laws.
The growth of the SACCO has been high since inception a fact attributed to good governance and leadership, staff commitment and effective patronage by members (Kingdom Sacco Limited, 2011) .
Figure Membership Growth Analysis. Source: www.kingdomsacco.com
Vision
To be a model SACCO, empowering the community economically and socially.
Mission
To promote a savings culture, and provide affordable credit by offering sustainable financial solutions to enhance the economic welfare of our members and stakeholders.
Motto
“Pamoja Twaimarika”
Core Values

Having been founded by members with a church based background, it was agreed that Integrity is one of the most defining values that the leadership and membership of Kingdom SACCO up hold.

The SACCO strives to carry out all its dealings in an open manner that is agreeable to members and co-operative values.

The SACCO aims at meeting the all member’s needs by ensuring that it is effecting necessary and desired change to its operations and products as frequently as needed.

The SACCO Leadership, management and members view the SACCO as a family unit and as such always aim at working together as a team.

All members are treated equally without any favoritism and discrimination
Products Offered by Kingdom SACCO
Credit Facilities

Business Loan
Development Loan
Emergency Loan
School Fees Loan
Supa Loan
Overdraft Loan
Jijenge Loan
Rembesha Maisha Loan

FOSA Accounts

Junior Mustard Account
Imara Account
Kings Savings Account
KSA Corporate Account
Kings Fixed Account

Other Services

Cheque Clearing
Safe Custody
Bankers’ Cheques
Standing Orders
Salary Advance
Night Stop Services

Problem Statement
SACCOs provide a wide range of products, offer loans that are cheaper than banks, provide higher interest on savings and according to a study by FinAccess, a significant percentage of the Kenyan population is unbanked (FinAccess, 2009). This recent study by the Financial Sector Deepening Trust (FSDT) revealed that banks serve 14.2 percent, SACCOs 13.1 percent and MFIs 1.7 percent of the population respectively. This is a big opportunity for SACCOs given that there is an untapped market. Since SACCOs do not raise equity from outside sources, theirstrength lies in numbers i.e. the more the members, the better it is for the SACCO because this means that higher capital is raised. This study seeks to find out how SACCOs are tapping into this ready market, the methods they are using to do this and their effectiveness in reaching this market
Purpose Statement
The purpose of this study is to examine the expansion strategies employed by Kingdom SACCO Limited.
Objectives of the study

To identify the expansion strategies employed by Kingdom SACCO Limited
To examine the implementation of expansion methods employed by Kingdom SACCO Limited
To determine the effectiveness of the expansion methods employed by Kingdom SACCO Limited

Research Questions

What are the expansion strategies employed by Kingdom SACCO Limited?
How are the expansion strategies employed by Kingdom SACCO Limited implemented?
What are the short falls/gaps of the expansion strategies employed Kingdom SACCO Limited?

Justification of the study
The vision held by Kingdom SACCO is to be a model SACCO. This coupled by the fact that its membership steadily increases every year makes it a suitable case to study. By studying the methods Kingdom SACCO uses to achieve a steady membership growth, a resource can be created for other SACCOs to reproduce in the country in order to improve the penetration and impact of SACCOs in Kenya.
Significance of the study
The results of this study will seek to benefit the Government, the ministries of Finance, and Cooperatives Development in formulating policies concerning SACCOs and other financial institutions in order to improve banking and financial services in Kenya. Kingdom SACCO will be able to identify those expansion strategies that are effective and discard those that are not and so be able to position itself as a model SACCO, consistent with its vision. Other SACCOs in Kenya will be able identify and implement effective expansion strategies in order to boost membership and penetration of financial services in Kenya.
Assumptions
This study will be conducted under the following assumptions:

The respondents will provide needed information objectively and fully
All data provided by respondents will be correct and genuine

Scope of Study
This study will be carried out at Kingdom SACCO Limited. Data will be collected from the top and middle level management at the headquarters of the SACCO in Githurai, Nairobi
Limitations and Delimitations
Since this is a case study focused on a single SACCO, the results of the study cannot be attributed to a whole industry as generally representative. The researcher also expects that there may be reluctance by the respondents to provide adequate accessibility of information since most businesses prefer to keep such data private. The researcher intends to seek full permission of the SACCO management to conduct this study in order to ensure full cooperation.
Definition of Terms

Back Office Services Activities. The branch of any SACCO that provides credit facilities to its members.

An arm of FSD Kenya. FinAccess has been established as the leading source of reliable data on financial access in Kenya and is widely cited in the media and by Government, the private sector and international development partners.

Front Office Services Activities. A service provided by SACCOs that enables its members to deposit and withdraw cash from or into their accounts just like a bank.

The Kenya Financial Sector Deepening (FSD) programme was established in early 2005 to support the development of financial markets in Kenya as a means to stimulate wealth creation and reduce poverty. Working in partnership with the financial services industry, the programme’s goal is to expand access to financial services among lower income households and smaller enterprises. It operates as an independent trust under the supervision of professional trustees, KPMG Kenya, with policy guidance from a Programme Investment Committee (PIC). In addition to the Government of Kenya, funders include the UK’s Department for International Development (DFID), the World Bank, the Swedish International Development Agency (SIDA), Agence Française de Développement (AFD) and the Bill and Melinda Gates Foundation.

International Co-operative Alliance. The ICA was established in 1895, and brings together over 230 affiliated bodies from more than a hundred countries. In total, the ICA represents an estimated 760 million co-operative members worldwide.

Kings Savings Account. A service provided by Kingdom SACCO that enables members to make their savings. It is available for individuals and corporates

Savings and Credit Cooperatives

A service offered by Kingdom SACCO for the safe keeping of valuables.

The World Council of Credit Unions (WOCCU). Established in 1970 with a membership from credit unions and co-operative financial institutions in 100 Countries, which between them have over 196 million members.