Expanding Financial Horizons

Expanding Financial Horizons: How product Diversification is Revolutionizing Saccos in Kenya
By Caroline Machira
Savings and Credit Cooperatives have become a popular financial institutions in Kenya, with millions of Kenyans relying on them for various financial services. Over the years, Saccos have evolved to offer a wider range of products and services beyond traditional savings and loans. This shift towards product diversification has proved to be beneficial for Saccos in Kenya.
Product diversification involves offering a range of products and services that cater to different customer needs. Diversification can take many forms, such as offering new savings and loans products, insurance products, investment products, and mobile banking services, among others. By diversifying their product offerings, Saccoshave been able to improve their financial performance in many ways.
One of the benefits of product diversification for Saccos is increased revenue streams. By offering new products and services, Saccos can tap into new revenue streams, reducing their reliance on a single product or service. For example, if a Sacco only offers savings and loans products, diversifying into insurance or investment products can provide additional sources of income. This approach has worked well for many Saccos in Kenya, including Harambee Sacco, Stima Sacco, Mwalimu Sacco among others, which offers insurance and investment products alongside its traditional savings and loans products. The additional revenue streams have helped the Saccos to grow and expand their operations.
Another benefit of product diversification for Saccos is reduced risk exposure. Relying solely on a few products or services can increase the Sacco’s exposure to risk. By diversifying their offerings, Saccos can reduce their reliance on a single product or service, thereby reducing their risk exposure. This approach can also help Saccos to weather economic downturns, as they are not solely reliant on a single product or service. For example, during the COVID-19 pandemic, Saccos that had diversified their product offerings were better able to withstand the economic shock than those that had not.
Product diversification can also help Saccos to improve their customer experience. By offering a range of products and services, Saccos can meet the diverse needs of their members. For example, offering mobile banking services can improve customer convenience and accessibility, while offering insurance products can provide protection for members against various risks. Many Saccos in Kenya have embraced mobile banking as a way to enhance customer experience that allows members to access their accounts and conduct transactions from their mobile phones. This has improved customer convenience and reduced the need for members to physically visit Sacco branches.
In addition, product diversification can help Saccos to tap into new markets and attract new members. By offering products that cater to the needs of specific groups, Saccos can attract new members who are looking for financial solutions that are tailored to their needs. For example, by offering Sharia-compliant products, Saccos can attract members who require financial services that comply with Islamic law. Similarly, by offering products that cater to the needs of small businesses, Saccos can attract new members who are looking for financial solutions that are tailored to their needs. This approach has been successful for many Saccos in Kenya, including Unaitas Sacco, which offers a range of products for small and medium-sized enterprises.
Product diversification can also help Saccos to expand their operations and improve their competitiveness. By offering a wider range of products and services, Saccos can become a one-stop-shop for financial services, which can improve their competitiveness. This can help Saccos to attract more members and retain existing ones. For example, by offering a range of investment products, Saccos can compete with banks
Another significant benefit of product diversification in Saccos is the ability to attract a wider range of members. By offering a variety of products and services, Saccos can cater to the diverse financial needs of their members. For example, a Sacco that specializes only in savings and credit services may only attract members who need those particular services. However, by diversifying their offerings to include insurance, investments, and other financial products, they can attract members with a wider range of financial needs.
This ability to attract a wider range of members can lead to increased membership and revenue for the Sacco. As more members join the Sacco, the pool of funds available for lending and investment also increases, providing more opportunities for growth and expansion. Additionally, diversifying the products and services offered by a Sacco can also help to reduce the risk of overdependence on a single product or service, which can be detrimental to the Sacco’s financial stability in the long run.
Moreover, product diversification also enables Saccos to adapt to changing market trends and member needs. By keeping up with changing financial trends and responding to members’ evolving financial needs, Saccos can maintain their relevance and competitiveness in the market. For instance, the advent of mobile banking and digital payments has transformed the financial services industry, and Saccos that have diversified into these areas have been able to leverage the benefits of these new technologies to provide more convenient and efficient services to their members.
In conclusion, product diversification has numerous benefits for Saccos in Kenya. It enables them to spread their risks, attract a wider range of members, generate more revenue, and adapt to changing market trends and member needs. However, it is important for Saccos to undertake thorough market research and due diligence before embarking on any new product or service to ensure that they align with their strategic goals and member needs. Additionally, Saccos need to develop sound risk management strategies to mitigate the risks associated with diversification and ensure long-term financial stability. With proper planning, execution, and management, product diversification can be a valuable strategy for Saccos looking to grow and thrive in Kenya’s dynamic financial services sector.