Kenya's Most Authoritative Political Newspaper

Citizen Weekly

Monday, 4 May 2015



The Chief Guest, the Managing Director Co- operative Bank
Dr. Gideon Muriuki/CEO, MBS
County Co-operative Commissioner, Mrs. Enid Njeru
The County Co-operative Officer, Starehe, Mrs. Hellen Njuguna
The Co-operative Officers, present
The Delegates
Distinguished Members
Ladies and Gentlemen
It is my great honour and pleasure to welcome you to the 37th annual delegates meeting of the Society. As members of the same family with common focus we meet to share and review the performance and operations of our Sacco for the year ended December 2014 and also forge the way forward for the coming year. Dear delegates your attendance is a demonstration of your commitment to the Sacco affairs, and shows your continued interest in your Sacco.

To our Guest of Honour and other invited guests, I wish to appreciate your creating time
from your busy schedules to grace this meeting. Your being here with us is a manifestation of the cordial relationship our Sacco has with you and your respective

Ladies and Gentlemen, before I proceed, I wish to report the sad demise of Mr. Paul Thuku Njoroge who until his death on 29th March 2015 was the Branch Treasurer, Nyandarua.- The late Paul had served in the position for one year and his demise is a big blow to both the Sacco and his family. As you are all aware our country through terrorist heinous act lost 147 lives at Garissa University. We join hands with other Kenyans and international community to convey to the families our heartfelt condolences as we wish the injured quick recovery. I request we observe a minute's silence in their honour. May the Almighty God Rest their souls in Eternal Peace. Amen.

Our Guest of Honour, at this juncture may I take this opportunity to introduce to you members of my Board, Supervisory Committee, Senior Staff and delegates from our Branches
Dear Delegates, I wish to inform you that this forum provides an opportunity to strengthen our relationships, mingle and share our thoughts and I therefore call upon you to interact and share views on how we can collectively contribute positively in creating a better Ukulima for the benefit of our members and stakeholders who have entrusted us the onerous task of managing the Society on their behalf.

Dear Delegates, the Year 2014 was challenging as highlighted in our various communications to you. It had mixed fortunes and challenges that impacted on our operations. It was a period that experienced a high cost of borrowing and doing business as reflected in the Central Bank Base Rate (CBR) from which banks peg their lending rate, rising steadily from 16% to 18%. The CBR rates referred to above do not however represent the financial institutions lending rates as they normally load this with other charges which increase the rate further. This when compared to your Sacco's lending rate of 6.5% per annum for BOSA loans makes our rates very competitive and within reach of our members.
On the global scene, the year 2014 witnessed a gradual improvement in the world markets as consumers regained confidence. However, unemployment rate went up, while Kenyan GDP grew at an estimated rate of 5.3% as compared to 5.7 % the previous year 2013. This year it's estimated that GDP will grow by 5.9%. We remain optimistic that the business environment will improve as projected to enable us carry out our business.
The Society's Annual Report and Financial Statements for the year ended 31st December 2014
Ladies and Gentlemen, the Society continued to post good results, despite many challenges in the operating environment. The total turnover increased to Kshs.960, 912,181 from Kshs.798,396,268 realized in 2013 recording an increase of 20%. Interest income grew by 20% to Kshs. 858,649,558 from Kshs.713, 834,920 in the year 2013. Share capital increased by Kshs. 102,149,085 to Kshs.268, 043,596 from Kshs. 165,894,511 registered in the previous year. This represents a 62% growth which is due to the increase of Institutional Capital from 5,000/= to 10,000/=. However since this was a book transfer, the Sacco did not experience any fresh Capital Injection. Member deposits also grew to Kshs.6,004,712,254 from Kshs.5,514,465,939 in 2013 representing a 9% increase.
The Total Assets also increased to Kshs.8,294,183,624 from Kshs.7,321,315,578 as at 31st December 2013 representing a growth of 11%. The total loan portfolio increased by 9% to Kshs.6,127,932,428 from Kshs.5,624,702,557 in 2013. The above results are well within the targets set out in the Strategic Plan 2012-2016 and they are no doubt the results of hard work by the staff and elected officials by the Society.
The Society disbursed BOSA loans worth Kshs 3,018,957,300 during the year which was a drop of 7% from Kshs 3,242,750,586 disbursed in 2013.  FOSA disbursed loans woth Kshs. 1,992,368,844 during the year, a growth of 2% from Kshs 1,945,232,300 disbursed during the year 2013 through FOSA. Overly the total loans disbursed were worth Kshs.5,011,326,1447= during the year decline of 3% from Kshs 5,187,982,886 disbursed during the year 2013. The Society processed 25,021 loans applications during the year. This was a growth of 5% from 23,896 applications during the year 2013. The Board has analysed the factors contributing to the decline in lending and has

put in place measures to change the situation. However the overall performance demonstrates an improvement and growth.
Delegates, owing to the good performance as shown in the Audited Accounts for the year 2014, the Board of Directors is proposing the distribution of surplus as follows:-

The Board of Directors further proposes that honorarium of Kshs.3,400,0007= be paid to the Board of Directors, Supervisory Committee and Branch Officials (Delegates) who were in the office during the year 2014 as a token of appreciation for their good work.
Dear Delegates; our Guest of Honour, I wish to report that some of our members have shown outstanding commitment to their Sacco by growing their deposits consistently. The top twenty savers have contributed almost Kshs.60 millions, an indication of their interest and commitment to the Sacco. While we would have wished to appreciate all the twenty, the Board of Directors resolved to categorize and recognize the following:-
i)        Highest overall saver - Mr. Gordon Khendi Misigo;
ii)       Highest saver Civil Service - Mr. Paul Kiiru Mwangi
iii)       Highest saver Private - Mr. Nelson M. Karanja
iv)      Highest saver, Female - Ms. Margaret Akoth Ochieng
v)       Highest saver for Youth (under 35 years) - Ms. Patroze Wamuyu Chege
Dear Delegates, I wish to report that our Sacco is yet to meet most of our Regulators the Sacco Societies Regulatory Authority (SASRA) requirements on key ratios as indicated below:-

All Sacco's had been given four years to comply with effect from 18th June 2010 i.e. by 17th June 2014. It is worth to note from the above that the Society has attained only one of the above ratios while the compliance period has lapsed. The Regulator may therefore impose any or all of the following sanctions against the Society:-
(a)             Prohibition from declaring dividends, paying bonuses, salary incentives and other
discretionary compensation to officers of the Society;
(b)             Suspension of lending and investment;
(c)              Prohibition from accepting further deposits or other lines of credit;
(d)             Prohibition or suspension from activities that the Authority perceives to be
contributing to the liquidity strain in the Sacco;
(e)             Prohibition from acquisition of additional non- core assets.
Any of the above actions will have severe consequences on the Society and measures to ensure compliance are required urgently. Other measures include stagnation of dividend payout.
In this regard, the Society has no option but to make bold steps towards compliance. The ongoing share drive will bring in additional capital that will enable the Society meet the core capital/ assets ratio.
The Society has not achieved the institutional capital to total assets ratio. Institutional capital comprises the internally generated reserves. For the Society to comply, we require to increase the reserves by Kshs.458,817,466/= within one year. This means that the Society may have to distribute less interest/dividends to increase the reserves in order to meet the regulation. I call for your support to enable us realize this. Dear Delegates, the Society was licensed as a Deposit Taking Sacco on 19th December 2011 by the Sacco Societies Regulatory Authority and its license has been renewed annually since then. Besides being regulated and supervised by the Authority, the Society has to comply with all the provisions of Sacco Societies Act 2008 and the Sacco Societies (Deposit taking Sacco Business) Regulations 2010.
Dear Delegates, over the years the Society has been paying interest and dividends to members which are computed using the flat rate based on shares/deposits held at the end of the year. This method is not equitable to all members as those who boost shares/deposits towards end of the year earn interest yet these deposits, have not generated any returns as they will not have been employed in loaning. With a view to coming up with a more equitable way of determining the dividend, we are proposing that the Society will from now moving forward adopt pro rata based computation of dividends which is generally accepted method of distribution. I ask all delegates to consider this method to allow fair distribution of the earnings according to the proportionate allocation of the whole period the contributions was received, according to its share of the whole year.

Dear Delegates, as reported in my speech during yesterday's Education Meeting, almost all of the milestones that had been expected to be achieved by 2016 are already achieved. It is with a view to this that the Board of directors seeks to bring forward the development of the 4tn Strategic Plan for the period 2016 -2020. The plan is expected
to inject fresh impetus in the Society's operations.
Dear Delegates, FOSA is the banking Activity of the Sacco members. You recall that during the ADM in 2013, we resolved to have all dividends paid through FOSA accounts. This was a milestone resolution that made us open about 20,000 accounts thereby assisting the Society retain funds that could have gone to our competitors. As at 31st December 2014, we had opened 29,065 accounts out of the total membership of 5~ 373. We shall continue to pay dividends and disburse loans through the accounts in order to persuade the remaining members to open the accounts.
However, out of 29,065 FOSA accounts there are only 6,356 salaries accounts which form only 21% ofthe total accounts. We consider members who remit their salary through FOSA very loyal as they patronize FOSA products and services. These members borrowed FOSA loans amounting Kshs.1.1 billion, and have made saving of Kshs.0.58billion. Through their support. FOSA was able to make a surplus of Kshs.230 million during the year 2014. I wish to make a passionate appeal to all of you as delegates to channel your salaries through FOSA, and urge all the members to do the same. Let us also patronize the FOSA products to strengthen the Society's financial position and also improve our income generating capacity.
To enable our members transact with FOSA from all parts of the country, the Society has ATM ana MSacco services that enable members to access their FOSA accounts at their convenience. We shall continue to use technology to improve service delivery to our members. Currently, members remitting their salaries through FOSA are able to apply for MSacco Advance through their cell phones any time. We have so far registered 10,230 MSacco accounts and we urge you to encourage all members to enroll for the service.
To take services closer to members, the Society has so far opened five FOSA branches, and we shall continue to use the strategy of opening branches to reach out to
our members.

Dear Delegates, Micro credit is a line of business focusing on the provision of loans to members of self-help groups, primary cooperatives, welfare groups, chamas, registered businesses, registered companies and individual members, through the use of cross guarantees or collateral securities to secure the loans. This Activity will mainly target Group B members.
Micro credit financing is a potential and dynamic line of business to grow our Society. It will open up the Sacco membership to businessmen and other organizations that form an important sector of our economy. As you are aware, most our members engage in various economic activities in addition to their employment. Such members bank their business income with commercial banks, and rely on such banks for funding of their businesses needs. We need to change this scenario and bring the members on board through Micro Credit and collateral based securities. By doing this our Sacco will be directly contributing to the attainment of vision 2030 by mainstreaming the low income earners who constitute the bulk of the unbanked.
Micro Credit is a new line that requires approval by SASRA, our regulators. We have engaged a consultant to conduct feasibility study to support viability of the project. We shall advice you immediately we launch the product.
Dear Delegates, as reported to you earlier, we have entered into partnership with Family Bank in the provision of customer cheque books solution. We are at the final stage of printing the cheque books to be ready for use. However, those members who will require using them for payments will require to apply for them to enable the office print their account details. This is aimed at resolving the complaints that have arisen on limited access to funds through ATMs. This will also enable our account holders to transact using the cheque books.
This is an important solution to facilitate payment, especially now we are venturing into micro credit. I appeal to members to patronize the product.
Dear Delegates, as informed during the Education Meeting the Sacco intends to adopt the Flat Rate Interest System to increase members' borrowing capacity. This change will enhance the borrowing capacity of members. I therefore urge you to advice members to reciprocate by patronizing FOSA products as their loans are not share based.
Ladies and Gentlemen, the society is working on a policy to introduce use of collateral as security on loaning to members. This will reduce the burden left to guarantors whenever defaulting of loans occurs; it's a desired condition particularly when the society introduces the new micro- credit products. The board and management will be keen to develop a method and process of determining Collateral requirements, including loan-to-value ratios; amount of loan to be given verses the value of the property after determination of value, title search, and insurance requirements; steps to Be taken to secure various types of collateral; and how often the Value and marketability of collateral is reevaluated;
Dear Delegates, the Board is in the process of reviewing the term limits of existing BOSA and FOSA loan products to cushion members against increased statutory deductions and dissuade them from seeking loans elsewhere. The Board is considering introduction of new products including collateral based loan products. The Society is in the process of laying the foundation for launch of micro credit business line.
Dear Delegates, to stop consideration of share capital in loan appraisal - the Society has previously been granting loans based on a multiplier of three (3) of total contributions which includes share capital of Kshs.10,000. This is in contravention of SASRA regulations which stipulate that only deposits and not shares shall be put into consideration when granting a loan. SASRA 32 (4) -" A Sacco Society shall not grant a loan or credit facility against a member's shares". Also the Board intends to reduce permitted loan frequency from three to one month, the current practice is that a member has to service a loan for at least 3 months before being granted another one. The Board has resolved that henceforth, a member shall qualify to be granted a loan provided that the recovery of the previous loan has commenced.
Ladies and Gentlemen, with a view to curbing the increasing rate of default on loans, the above were introduced via the Credit Reference Bureau Regulations 2008 operationalised in February 2009. The Bureaus are intended to share information on loan default.   Defaulters reported to the Bureaus are blacklisted thus cannot access loans for a period of 5 years upon their being reported. Your Sacco has listed with one of the Bureaus.
Members were informed of our registration with the CRB and each one of us was to ensure the loan repayment is up to date to avoid their names being sent to bureau as this will prove their credit unworthiness to seek credit elsewhere. The Society has since started listing of defaulters. Defaulters are listed subject to being given a one month's notice to regularize their loans accounts. We ask our members to repay their loans promptly to avoid such embarrassments whenever they to seek credit facility.
Ladies and gentlemen, the growth of FOSA business has created the need for the Sacco to generate additional financial resources to support our existing businesses and diversify our business, to enable us aggressively confront the challenges and to meet members financial needs. The Society's Vision is to increase its returns through superior performance by a portfolio growth of its investments. It seeks to grow member/investor confidence through expanding the FOSA services and operations with a view to bringing services closer to its members.
The Management believes that the Society's Vision and Mission can be achieved through expansion, investment and diversification, thereby increasing the Society's growth objectives and consequently, the potential of increased shareholder returns. To enhance working capital and create a fund for the future growth and expansion in the Society we are making this offer to purchase shares to its registered members and intend to apply the funds in the expansion of FOSA Investments. This will lead to improved liquidity that will facilitate the opening of more FOSA offices at strategic positions/locations, thus bringing these vital services closer to members.
The Board seeks through the shares purchase to increase investments by members and boost their stake in the Sacco. The venture we are undertaking is expected to boost performance of the Sacco as we utilize the competencies available within our management to exploit business opportunities in the financial services sector. The Board of Management will endeavor to continuously come up with innovative ways of doing business in order for our Sacco to grow in this industry, create wealth and increase investment returns. With the sale of those shares, the Sacco will raise capital and remain geared towards expansion. I welcome the delegates to take this opportunity to acquire the shares by investing and supporting our Sacco for posterity and sensitizing the members of the same. With your support, the future looks bright. Notwithstanding the above, we will continue to improve and grow our business strategies to generate new sources of revenue and earnings thus, enhancing shareholders value in the long run.
The drive will too allow the Sacco to have perpetual owners as the shareholders. Members acquiring the shares should be advised to desist from the current habit of disposing the shares as soon as they retire as this will be tantamount to reducing their stake in the Sacco. Let me state that the share sale is available to members only.
Dear Delegates the resolutions as passed during the last Annual Delegates' Meeting have been dealt with as detailed below:-


Ladies and Gentlemen, it is now a requirement that Saccos have a Nomination and vetting Committee to vet and clear candidates to vie for position in the Board of Directors. Those who would like, in the coming future to vie for positions in the Board will thus be required to apply to the Nomination Committee for Vetting ninety (90) days before the elections. The Committee will then advise those who will have been cleared and those not cleared in writing. Only cleared candidates will be allowed to contest for positions falling vacant at the ADM.
Ladies and Gentlemen, the operating environment has remained dynamic and members' needs continue to change. Competition in the financial sector has risen to levels that several institutions are striving for a market share by providing new and innovative services to grow their customer base. The changed regulations in the financial sector particularly formation of SASRA has created order and prudence in financial management, through the prudential standard requirements of core and institutional capital, liquidity and investment ratios and the risk management. We believe these will both streamline the Sacco Sector and enhance public/member confidence in the movement. In view of the aforementioned, the Board of Directors will seek to review the bylaws with a purpose to provide an enabling environment and conform to statutory requirements.
Dear Delegates, Ukulima Sacco has made notable strides in the use of ICT to enhance efficiency and convenience in service delivery to our members. We have successfully introduced Mobile Banking platform (MSACCO) which has enabled members to access their funds through their mobile phones. This facility has now been expanded to allow members who channel their salaries through FOSA to apply and receive Mahitaji Loans, which are advances against their salaries. Members can now apply for this loan through their phones, request for guarantors through the phones and upon approval the funds will be credited to their accounts without visiting the FOSA office. They can then withdraw using their phones. I therefore urge all members to open salary accounts with FOSA to enjoy this facility. We are still researching on more innovative products that can be rolled out to you through the use of technology.
We have also introduced the use of bulk messaging as a means to enhance communication with our members and update them on developments within their Sacco. Through this-means we intend to reach every registered member at a personal level and sensitize them on new products and services. I also urge members who have not given us or have changed their mobile phone numbers to do so.
Since we acquired a new ERP System called Navision, we have made great strides in computerizing most of our processes, such as:
1       We are now able to process top-up loans automatically; members need not travel to the headquarters to process the Daraja loan manually.
2.                   Processing of loans has become much faster because since all the required
information is available in the system
3.                                       SMS Alerts are now sent to members when a loan is received and processed in
the system, salary is credited into a member's account or when a withdrawal is
done from the account.
4.                   Members are now able to withdraw or deposit cash at any FOSA branch to either
boost their shares or reduce their loan balances, obtain statements or answers to
their queries etc. The system has enabled FOSA branches to act as mini
Ukulima Sacco whereby all the services rendered at the headquarters are
available at the branch level. As a result members do not have to travel to
Nairobi to get services but can be served at any branch.
5.                   The system has enabled processing of erroneous payments to be paid into the
respective Fosa accounts for the members, this has ensured that we do not have
to write individual cheques and as a result we save on cost of cheques and man-
6.                   Dividends are now processed at the touch of a button and disbursed into the
members' accounts from where they are able to withdraw from the comfort of
their homes. Additionally, this efficiency has greatly helped reduce the number of
7.                   Trial balance can be produced online, any time.
8.                   The Society has better control of its finances since approved budgets are now
easily monitored from the system, showing expenditure used and balances
9.                   The system is centralized, this means that your account is always up to date,
regardless of where you transact from; ATM, MSacco or at the counter.
Through our website,, we intend to market our products and services, post news and updates on current issues within the Sacco. Members can visit the website to keep themselves updated on the Society's events. The enhanced website now has a loan calculator which members can access from anywhere, that shows them how much they qualify for and a payment schedule. We shall soon be introducing web banking where members will be able to log on and view their account statements, next of kin details, personal information, loan application status and so on online.
In summary, ICT has improved operational and administrative efficiency thus saving costs to the Society while ensuring convenience and timeliness of service delivery to the members.
Ladies and Gentlemen, Collaboration with IPPD staff in Counties has ensured that the teething problems that the Sacco has been experiencing are minimised. The biggest challenge that is still persisting is the movement of staff between the National and County Governments.
ISO 9001:2008
Dear Delegates, in our pursuit to improve service delivery effectiveness and efficiency, the Society during the year 2014, engaged Apex Consulting Africa Ltd (ACAL) to assist in development and implementation of a Quality Management System based on ISO 9001:2008 International Standards. I am glad to inform you that through the dedication and commitment portrayed by the staff all the Society operational processes and procedures have now been validated and documented. I strongly believe that adopting Quality Management Systems (QMS) will set out a more efficient working practice, focusing on the business objectives of the Society and improve communication and levels of customer satisfaction survey. Going with same pace, we look forward to being ISO 9001- 2008 certified before the end of this year. This will lift the Sacco to the community of elite enterprises and also ensure that we are listed in the Nairobi Stock Exchange upon the enactment of requisite regulations.

Dear delegates, I am delighted to inform you that during the year under review, the society in line with its strategic objectives carried out the above exercise
Overall Findings
1.                                  Overall Satisfaction Index for Ukulima Sacco Society is 72%. Customers
expected us to perform at 87% hence a Satisfaction Gap of 15% to breach if we
are to delight them. At 72% our customers are just satisfied   hence a need to
perform better.
2.                Specifically, the following touch points scored lower than the overall
Satisfaction Index; Promotion, Marketing & Communication (66%), Channels of
Banking Services (71%), and Physical Environment (70%)
3.                Customer Care: We are generally performing well in Customer care at 74%
against customer expectations of 87%. We need to improve in our  ability to
solve problems quickly and   customer follow ups / after sales service. We
scored poorly in Nairobi and South Rift regions in this particular touch point
4.                Product, Price & Value: Main parameters to improve in are; Service
innovation and offering of unique products & services.

Ladies and Gentlemen, the society has not been without challenges/problems. The problems/challenges experienced have always been our enemy to overcome.
ü  Devolution and decentralization of government payroll
ü  High loan demand by members.
ü  Delay in remittances of society's funds by some employers
ü  Erroneous loan recovery by some employers
ü  Challenges to over come
ü  Loan defaulters and non performing loans
ü  Reducing membership through retrenchments now that the 5 year grace period
has expired
ü  Competition from financial institutions such Banks, Micro Finance Companies
and other Saccos.                         
Future Prospects & Performance
Dear Delegates, due to the austerity measures adopted above and also the aggressive marketing strategies tnat have been put in place, our Sacco's future appear quite bright. Since the launch of the shares drive in March, 2015, we have recorded significant subscription within the short period. This will give us the resources we need to expand and grow our business   This is a new kid on the block that we are now nurturing into a successful resource revenue generation to give us the capacity.

>     Diversification of our business
>     Opening FOSA offices
>     Opening microfinance institution business
>     Introduce other collateral securities for loaning
>     Adopt ISO certification process
>     Recruitment more members
>     Introduce affordable variety of products and services on favorable terms.
Ladies and Gentlemen, as members of the Ukulima fraternity, I wish to thank you most sincerely for attending this meeting. Your proposals as will be given will go along in improving your Sacco. Your presence here today demonstrates your support of our Sacco for which 1 am very grateful. I look forward to this support in other Sacco
I again wish to thank the Ministry of Co-operative Development & Marketing, Officials through the Commissioner for Co-operative Development, County Co-operative Officer Mrs. Enid Njeru and the District Co-operative Office, Mrs. Hellen Njuguna, for the guidance that has steered our Sacco to our current heights. We also wish to appreciate the role our regulator Sacco Societies Regulatory Authority (SASRA) has played in the Sacco moreso in the ongoing Shares Drive.
Special mention is also reserved to our other partners, the Kenya Union of Savings & Credit Co-operatives (KUSCCO) and our bankers, Co-operative Bank of Kenya who have given us a lot of support in providing a worthy platform that facilitated the enhancement of our Members' financial capabilities.
The Sacco Delegates, Board of Directors and Supervisory Committee, Management and staff deserve recognition for availing themselves, sometimes at odd hours and short notices when required to serve our Members during the year. To them I say that we continue keeping our eyes on the ball as the coming years hold a lot of expectations from Members.
1 once again wish to thank our Guest of Honour for sparing time from his busy schedule to be with us today and for the many words of wisdom he will provide us.
Long live the Co-operative Movement, long live Ukulima Sacco.

Thank you very much and May God Bless you.


28TH APRIL 2015

No comments:

Post a Comment