Why SACCOs Cannot Afford To Skip Core Banking

"We want to ensure that we take SACCOs to the next level in terms of the digital era we find ourselves in. SACCOs have to...


Why SACCOs Cannot Afford To Skip Core Banking
SACCOs need to return to their core.

“We want to ensure that we take SACCOs to the next level in terms of the digital era we find ourselves in. SACCOs have to prepare to compete in the fintech space. We want to serve them and help them grow and access Millennials, ” introduces Wambui Mbesa, CEO INTRASOFT International East Africa.

With INTRASOFT being the healthy company that it is in terms of profitability, with over 2,200 professionals across 20 nationalities across the board with headquarters in Greece, SACCOs could not have asked for a better partner. When they came into East Africa via Rwanda, INTRASOFT’s first focus was in the SACCOs. They expanded into the public sector in the areas of social security systems handling accounts such as our very own NSSF.

We all know and love our SACCOs. They are lifesavers. But in recent times they have been upended with headlines proclaiming their doom. The reality today of the SACCO sector was seen when SASRA pushed SACCOs to merge, and there was reportage of bad loans owing to COVID-19. The outlook is that the pandemic has forced organisations to change and adapt digitally.

But according to Gerrard Kosgei, Project Manager, Banking and Finance at INTRASOFT, “If you look at the numbers, COVID-19 just brought out a symptom. SACCOs needed to go digital.” SACCOs represent approximately 5.55 per cent of Kenya’s GDP. However, the number of SACCOs is reducing with less than a billion in deposits. In 2020 for instance, there were 172 registered SACCOs compared with 215 in the same period in 2012.


The SACCO sector is about empowering members with easy access to credit and allow them to save as much as possible. How can they then make use of a core banking system? How can you as a Sacco make use of your SACCO base? Can SACCOs processes take them into the near future, two to five years down the line? What is the outlook for SACCOs? What challenges can core banking address?

These and more are questions every self-respecting SACCO is no doubt asking and seeking answers to. Some of the afflictions stifling SACCO growth at the moment range can be seen below.

  • As much as SACCOs have been growing faster than the banks, there is a lot of room for SACCOs to grow. This despite their growth curve slowing down.
  • Some of the things that have changed include the process of having a guarantor for one’s loans. That has since been phased out. A lot of SACCOs are moving to unguaranteed (aka FOSA or instant) loans.
  • With job losses and salary cuts, members cannot afford to pay as fast. Loan restructuring where loans are restructured downwards/ do so downwards mostly.
  • Not many members are willing to take long-term loans because they are not sure about their jobs.
  • Mass withdrawals with SACCOs closing branches with people in that area then left unserved.

Conventionally, loan processing starts with a member filling out a form, and the scoring system kicks in. This is all done by individuals with a cross-section of jobs. Core banking systems eliminate the tedium, replacing it with a far more efficient automated workflow. So simple is the process, members can initiate the loan on their phones from the comfort of their homes.

The system does the thankless task of vetting loan eligibility, allowing for the creation of dynamic parameters. This is all done seamlessly and automatically. Credit officers can then shift focus to creating, generating and granting more loans rather than managing the grunt work.


Loan recovery, for instance, a process requiring loan officers to have to block and unblock systems manually is time-consuming. It is up to the SACCO to design the system as needed. If, say a member has not paid in time, yet their account is active, loan officers do not have to try recovering the money manually. The core system does what is called sniffing, doing recovery automatically.

Disbursements of loans exceeding deposits

The one challenge SACCOs have to deal with on the daily is making sure that there aren’t a lot of unnecessary withdrawals; that SACCOs members know the money they have can be used to transact without having to move to mobile money or a second or even third platform to deploy.

Here is where core banking shines with its omnichannel perspective. It allows for multiple avenues of transactioning directly from the mobile phone. The same mobile SACCOs need to use to urge members to set up fixed deposit accounts as a means of beefing up savings instead of turning to other sources.

The beauty of this is if your money comes through payroll. Core banking brings with it 24/7 access. Officers can develop leads through mobile phones as well. Owning the core banking system also allows you to integrate customisations. One does not have to keep engaging the vendor.


One thing as a SACCO member I have looked forward to every end year were dividends. SACCOs know they need to be liquid for this because members expect it. Over the last few years, there has been a shift to mobile loans.

“But what if you can offer differentiated products by looking at your member bases such as farmers or teachers – offer unique loans in the system allowing you to issue multiple mobile loans, seeing your revenue increase tenfold because you have new revenue streams. You also have more touch-points for mobile loans through agents and the internet too,” a vision Gerrard paints clearly and succinctly.

Staying safe and secure

Being able to transact fully through a core banked SACCO brings stability and reliability, preventing multi blanking and use the SACCO as a means of moving money. It makes one more loyal, allowing them to invite others to bring themselves and their money to the SACCO. An enhanced member experience, where they feel catered to, will mean more members, deposits and financial growth.

Then there is security, a matter SACCOs seriously need to address especially with vulnerabilities that have been exposed over the past few years. SACCOs without cybersecurity measure have a weak spot and have been hit by cyber threats. The core banking system comes with inbuilt security.

Here, it is evident, SACCOs operate optimally in terms of business practices. It is far easier to take a SACCO to next-level greatness when all the niggling little elements have been taken care of by a behemoth of a system.

Revenue, clients and business all grow, the field is levelled out for glorious competition, and retention of members who get value for their money through multiple channels is realised. Members participate in banking services such as those offered by commercial banks with solutions that are on par with digital banking. This is why the sector has to embrace digital channels

For even deeper insights into core banking for SACCOs, click here. And be sure to follow @WambuiMbesa on Twitter.

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