Why SACCOs’ Salvation Rests On Millennials And Gen Z

Every Kenyan adult and their mother are undoubtedly part of a SACCO. But could this be the reason Millennials are shying away from them? Observe the continent; 75 per cent of her population falls below the age of 35. We are looking at close to 800 million young adults. How can they be reached and initiated into financial institutions like Saccos?

George Y. Ombado, ICUDE, Executive Director and CEO ACCOSCA (African Confederation of Cooperative Savings & Credit Associations) was speaking during CIO East Africa’s 2nd edition SACCO event, East Africa SACCOTech Forum. The event was CIO East Africa’s first-ever fully virtual experience. Themed Accelerating Automation for Socio-Economic Development, George reiterated that the role of SACCOs as cooperatives are meant to empower people. He points out that in countries such as Canada and in the US, there exist people who have yet to set foot in a bank. Their lives are financed and empowered by financial cooperatives as members. “Africa is currently the youngest continent in the world, and our economic growth has probably been the highest in terms of standing at 3 per cent to 10 per cent over the past decade. But why is there so much unemployment? This is something that as SACCOs we need to address.”

That is where financial cooperatives come in. To develop various ways in which to encourage and see young people get economically empowered. For one, young ones inside the cooperatives are able to chart their own ways to grow, which is atypical modus operandi when it comes to banks. In terms of participation and feeling included, financial cooperatives are better placed to provide their particular platform with a lot of ease.

Keeping in mind that this were projections made pre-COVID-19, the continent was on average targeting 4 per cent growth, with East Africa and West Africa considered one of the fastest regions according to growth and South Africa being stagnant. With this path in mind, Kenya, reflected the IMF, was listed as the fourth-largest economy in Africa. That even creates the impression Kenya might be doing well, except not just yet. “This is no time to rest as there is still much to be done. Most of the SACCOs across the continent have not taken what I call demographic dividend. The young population can take advantage and support the financial cooperatives and see a mutual benefit,” explains George.

“One of the things I see from my corporate space is the cooperatives mantra that goes ‘we are growing and we are growing in brick and mortar.’ But if you want young people in the system, they will not go to branches. They need to be served with the new way of doing things.”

With all this at play, the risk we then have is this. If more people, specifically Gen Y and Z want to join financial cooperatives, do said institutions have the right systems to mitigate what would affect their ability to serve their members? Can regulators identify, predict, measure, monitor and control any risks Saccos may have? This includes registering the monstrous challenge facing the world we speak. “COVID-19 is just a disruption like any other. We have had floods, locust invasions, these affect the goals of the financial cooperatives. Financial cooperatives need to have a structure, one that requires them to have a financial base, like capital adequacy, or a fall back plan that the commercial banks have had during these disruptive times allowing them to be able to recover,” says George.

The most critical aspect of SACCOs that would draw in youngsters, however, would have to be far more than yet another branch. “One of the things I see from my corporate space is the cooperatives mantra that goes ‘we are growing and we are growing in brick and mortar.’ But if you want young people in the system, they will not go to branches. They need to be served with the new way of doing things. That means SACCOs need to evolve with time by engaging in what is applicable and adapt. We can, for instance, serve our membership through virtual and mobile.”

“if you want young people in the system, they will not go to branches. They need to be served with the new way of doing things. That means Saccos need to evolve with time by engaging in what is applicable and adapt.”

For relatively stable financial cooperatives in countries like Ghana and Kenya, the big question then becomes – what is the place of mobile banking and micro-lending? Are Saccos able to work comfortably enough to the extent that mobile platforms do not erode their space, but, instead, participate on that platform by providing similar services? As it is, quite a number of young people are on mobile credit.

George believes they can compete in the financial services industry. “What is needed is to engage in what brings in more productivity around things such as agritech. And I believe in terms of partnership and engagement, the financial cooperatives can work with partners. There needs to be a strong relationship between the national association Kenya Union of Savings & Credit Cooperatives Ltd., (KUSCCO) and the regulatory body, SACCO Societies Regulatory Authority (SASRA).

To succeed, SACCOs need to turn to the young people. Roping in the younger generations will take just the word – digitisation. The leadership needs to be in tune with current membership growth. As it stands, people ages 30 and below do not find the cooperatives model as it is is something relatable to them.

“If we embrace technology and prevent and identify systems preventing cybercrime, it will prevent SACCOs from being attacked and losing credibility. Banks are investing in security. SACCOs need to do the same. And SACCOs also need to be able to provide financial facilities to all, even in the rural areas. SACCOs tend to be city-based in the capital. We need to change that if the model is about helping people who can’t help themselves. That model is about saving through the phone.”

On top of that comes the realisation that SACCOs should care about teaching people how to save through mobile platforms. “If the model is about helping people to help themselves, then I think the future of SACCOs will be bright,” he concludes.