KILIFI TEACHERS SACCO SOCIETY LTD.
DELEGATES SEMINAR TEMPLE POINT RESORT, WATAMU 16TH 17TH JUNE 2011
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Areas to be covered
I. Introduction Definitions How Saccos differ from other financial institutions Need for finance II. Co-operative Finance
Sources Applications
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Areas to be covered (CONT III. Why Saccos experience difficulties in raising adequate finance IV. Suggested way forward
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introduction
DEFINITIONS CO-OPERATIVE
DEF I: is a business organization owned and operated by a group of individuals for their mutual benefit DEF II: [ICAS DEFINITION STATEMENT (PRURAL)] As autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through jointly owned and democratically controlled enterprises
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INTRODUCTION (CONT) - DEFINITIONS
DEF III: as a business owned and controlled
equally by the people who use its services
SACCO/CREDIT UNION [SACCO acronym for Savings
and Credit Co-operatives]: is a co-operative financial
institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.
FINANCE
In general terms, it is the task of providing the funds for business activities.
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INTRODUCTION (CONT)
HOW SACCOS DIFFER FROM OTHER FINANCIAL INSTITUTIONS
Saccos represent people centered organizations, as opposed to capital centered commercial companies. In a Sacco, customers are also its owners . In other firms, customers and owners are separated
In a Sacco, Price of share is fixed not traded in an open market
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INTRODUCTION (CONT)
[how saccos differ]
In a Sacco, objective is to benefit member/customer by offering high quality member service. In other firms, primary objective is to benefit owners by maximizing profits
In a Co-op/Sacco, profit/surplus generation is secondary: ought to be the result of efficient operations
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INTRODUCTION (CONT)
[need for finance]
NEED FOR FINANCE Start-up capital for acquisition of fixed assets: buildings, furniture, equipment etc Funds for operations to meet operating expenses e.g stationery, rent, water, electricity, salaries etc Funds for Investments in core business: lending in the case of Saccos and other profitable securities Funds for Growth and Expansion in acquisition of new fixed assets e.g additional branches, modernization of processes (ICT improvement) Business continuity: Retained earnings, reserves, inst capital
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co-operative finance
SOURCES AND APPLICATION OF FINANCE
INTERRELATIONSHIP BETWEEN SAVINGS, CAPITAL AND INVESTMENT
CAPITAL
SAVINGS INCOME
CONSUMPTION
INVESTMENT
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SACCOS CAPITAL/FINANCIAL STRUCTURE
CAPITAL
OWNED BORROWED
SHARE CAPITAL
RESERVES
MEMBERS
GOVT
FINANCIAL INSTS.
BUSINESS PARTNERS
SHARE CONTRIBUTION
UNDISTRIBUTED SURPLUS
DEPOSITS
LOANS
LOANS/ OVERDRAFTS
TRADE CREDITS
ENTRANCE FEES
GRANTS
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WHY SACCOS EXPERIENCE DIFFICULTIES IN RAISING ADEQUATE FINANCE
LIMITED AREA OF OPERATION/CLOSED MEMBERSHIP
POOR SAVINGS CULTURE: CONCEPT OF NET
BORROWERS VS NET SAVERS
POOR RESERVE RETENTION AND CAPITAL BUILD UP
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WHY SACCOS EXPERIENCE DIFFICULTIES IN RAISING ADEQUATE FINANCE
Poor image/branding Poor pricing of products/low profitability
Distribution of dividends ignoring capitalization concerns
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SUGGESTED WAY FORWARD
Long term savings products Liquidity retention
Children and Youth Savings Create incentives for Net Savers vs Net Borrowers
Take advantage of the new regulatory environment to build confidence
PRODUCT DIVERSIFICATION
ENCOURAGE SAVINGS
REGULATORY ENVIRONMENT
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SUGGESTED WAY FORWARD (cont)
Have a broader outlook of membership
AREA OF OPERATION
The larger the membership base, the larger the capital base, ultimately the more the financial strength and stability
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END THANK YOU JUNE 2011
BY Daniel S.G.Masha Chief Executive Officer, Kilifi Teachers Sacco
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