Nairobi: The government and other stakeholders are pushing for the merger of small cooperative societies as part of boosting their competitiveness both locally and internationally. Cabinet Secretary for Cooperatives and MSMEs Wycliffe Oparanya emphasized that small cooperatives cannot endure local and global emerging competitive dynamics, thus highlighting the necessity to adopt new strategies to remain viable in the business landscape.
According to Kenya News Agency, Oparanya pointed out that over 216 regulated SACCOs have asset bases below Sh1 billion, restricting their capacity to compete effectively. He made these remarks during the 4th annual Cabinet Secretary's Cooperative Movement Stakeholders' Forum, urging Savings and Credit Cooperative Organizations (SACCOs) with similar economic or social bonds to consider mergers or shared services, especially in ICT platforms. This move is seen as crucial for achieving economies of scale, improving service delivery, and maintaining competitiveness in the era of fintech-driven financial services.
Oparanya further stated, "Global business practices demand entities to consolidate resources in order to enjoy economies of scale. Further, merging of small cooperatives, especially the SACCOs will boost Kenya's competitiveness in the global cooperative movement." He noted that cooperative leaders and managers need to adopt international best practices that ensure high returns, citing successful examples of consolidated cooperative entities in the USA, Canada, and Europe.
The Cabinet Secretary also mentioned that the merging process would require stakeholders, including the government, to review the legal framework to facilitate the massive registration of new cooperative societies. He expressed concerns over self-interested business individuals seeking registration of new cooperative societies and the splitting of big institutions due to leadership disputes and resource mismanagement. The government's new advocacy is for small cooperatives to embrace innovative business models that manage costs, compete aggressively, and enjoy economies of scale.
Oparanya urged the cooperative movement to focus on innovation and sustainability, emphasizing the importance of ICT adoption to compete with digital lenders and commercial banks. "Shared digital platforms, fintech partnerships, and sound cybersecurity practices are no longer optional; they are critical for growth and resilience," he asserted.
McCloud Malonza, Chairman of the Cooperative Alliance of Kenya (CAK), echoed these sentiments, stressing the need for technology integration and consistent reporting standards. He emphasized the transition from paper ledgers to digital solutions and the adoption of International Financial Reporting Standards (IFRS) tailored for SACCOs and cooperatives, combined with rigorous, risk-based audit procedures.
Malonza noted, "By doing this, we signal to our 14 million members, to the government, and to international partners that the data coming out of the Cooperative Movement is verifiable, reliable, and absolutely trustworthy." He expressed optimism about the cooperative movement's growth trajectory, citing strong fundamentals and ongoing reforms as key drivers of local and international development.
The Department of Cooperatives reports that Kenya has 26,582 registered cooperatives, including 13,511 SACCOs and 4,300 Sacco agents. Despite their significant contribution to the national economy, some cooperatives remain small with limited assets, unable to cover their expenses.
Kenya's cooperative sector boasts a robust and growing asset base, with the regulated SACCO industry's total asset base reaching Sh1.07 trillion last year. The country ranks first in Africa regarding membership and deposits and seventh globally.