Re: Enabling rural cooperatives and producer organizations to thrive as sustainable business enterprises


Sustainability of cooperatives and Saccos, can be looked as well as from the evolution over time of the economic, financial and market conditions of the cooperatives. The original model of a savings and credit society was to mobilize savings from members and pool the same for on lending to the borrowing members. This model worked well, for a while, until foreign parameters like investing in non core businesses and borrowing from commercial organizations, was introduced in the equation.

The dilution of the cooperative model and function came with burden of high cost of capital, which over the years has enslaved the once vibrant sector into an emasculated sector with little innovation to excite the members. Some societies collapsed, further worsening the bad situation.

This has meant that for cooperatives and Saccos to survive, they must enhance current and seek more viable financing models that will support both on lending and capitation requirements. In a world where standards and compliance matter the cooperatives. Must have capacity requirements to meet the requirements set by both the regulators and the financiers in order to drive toward a self-financing Cooperative

Example of Kenya - Prior to the Sacco Societies Act of 2008, the lack of regulation was the main reason for Saccos stagnating: brought by issues of mismanagement, poor structure risk and mismanagement. The setting up of a strong legal and institutional regulatory framework has led to several reforms creating order, sustainability, stability and growth in the sector.

However, under the regulation framework, mandated by Ministry of Cooperatives and enforced by Sacco Societies Regulatory Authority (SASRA), Saccos MUST meet the legal requirements in key capital adequacy in the sector and liquidity ratios to achieve growth and sustainability while operating efficiently.

When cooperatives and Saccos reform, and as the member’s confidence with them grows, they will support them through savings, shares and deposits. This is the stage where the cooperatives and Saccos start running from their internally generated funds from the members.