EXCLUSIVE: Kenya’s co-operative sector positively impacts livelihoods, growing economy – PS Ali Noor Ismail

When you talk about the cooperative sector, you are referring to Kenya’s source of livelihood support and economic development. This is according to the outgoing Principal Secretary (PS) State Department of Co-operative Ali Noor Ismail.
In a one-on-one interview with Sacco Trend Magazine, Ismail noted that the cooperative movement directly touches the lives of all Kenyans. Having served in the sector for more than seven years, he said that the majority of Kenyan leaders were educated in the sector.
“I have been in this sector for about seven years – from 2016-2018 then I stepped out to the environment ministry and in March 2019 I came back here. I can say I am the longest-serving PS for co-operatives in the context of the previous administration.
“I see co-operatives as a very impactful sector. A sector that touches directly on the lives of people in the country. The majority of the leaders we have in this country were actually educated with the help of the cooperative societies,” said Noor.
Co-operative sector growth
With more than 26,000 registered cooperatives, the movement continued to register faster growth in the East African region and the entire continent.
The PS revealed that Kenya’s cooperatives are leading in the African continent, with over 14 million members and an asset base of about KSh 1 trillion to KSh 1.5 trillion. Members’ deposits stand at about KSh 580 billion.
More than 2/3 of Kenyans have had interaction with the sector, either directly or indirectly supporting their livelihood and improving their living standards.
“The co-operative sector is large and important to the country. It has more than 26,000 co-operatives, but I can confidently say that on the lower side, 10,000 co-operatives, whether they are SACCOs or mainstream cooperatives, are active and the number could be much more than that.
“…it is considered number 1 in Africa and 7th globally. In terms of employment, the sector has directly employed an estimated 500,000 people and probably another 1.5 million people indirectly,” he said.
The PS reiterated the strides taken by the sector in maintaining its position both locally and internationally.
He noted that the Sacco subsector which comprises mainly Deposit Taking (DT) SACCOs beat global credit unions in terms of growth.
“Our forefathers started the cooperative movement as an avenue to empower the African people. We have made a lot strides making us number 1 in Africa and 7th globally. But there are other countries like Ghana, Rwanda, Botswana and Ethiopia that are doing well in the sector. Although they have not reached the level of Kenya. Our neighbours Tanzania are doing well, especially in the agriculture cooperatives.
“Apart from mainstream cooperatives, our Sacco subsector is the fastest growing, not only in Africa but also across the globe. These are financial co-operatives – including, Mwalimu National SACC), Harambe SACCO, Stima SACCO, and Kenya National Police DT SACCO among others.”
Co-operative sector reforms
Despite this tremendous growth, the sector has been also facing challenges including governance, leadership and financial constraints, among others.
Noor said the government has been and continues to stand firm in instituting sustainable reforms that beings solutions to the problems facing the sector.
“One of the key challenges in the sector is governance, in isolated cases, we have had challenges in governance. In cooperatives, we operate based on the seven principles –
“There are certain universal guiding principles and values – integrity, honesty and others, which are accepted at the level of international cooperatives alliance, which is our global body. At any given time, if you are a leader in the cooperative sector you are supposed to subscribe to those values and principles,” he explained.
He affirmed that despite such challenges caused by a few leaders in the sector, the cooperative movement is 90% sound and stable.
The PS cited the resilience of the cooperative movement, especially during the COVID-19 pandemic, recording steady growth in key performance indicators like assets, deposits and loans.
“Unfortunately, in certain instances, in certain societies the leaders have done things considered to be unethical. They use their trusted positions as leaders to act against the cooperative values and principles. For example, misappropriation, things like insider loaning, where they lend themselves beyond what you are entitled to… the problem revolves around housing and investment co-operatives like Ekeza, and the current Metropolitan Sacco issue which we are resolving.”
The sector falls under the devolved functions of the county government, meaning all operations are governed by the county. The national government only set policy legislations and institutional frameworks employed in the sector.
PS Noor said the Ministry of Co-operatives undertook major reforms for the first time in over two decades, to ensure the challenges in the sector are dealt with. Over the last 7 years, the government has undertaken the following key policy reforms;
- National Co-operative Policy
The National Co-operative Policy is based on the key legislation Co-operative Societies Act intended to take the movement to the next level.
“The last policy done in the sector was about almost 20 years ago and since devolution, we have not had a policy that is consistent with the devolved nature of the sector. We engaged the stakeholders and passed this policy in Cabinet in 2019 and in 2020 it became a sessional paper no 4. 2020 after parliament approval,” the PS noted.
Among the key proposals in the policy, reform was to review the mother legislation so that the respective roles of the national and county government are very clear in the law.
The police gave birth to the draft co-operative bill of 2022 which seeks to overhaul the co-operative act. - The non-deposit-taking SACCO business regulations 2021
The regulation was instituted to incorporate non-deposit-taking SACCOs with over KSh 100 million in deposits under the Sacco Society Regulatory Authority (SASRA). The regulator has been taking watch of up to 175 DT SACCOs but according to the PS, a need arose to curb possible risks resulting from non-DT Sacco’s with large deposits.
“We saw that there are other SACCOs holding huge member deposits which are not under SASRA regulation, posing a risk… that SASRA cannot regulate all these SACCOs. The regulation directed that SACCOs with deposits of KSh 100 million above should come under SASRA,” noted the PS.
Through this process, an additional 190 non-DT SACCOs were brought on board the SASRA regulations. - Amendment to Sacco Societies Act
The PS said the ministry obtained approval from the cabinet to amend Sacco Societies Act and establish a Central Liquidity Fund (CLF) through a shared service technology platform.
“This is the central reserve for SACCOs, just like the Central Bank of Kenya (CBK) acts as a reserve for banks. This will enable inter-Sacco borrowing on a temporary basis and bring societies to the national payment system.” - Deposit Guarantee Fund
The amendment also established the Deposit Guarantee Fund (DGF) for SACCOs. This is an insurance scheme that covers members’ deposits in the event a SACCO goes under.
“It is an insurance scheme for SACCOs to cover members’ deposits so that in the event it goes under, members’ funds are insured,” said the PS.
Other reforms include the establishment of the KSh 3 billion coffee cherry revolving fund, digitisation of coffee co-operatives and a weighing scale that gives standard receipts reflected in the farmers’ phones to remove human interference.
The cooperative movement continues to grow, even as the government introduces facilities like the Hustler Fund via the sector to empower Kenyans.
The Fund which was launched by President William Ruto on November 30, 2022, targets small business owners and low-income earners who can access it either individually or through SACCOs and Chamas.
“The Hustler Fund target people at the bottom of the pyramid. In this country, we have had many years of lending, which has been prohibitive charging high interest. This will give access to affordable credit at an interest of 8% per annum.
“We will start with the personal loan product, but there are other loan products that will come up later, including micro-loans, SMEs and start-up loans,” PS Noor revealed.