Cooperative Leaders Urged to Tap New Growth Sectors --[Reported by Umva mag]

Cooperative leaders have been called on to tap into new, lucrative sectors such as real estate and retail to accelerate growth and double resources in the sector, which currently controls nearly Ksh1 trillion in assets.

Despite its size, the cooperative movement has yet to fully exploit new economic opportunities, said Cooperative Alliance of Kenya (CAK) Chairman Macloud Malonza, who noted that the sector has seen impressive growth and contributed significantly to Kenya’s economic development.

“The cooperative societies have continued to mobilise more resources and disburse loans, but despite the positive outlook, cooperatives have not fully tapped into lucrative sectors that could drive further growth,” Malonza said during a workshop organized by the CAK.

Primary cooperatives, Malonza said, have traditionally focused on sectors like coffee, dairy, and tea, while missing out on opportunities in other industries. He encouraged leaders to explore emerging avenues to diversify their income streams.

According to the 2023 Sacco Supervision Annual Report by the Sacco Societies Regulatory Authority (SASRA), savings and credit cooperatives (Saccos) account for the largest portion of the cooperative sector’s assets, which stood at Sh971.96 billion, equivalent to 6.43 percent of Kenya’s nominal GDP.

In 2023, loans issued by 357 regulated Saccos grew by 11.5 percent to reach Ksh758.57 billion, up from Ksh680.35 billion in 2022, reflecting rising demand for credit services. These loans were primarily funded by member deposits, which increased by 9.95 percent to Ksh682.19 billion, highlighting the importance of Saccos in domestic savings mobilisation.

Mr Malonza also highlighted the impending Cooperative Bill, which is in its second reading in parliament and expected to be finalised by October. The bill is anticipated to transform the business model of Saccos, driving further sector growth.

Vincent Marangu, Director of Cooperatives Banking at Cooperative Bank of Kenya, emphasised that cooperatives play a crucial role in promoting financial inclusion.

As of July 2024, cooperative-controlled assets had risen to nearly Sh1.7 trillion, reflecting the sector’s economic potential.

“There are numerous opportunities for cooperatives to diversify into sectors such as property development, retail, hospitality, transport, and healthcare,” Mr Marangu said, noting that international credit unions hold substantial portions of national savings in their respective countries.

Mr Marangu urged cooperatives to innovate by expanding their credit businesses beyond traditional sources, such as salaries. He advised cooperative leaders to seek out additional income streams from members engaged in farming, manufacturing, or other industries.

He also highlighted the importance of scaling housing projects appropriately. “The most successful housing cooperatives are those that undertake smaller, manageable projects that members can afford,” he said, cautioning against large-scale ventures with uncertain marketability.

The workshop, themed “Integrating Continuous Improvement in Audit, Financial Reporting, and Risk Management Strategies for Cooperatives of Tomorrow,” sought to equip cooperative leaders with the tools to face emerging risks and adapt to a rapidly changing business environment.

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