UNITED NATIONS SACCO SOCIETY LIMITED
STRATEGIC PLAN 2015 - 2017
April 2015 FOREWORD BY THE CHAIRMAN STRATEGIC PLAN 2015 - 2017
he UN SACCO has the mandate of providing financial services for the economic empowerment and social progress of its members. The SACCO intends to enhance this mandate by implementing this three year strategic plan, covering the period 2015-2017. Following the expiry of the strategic plan for the period 2012-2014, the board and management embarked on an all-inclusive process of developing a new plan for the period 2015-2017, taking into Taccount changes in the operating environment as well as the need to align the services with the membership financial needs.
Given the dynamic operating environment, emerging business trends and the determination to be the financial solutions provider of choice, the Board of Directors and the Management reviewed the SACCO’s operations structure and business focus in order to be competitive. They revised the Vision statement and retained the Mission Statements to benchmark with the market leaders in the financial services. The new Vision statement is “The financial solutions provider of choice”. The corresponding Mission Statement is “To uplift the social economic status of our members by offering them quality, affordable and diversified financial services”.
This plan has embraced the concept of the Balanced Scorecard performance management framework in its thematic areas to align our business activities and programs with the corporate objectives and strategies. The financial perspective has been addressed through focus on revenue growth, capital growth, loan book growth and cost optimization. The theme on customer service addresses membership growth, improved customer satisfaction, corporate image, new product development and improved information access by members. Internal business processes perspective focuses on improved operational efficiency, business processes automation, review of policies and procedure manuals, business continuity planning and increase in office space commensurate with business size. Finally, the learning and growth perspective focuses on enhancing the organizational capacity levels for members, board and staff. The plan therefore balances financial, human resource, business development and operational concerns.
The good aspirations of this Strategic plan can only be realized through an effective implementation. This will be facilitated through prudent talent management supported by appropriate systems and processes to offer quality service to our customers and ultimately enhance business growth.
I wish therefore to take this opportunity to emphasize the Board’s commitment to providing guidance and oversight role to ensure the goals of this strategic plan are realized. Finally, I take this opportunity to sincerely thank all those who participated in the development of this strategic plan. In particular, I acknowledge the valuable input of the Board, Supervisory Committee, the Ministry officials, Management and Staff.
Lastly we are highly indebted to the facilitative role and expert guidance provided by M/S Alpex Consulting Africa Limited during the preparation of this plan.
Samuel Olago CHAIRMAN, BOARD OF DIRECTORS
ii United Nations SACCO Society Limited • Your Financial Anchor PREFACE STRATEGIC PLAN 2015 - 2017
he challenge that the Management faces is to ensure that this Strategic Plan is disseminated and owned by staff throughout the organization. Members of staff have the contributory responsibility of ensuring sustainable growth and prosperity of the SACCO. If we do not plan, we plan to fail .I am therefore happy to note that considerable time and resources have gone into developing this corporate road map. This Strategic plan takes cognizance of the changes Tin the environment that are constantly impacting on the financial industry especially in the areas of technology, customer focus, and security and the critical need for sustainable growth.
In order to achieve our ambitious goals as set out in this strategic plan, our most important asset, human capital is expected to play a key role in developing an appropriate corporate culture that continuously embraces change based on dynamism in the operating environment. This will not only enhance productivity and facilitate radical improvements in the quality of customer service and corporate image but also improve shareholder value.
To enhance our mandate, customer/members are considered paramount and will therefore be a key area of focus during the strategic plan period. Processes and procedures will be streamlined and strengthened at all levels of the organization to ensure good corporate governance.
The Strategic plan targets improved financial performance through new revenue streams to expand the revenue base, outsourcing of non-core activities, cost management and institutionalization of risk management. Implementation of this strategic plan has been structured to ensure accountability at all levels with explicit expected deliverables for all activities within clear timelines. Sound performance targets have been set, backed with adequate budgetary provisions and supported by clear responsibility centres. For sustainable business growth, the plan will be implemented while continuously embracing our core values.
Monitoring and evaluation will be done at all levels of operation through a sound performance management system. Senior management will periodically review progress on the implementation of the plan while my office will submit quarterly reports to the Board of Directors.
I note with great expectation that the Strategic plan recognizes the integral need for deepening of partnerships with other service providers and also envisages closer collaboration with the regulator.
It is my conviction that with professionalism, teamwork, creativity, innovation and commitment during implementation and adequate support from all stakeholders, this 2015-2017 Strategic plan lays a strong foundation towards the realization of our Vision to be “The financial solution provider of choice”.
Clement Tongi, CHIEF EXECUTIVE OFFICER
United Nations SACCO Society Limited • Your Financial Anchor iii Table of Contents FOREWORD BY THE CHAIRMAN II PREFACE III LIST OF TABLES V LIST OF ABBREVIATIONS VI EXECUTIVE SUMMARY VII 1.0 INTRODUCTION 9 1.1 CONTEXT OF THE STRATEGIC PLAN...... 9 1.2 BRIEF PROFILE OF UNITED NATIONS SACCO LTD...... 9 1.3 RATIONALE FOR THE STRATEGIC PLAN...... 11 1.4 METHODOLOGY USED IN DEVELOPING THE STRATEGIC PLAN...... 12 1.5 STRUCTURE OF THE PLAN...... 12 2.0 SITUATIONAL ANALYSIS 14 2.1 THE SACCO AND DEVELOPMENT IN KENYA...... 14 2.2 IMPACT OF THE SACCO SOCIETIES ACT ON SACCO SOCIETIES OPERATIONS...... 14 2.3 KENYA’S ECONOMY AND DEVELOPMENT OUTLOOK...... 17 2.4 PERFORMANCE OF SACCOS 2013...... 18 2.5 CHALLENGES IN THE MANAGEMENT OF SACCOS...... 19 2.6 PERFORMANCE OF UN SACCO LIMITED...... 21 2.7 COMPLIANCE LEVELS FOR UN SACCO LIMITED...... 22 2.8 CUSTOMER ANALYSIS...... 23 2.9 SWOT ANALYSIS OF UN SACCO LTD...... 23 2.10 STAKEHOLDER ANALYSIS...... 25 2.11 COMPETITOR ANALYSIS...... 28 2.12 RISK ANALYSIS...... 28 3.0 STRATEGIC FRAMEWORK 30 3.1 INTRODUCTION...... 30 3.2 VISION...... 30 3.3 MISSION...... 30 3.4 CORE VALUES...... 30 3.5 SUMMARY OF STRATEGIC THEMES...... 30 3.6 SUMMARY OF STRATEGIC OBJECTIVES 31 4.0 IMPLEMENTATION OF THE PLAN 32 4.1 INTRODUCTION...... 32 4.2 IMPLEMENTATION APPROACH...... 33 4.3 IMPLEMENTATION MATRIX...... 34 5.0 FINANCIAL REQUIREMENTS 48 6.0 MONITORING AND EVALUATION 49 ANNEXES 49 ANNEX 1: FINANCIAL TRENDS AND PROJECTIONS FOR 2015-2017...... 49 ANNEX 2:: MONITORING AND EVALUATION FRAMEWORK...... 53
iv United Nations SACCO Society Limited • Your Financial Anchor List of Tables
TABLE 1: UN SACCO PRODUCT PORTFOLIO 10
TABLE 2: PERFORMANCE TREND OF DEPOSIT TAKING SACCOS (KSHS ‘000,000) 17
TABLE 3: PERFORMANCE OF UN SACCO LTD 2011-2014 19
TABLE 4: COMPLIANCE LEVELS FOR UN SACCO LTD 20
TABLE 5: UN SACCO LTD SWOT ANALYSIS 21
TABLE 6: OPPORTUNITIES AND THREATS FOR UN SACCO 21
TABLE 7: UN SACCO STAKEHOLDER ANALYSIS 23
TABLE 8: COMPETITIVE ANALYSIS OF PLAYERS IN THE FINANCIAL SECTOR 25
TABLE 9: RISK ANALYSIS 26
TABLE 10: SUMMARY OF THEMES AND OBJECTIVES 29
TABLE 11: MEMBERSHIP GROWTH MATRIX 32
TABLE 12: BUSINESS GROWTH MATRIX 40
TABLE 13: CORPORATE GOVERNANCE MATRIX 44
TABLE 14: FINANCIAL REQUIREMENTS SUMMARY 47
United Nations SACCO Society Limited • Your Financial Anchor v LIST OF ABBREVIATIONS STRATEGIC PLAN 2015 - 2017
ADM Annual Delegates Meeting AGM Annual General Meeting BCP Business Continuity Plan BOD Board of Directors BSC Balanced Score Card CBR Central Bank Rates CCA Core Capital to Asset (Ratio) CCD Core Capital to Deposit (Ratio) CEO Chief Executive Officer CRB Credit Reference Bureau DTS Deposit Taking SACCOs EAC East African Community ERP Enterprise Resource Planning GDP Gross Domestic Product HOC Head of Credit HODs Heads of Departments HOF Head of Finance HOM Head of Marketing ICT Information Communication Technology IFRS International Financial Reporting Standards KES Kenya Shilling KYC Know Your Customer M&E Monitoring and Evaluation MFI Micro Finance Institution PESTEL Political Economic Social Technological Ecological, Legal (Analysis) SACCO Savings and Credit and Cooperative Societies SASRA SACCOsSocietiesRegulatory Authority SWOT Strengths Weaknesses Opportunities Threats (Analysis) ToR Terms of Reference UN United Nations IAS International Accounting Standards SC Supervisory Committee NACOS National Cooperatives FOSA Front Office Services Activities BOSA Back Office Services Activities UNFCU United Nations Federal Credit Union
vi United Nations SACCO Society Limited • Your Financial Anchor EXECUTIVE SUMMARY STRATEGIC PLAN 2015 - 2017
he United Nations Co-operative Savings and Credit Society (UN SACCO) was started in 1975 with the objective of providing a mechanism for United Nations (UN) employees in Kenya to save and borrow at low cost in order to meet the employees’ socio-economic needs. The UN SACCO membership has grown from 131 members in 1975 to above 4,700active members in 2014. In the same period, members’ deposits have grown from Kshs. 290,000 to Kshs7.10 billion. TThe membership of the SACCO is open to all local and international staff of UN agencies. Therefore, as part of the effort to strengthen the performance of UN SACCO and continue to offer value to its members as well as respond to the ever changing socio-political and economic environment, there is need to develop a strategic plan to guide the growth and sustainable development of the institution in the SACCO’s competitive environment in Kenya.
Over the past three years the SACCO has seen great achievements that include but not limited to reduced turnaround time for loan processing; reduced costs and fraud incidences; Portfolio diversification; Increase membership from the Diaspora and Savings account balances doubled. Some of the challenges include Strict compliance requirements by SASRA; Short term nature of UN SACCO members employment contracts made management of loans difficult; Fraud Cases; Inadequate office facility; Drastic changes in Board and Management; Poor communication to members; Weak governance- interference of Board with day to day operations and Incomplete Know Your Customer (KYC) data making defaulter recovery difficult.
The SACCO embarked on a process to develop a new strategic plan that would ensure that the challenges are addressed and the opportunities in the market are exploited. The process was participatory and involved all the key stakeholders and the staff of UNSACCO.
The three year business plan is anchored on changing the business model of the SACCO to achieve three broad outcomes that include improved governance (and compliance), business growth and expansion and growth of membership of the SACCO.
The SACCO’s Vision is the financial solutions provider of choice while the mission is to uplift the socio- economic status of our members by offering them high quality, affordable and diversified financial services. The SACCO shall be guided by the values of Teamwork, Accountability, Customer focus and Integrity.
The strategic plan is anchored on four strategic themes of membership diversification; corporate governance; business growth and compliance. Several objectives have been developed for the achievement of the strategic themes.
Implementation of the strategic plan shall be through the Balanced Score Card approach. The various objectives under each of the BSC perspectives include:-
PERSPECTIVE OBJECTIVES Financial Loan book growth; Grow deposit base; Revenue growth; Cost optimization; and Growth of core capital
United Nations SACCO Society Limited • Your Financial Anchor vii EXECUTIVE SUMMARY STRATEGIC PLAN 2015 - 2017
Customer Increase membership to 10,000; Enhance retention of members; and Improve customer satisfaction Systems and processes New product development; Business process automation; Review Policy & procedure manuals; Creation of adequate office space; BCP (Business continuity) implementation; and Improve operational efficiency Learning and growth Capacity building of staff, board and members; Ensure compliance with SASRA Ratios; Enhance information access for customers; and Improve Corporate image of the SACCO
Several strategic initiatives have been identified towards the achievements of these objectives. Implementation of the strategic plan shall use the Balanced Score Card Approach and the plan shall be cascaded downwards to individual employees to ensure there is a link between their day to day work and the organizational strategy. Implementation is expected to cost KES 1.123 billion over the three years. Over the same period the SACCO is expected to grow its revenues and capital by 15% and also increased investment opportunities for members. This will finally translate into higher returns for members while at the same time ensuring compliance with prudent standards.
viii United Nations SACCO Society Limited • Your Financial Anchor INTRODUCTION STRATEGIC PLAN 2015 - 2017
1.0 INTRODUCTION
1.1 Context of the Strategic Plan Saving and Credit Co-operative Societies (SACCOs) are seen as vehicles for resources mobilization and gateways to economic prosperity for families especially those in the lower and middle-income categories. These enterprises handle large sums of member funds in the form of deposits, shares and interest. The management of SACCO funds is as such a topical issue in the co-operative movement and among policy makers. The SACCO sub-sector in Kenya has witnessed rapid growth in the last few years at the rate of about 25% per annum and currently boasts of a savings mobilization of over KES400 Billion and an asset base of over KES300 billion as at December 2013. The savings mobilized represent 48% of the national savings.
SACCOs have therefore played a key role in the mobilization of financial resources and are regarded as major players in the realization of Kenya’s development blue print, Vision 2030. The SACCO sub- sector therefore occupies a strategic position in the socio-economic development of Kenya. The Kenyan Co-operative sector is rated the best with the highest resource mobilization in Africa and seventh in the world according to a survey carried out by the International Co-operative Alliance (ICA). The co-operative values and principles have withstood the test of time and offer the best model for fighting poverty and inequality in society. Co-operatives are therefore the best vehicle for driving socio-economic development in the country.
The enactment of the SACCO Societies Act has made provisions for licensing, regulation, supervision and promotion of SACCO Societies through the establishment of the SACCOSocieties Regulatory Authority (SASRA). In addition, the Act provides for protection of members deposits by creating a Deposit Guarantee Fund. The Act is therefore intended to enhance transparency, accountability and good corporate governance in the management of SACCOs.
Therefore, as part of the effort to strengthen the performance of UN SACCO and continue to offer value to its members as well as respond to the ever changing socio-political and economic environment, there is need to develop a strategic plan to guide the growth and sustainable development of the institution in the SACCO’s competitive environment in Kenya.
1.2 Brief profile of United NationsSACCO Ltd
1.2.1 History The United Nations Co-operative Savings and Credit Society (UN SACCO) was started in 1975 with the objective of providing a mechanism for United Nations (UN) employees in Kenya to save and borrow at low cost in order to meet the employees’ socio-economic needs. The UN SACCO membership has grown from 131 members in 1975 to above 4,700active members in 2014. In the same period, members’ deposits have grown from Kshs. 290,000 to Kshs7.1 billion. The membership of the SACCO currently includes local and international staff of UN agencies, spouses and dependants of the staff of UN, Diplomatic staff and staff of International Organizations affiliated to the UN operating in Kenya.
United Nations SACCO Society Limited • Your Financial Anchor 9 INTRODUCTION STRATEGIC PLAN 2015 - 2017
1.2.2 Mandate UNSACCO Ltd derives its mandate from the Co-operative Societies Act 2004 and the attendant Rules, the SACCO Societies Act, 2008, the SASRA Regulations and the SACCO’s Bylawswhichguides its operational management. These regulatory frameworks enable the SACCO to facilitate the promotion of economic and social interests of members, in accordance with the co-operative principles that include voluntary and open membership; democratic member control; economic participation by members; autonomy and independence; education, training and information; co- operation among co-operatives; and concern for community in general.
A SACCOis therefore organized to undertake the following functions: i) Encourage thrift among its members by affording them an opportunity to accumulatetheir savings; ii) Create a source of funds at a fair and reasonable rate of interest; iii) Provide an opportunity for each of its members to improve the members respective economic and social conditions; iv) Provide members with credit for purposes of providence or production or both; v) Offer to the members complementary savings and credit services and other financial products as may be required by the members from time to time; vi) Ensure safety and soundness of the member’s funds through a risk management programme or appropriate insurance coverage; vii) Ensure the progress of its members by educating them continuously on the proper use of credit; and viii) Perform the functions and exercise the powers designated for savings and credit cooperative societies under the applicable law for the benefit of the members.
1.2.3 Products and Services UNSACCO Ltd offers the following products and services to its members: Table 1: UN Sacco Product Portfolio Loan Products Savings Products Other Services • Normal Loan • FOSA Savings Account • EFTs • Premium Loan • Fixed Deposit • RTGS • Education • Children’s account • MSACCO • Emergency • Chama Account • Bankers cheques • Instant • ATM services • FOSA Salary Advance • Safe custody services • Motor Vehicle Loan • Secured Asset Loan • Retiree Loan • Settling down Loan • Insurance premium financing • Festive season Loan
10 United Nations SACCO Society Limited • Your Financial Anchor INTRODUCTION STRATEGIC PLAN 2015 - 2017
1.2.4 Achievements over the last three years The SACCO made the following strategic achievements over the last plan period:- 1. Reduced turnaround time for loan processing from 72 hours to 48 hours; 2. Higher dividends to members; 3. Reduced costs and enhanced control systems; 4. Portfolio diversification; 5. Increase membership from the Diaspora; 6. Junior account growth; 7. Critical business systems uptime maintained at over 95%; 8. Savings account balances doubled; 9. Commencement of implementation of a Document Management System; and 10. Growth in interest on deposits
1.2.5 Gap Analysis The SACCO had planned to undertake some activities in the last plan period. The key activities that have not been implemented include: 1. Automation of procurement processes; 1. Increase in member education; 2. Compliance in financial reporting; 3. Construction of a UN SACCO Plaza; 4. Formulation of policies to guide operations; 5. Establishment of a salaries account; 6. ICT Data recovery site; 7. Customer Relationship Management System not yet established;
1.2.6 Challenges The following challenges and constraints were encountered during the plan period: 1. Strict compliance requirements by SASRA; 2. Short term nature of UN SACCO members employment contracts made management of loans difficult; 3. Incidences unethical practices; 4. Inadequate office facility; 5. Drastic changes in Board and Management; 6. Poor communication to members; 7. Incomplete Know Your Customer (KYC) data making defaulter recovery difficult.
1.3 Rationale for the Strategic Plan The development of Strategic Plans is expected to result into the realization of the following benefits to SACCOs: 1. Increased organizational effectiveness and efficiency resulting from the development of a clear strategic direction through the formulation of corporate goals and objectives. This practice will thus allow for prioritization of resource allocation by making strategic choices;
United Nations SACCO Society Limited • Your Financial Anchor 11 INTRODUCTION STRATEGIC PLAN 2015 - 2017
2. Provides a framework for evaluating alternative strategies. Since the planning process includes participative discussions touching on all functional areas of the organization, the deliberations provide the planning team and participants with a clear understanding of the business key success factors and operational issues. 3. An improved mechanism for stakeholder participation and motivation. This is achieved through effective internal and external communication that is used during the strategy analysis, formulation, implementation, and evaluation. This therefore stimulates positive response from the various stakeholders of UN SACCO Ltd as it results into a feeling that they are part of a team that is focused on a specific purpose and mission. 4. Provides the functional managers and operational staff members with an opportunity to broaden their viewpoint and grow with the organization. This practice further helps to ensure sustainability of activities and allow for diffusion of strategic management mind set and culture in the organization. 5. Provides a framework for effective monitoring and evaluation of corporate, functional, and individual performance.
The development of a three year strategic plan for UNSACCO has been necessitated by the following factors: - 1. Expiry of the 2012-2014 Strategic Plan; 2. Changes in the operating environment that have been brought about by regulation, changes in the economy, increased demand for SACCO services and the increased cost of doing business. 3. Increased competition from banks, microfinance institutions and other SACCOs. 4. Rapid Changes in technology meaning that the SACCO has to realign itself to the emerging technological challenges.
1.4 Methodology used in developing the strategic plan Development of this strategic plan was inclusive and participatory and it entailed the following key activities;- 1. Meetings with management to agree on the scope and methodology to the used in the process of developing the plan. 2. Meetings with top management to agree on strategic direction for the SACCO. 3. Review of Documents including the SACCOs annual reports, strategic plan, SASRA reports, Vision 2030 and other relevant publications. 4. Use of questionnaire for the Board, Supervisory Committee, management and staff to capture successes, challenges and lessons learnt. Proposed strategic direction for the SACCO was also captured using the questionnaires. 5. Three day strategic planning retreat for board and management to build consensus on SWOT, PESTEL, Strategic themes, objectives, performancetargets and indicators for the planning period.
1.5 Structure of the plan The strategic plan is divided into five chapters. Chapter one looks at the background of UN SACCO and the context within which the plan is developed including rationale and methodology. Chapter
12 United Nations SACCO Society Limited • Your Financial Anchor INTRODUCTION STRATEGIC PLAN 2015 - 2017 two looks at the operating environment for UNSACCO Ltd. Including an analysis of the macro- economic environment, regulatory environment, competitor analysis and the internal operating environment. Chapter three presents the strategic model for UNSACCO Ltd. Including the vision, mission, core values and the issues and strategic objectives for the next three years.Chapter four looks at the implementation framework which identifies specific actions to be taken to achieve the strategies, institutional arrangements(current and required), capacity development issues and financing of the plan. Finally chapter five looks and the monitoring and evaluation of the plan to ensure the desired goals are achieved.
United Nations SACCO Society Limited • Your Financial Anchor 13 SITUATIONAL ANALYSIS STRATEGIC PLAN 2015 - 2017
2.0 SITUATIONAL ANALYSIS
2.1 The SACCO and Development in Kenya Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.
The co-operative principles are guidelines by which co-operatives put their values into practice. These are: 1. Voluntary and open membership: Co-operatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership with no discrimination against others. 2. Democratic member control: Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. 3. Member economic participation: Members contribute equitably to and democratically control the capital of their co-operative and allocate surpluses for developing the co-operative, benefiting members in proportion to their participation and contribution. 4. Autonomy and independence: Co-operatives are autonomous, self-help organizations controlled by their membership. They enter into agreements or raise capital on terms that ensure democratic control of their members. 5. Provision of education, training and information: Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives, and inform the public on the nature and benefits of co-operatives. 6. Co-operation among co-operatives: Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local and international structures. 7. Concern for the community: While focusing on member needs, co-operatives work for the sustainable development of their communities through policies accepted by their members.
SACCOs have played an important role in the development of the Kenyan economy that has led to the uplifting of the standards of living of the people. Through their SACCOs, members are able to access quality education and Medicare, funds for enterprise development, home purchase or construction and many other financial benefits. Due to the rapid growth, and the Government of Kenya’s commitment to established SACCO legislation and to implement international financial performance standards it begun supervision of SACCOs with the sole aim of providing the incentive for improvement of SACCO management and performance.
The critical role of SACCOs has been recognized under Vision 2030 as that of mobilization of savings for investments. It is therefore expected under the new SACCO legislation and adoption of prudential regulations growth of SACCOs will quickly improve. The SACCO movement has entrenched the culture of savings to Kenyans which is a pre-requisite for wealth creation. SACCO savings have also helped employees into their retirement. Like other co-operative societies, SACCOs are governed by
14 United Nations SACCO Society Limited • Your Financial Anchor SITUATIONAL ANALYSIS STRATEGIC PLAN 2015 - 2017 the Rochdale principles, which include democratic control by the members. The membership elects a Board of Directors which is responsible for managing the affairs of the SACCO.
According to SASRA, as at 31st December 2013 the total number of Deposit Taking SACCOs was 215 of which 135 had been licensed. 80 SACCOs were at various stages of analysis and processing. It should be noted that these Deposit Taking SACCOs were in operation prior to establishment of SASRA in 2009 and have applied to be considered for licensing as Deposit Taking business. The licensed Deposit Taking SACCOs that are spread across the Counties are distributed as follows:-Government based SACCOs 27, Farmers based SACCOs 44, Teachers Based SACCOs 32, Private institutions based SACCOs18, and Community based SACCOs14.
According to SASRA, membership grouping of DTS is changing due to the competitive pressure and the need to open new growth opportunities beyond traditional membership sources. The SACCO industry has seen the opening up of the common bond where for example a teacher’s based SACCO is serving farmers, business persons and other members of the society. Rebranding and change of names is accompanying this and so far a total of 47 DTS have changed names. However, opening up of membership introduces new business risks including the guarantee mechanism whose strength is anchored on social collateral becoming less effective. (Source: SACCO Supervision Report, 2013)
2.2 Impact of the SACCO Societies Act on SACCO Societies Operations The SACCO Societies Act 2008 has caused a paradigm shift in the way SACCO Societies perform their operations. 1. It has created a regulatory mechanism where SACCO Societies areregulated under the oversight of the SACCO Societies Regulatory Authority. 2. SACCOs are recognized as formal and regulated entities 3. They are licensed, regulated and supervised by SASRA 4. The deposits of the SACCOs will be guaranteed under a Deposits Guarantee Fund 5. Committed to good governance and best practices 6. Well capitalized to withstand financial crises and to grow their business 7. Share credit information 8. Regulate dispute resolutions between SACCOs and SASRA 9. Ensure SACCOs invest in productive and core areas. (Investment Policy) 10. SACCOs shall be more effective and efficient by: • Upgrading the Management Committee to Board of Directors • Developing policies like the Credit Policy, Human Resource Policy, Risk Management Policy, etc. • Adopting Prudential Standards • Adopting International Financial Reporting Standards (IFRS) • Investing and more use of ICT in their operations • Pay for the cost of regulation The SACCO regulations emphasize that in accordance with Vision 2030, the policy objective of establishing prudential regulation of deposit taking SACCO societies is to enhance transparency and accountability in the SACCO subsector. This is consistent with theon-goingreforms in the financial
United Nations SACCO Society Limited • Your Financial Anchor 15 SITUATIONAL ANALYSIS STRATEGIC PLAN 2015 - 2017 sector whose ultimate aim is to expand financial access,encourage efficiency and enhance financial stability of financial service providers in Kenya.
The Regulations require that SACCOs meet the following thresholds:-
1. Capital Adequacy (Reg. 9-12) The SACCO shall have a minimum of:Core capital of 10% of total assets; Core capital of 8% of total deposits; Institutional capital of 8% of total assets and The SACCO may not distribute surplus if capital adequacy ratio is not met
2. Liquidity and Asset/Liability Management (Reg.13-20) The SACCO shall formulate a liquidity policy; have 15% of its deposits maintained in liquid assets; Liquid assets not used immediately may be invested in call deposits in Banks, NACOS or SACCOs under the Act ; Board to prepare contingency liquidity plan; Average monthly balances report to be prepared weekly and a liquidity statement return shall be submitted to SASRA monthly.
3. Shares, Savings and Deposits (Reg. 21-27) The SACCO shall formulate a shares, savings and deposit policy; minimum shares;- The SACCO shall specify amount of shares to become a member; Shares are transferable but not refundable; Shares may earn dividends if surplus is made by the SACCO; Deposits shall be used to secure loans. May be refunded on withdrawal within 60 days; Savings disclosure; - Terms and conditions of operating accounts shall be disclosed. Additionally, Dormant Accounts;- Savings accounts not operational for six months; Abandoned savings;- Unclaimed dormant accounts deposits over six months and up to five years in the SACCO and Transfer to Public Trustee;- After five years abandoned savings are transferred to Public Trustee.
4. Credit Management The SACCO shall operate a credit policy and loan`s granting manual; The policy shall describe loan granting and recovery procedures, eligibility, collateral, turnover appraisal e.t.c.
5. Approvals: - SACCOs shall seek approval on accepting deposits; Opening of new branches; Operating an agency business; Relocating business; Closure of business and Introduction of new products
6. Prescribed policy documents for SACCOs shall include; Credit policy; Savings policy; Business plans; Investment policy; Members register;Disaster preparedness plan; Information preservation policy and Record for dormant members
7. Prohibited business shall include: Foreign trade; Trust operations; Investing in enterprise capital beyond prescribed limits; Underwriting or placement of securities and Land acquisition other than for purposes of expanding business.
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Additionally, after three years of implementation challenges have been identified and lessons learnt have been documented. To ensure efficiency and effectiveness in the sector, the SACCO Societies Regulatory Authority (SASRA) has proposed a raft of changes in the policy and regulatory environment. This will in the long run affect how SACCOs shall conduct their businesses. They include:- a. Capital Adequacy: introduction of total capital and supplementary capital as a capital adequacy measurement in consistent with the Act. This will encourage innovation in raising capital by the DTS and also encourage making general provisioning for performing loans. b. Equity Investments: proposes to amend regulation 48(4) pursuant to section 38 of the SACCO Societies Act to prescribe the maximum proportion for equity investments by a SACCO. c. Investment property: remove limitations on investment in properties by providing a definition that incorporates IAS 40 such that the non-earning component of investment in land and buildings will be limited to the portion occupied by the SACCO for own usage. d. Credit information sharing: amendments of the law to allow sharing of information with other licensed financial institutions including the sharing of full file information through licensed CRBs. e. Development of a central liquidity system and participation in the national payment system to help SACCOs address short term liquidity borrowing needs in acost effective and sustainable manner. f. Criteria for suitability of officers of SACCOs: amendments that seek to provide for minimum criteria for assessing the fitness and propriety of senior officers of SACCOs, which include members of the Board of Directors and senior management.
2.3 Kenya’s Economy and Development Outlook According to the Economic Survey, 2014, the world economy grew by 3.0% in 2013 against a revised projection of 3.1%. The lower performance was observed across most regions and major economic groups. However, the economy was expected to turn around in 2014. Growth in Sub-Saharan Africa and the East African Community (EAC) however remained relatively robust with real GDP estimated to have expanded by 5.0% and 6.1% respectively in 2013. This was due to an increase in trade and investment with emerging market economies.
Domestically, the country’s Gross Domestic Product (GDP) expanded by 4.7% in 2013 compared to 4.6% in 2012. The performance was supported by a stable macroeconomic environment; low and stable inflation supported by improved supply of basic foods; lower international oil prices and reduced costs of electricity; infrastructural development and the construction sector.
Overall, Kenya’s economy was resilient in 2013 despite elections with Agriculture, Transport and communications and manufacturing recording growths of 2.9 %, 6.0% and 4.8% respectively. Growth was also recorded in Financial Intermediation (7.2%), Construction (5.5%), wholesale and retail trade (7.5%) and electricity and water (5.9%). In the Financial sector, the annual average inflation rate declined to 5.7 due to largely availability of basic foodstuffs and stable domestic prices of petroleum products. Central bank interest rates reduced from 11.0 to 8.50 in the first half of 2013. The overdraft and maximum lending interest rates dropped by 1.28 and 1.16 percentage points, to 26.51% and 16.99% largely due to lower inflationary pressure and the Central Bank Rate (CBR) reduction.
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However, despite the growth, the performance was lower than projected. This was mainly due to : depressed performance of the rains that affected the agriculture sector; decline in exports; comparably higher interest rates; reduced spending by government agencies (transition period); risk aversion in the build up to the elections and insecurity concerns.
For 2014 and beyond, the macroeconomic stability is expected to prevail; operationalization of development budgets in counties will spur economic growth while private consumption is also likely to improve given the stable interest rates and low inflation regime. Additionally, recent discoveries of oil and natural gas are likely to trigger more foreign direct investments inflows. The manufacturing sector’s performance is projected to maintain its current growth path given the positive growth within the region. Similarly, the financial intermediation sector is likely to maintain its momentum on account of enhanced performance and innovations in the sectors. Investments in the construction industry is likely to remain robust against a background of stable interest rates coupled with ongoing government infrastructural projects and the private sector’s resilient participation especially in the real estate development(Economic Survey, 2014).
Implications on SACCOs Cooperative financial institutions tend to be more stable in times of crisis, as their investment patterns use the capital of members in ways that best serve their long term needs and interests. They have a lesser tendency to invest in high risk financial markets compared to commercial banks. It is therefore thought that their comparative stability, under both average and extraordinary conditions, can help to mitigate crisis impact for members and clientele, especially in the short-term. However, since most SACCOs draw their membership from the formal sector, in times of economic downturn, the functioning of the SACCO can be undermined if member’s incomes are destabilized by volatility in the economy. This may lead to reduction of members’ savings and an increased demand for loans. SACCOs have reported increase in demand for loans, but have exercised caution in responding to requests.
SACCOs are generally guided by a conservative lending philosophy that places member needs ahead of institutional profits. This restricts them from engaging in high risk lending practices, distinguishing them from other financial institutions and has shielded them from financial upheavals that continue to face the commercial banking sector.
2.4 Performance of SACCOs 2013 According to the SACCO Supervision Report 2013, the number of licenseddeposit taking SACCOs (DTS) grew to135 with a membership of 2.6 million. Deposits grew to KES 172 billion while total assets grew to KES 241 billion. It is expected that the number of licensed deposit taking SACCOs will grow considering that there were 80 applications that had not yet been approved. This shows that despite increased competition from other players in the financial markets, the sector has remained resilient and has continued to register growth.
The report further states that DTS sustained efforts to attract deposits through sustained aggressive marketing, new products and innovations such as partnerships with banks to offer cheques and other value adding services to members. All licensed DTS are now connected to SACCO Link, automated
18 United Nations SACCO Society Limited • Your Financial Anchor SITUATIONAL ANALYSIS STRATEGIC PLAN 2015 - 2017 teller machines by Cooperative Bank while 11 DTS had integrated mobile financial services to their core SACCO Systems.
It is also important to note that external borrowing relative to the assets declined indicating shifting funding strategies by DTS in line with prudential norms. There was also increase in capital through issuance of shares and retention of surplus.
Overall, DTS constitute over 72% in key financial indicators of the entire industry in terms of membership, assets, loans, deposits and capital an indication of the soundness of the entire SACCO industry. The subsector remains relatively financially stable as supported by compliance with the minimum prudential requirements in capital, liquidity, improved asset quality and overall earnings. (Source: SASRA, 2014)
The table below shows the performance trends for the period 2012-2013.
Table 2: Performance Trend of Deposit Taking SACCOs (Kshs ‘000,000) Performance Item 2013 2012 % Change Total Assets 241,622 207,291 17% Deposits 172,526 149,169 16% Total Capital 31,156 23,886 30% Loans 184,539 28,403 17% Turnover 33,715 28,403 19% Membership 2.6 2.3 13% Source: SACCO Supervision Report 2013
2.5 Challenges in the Management of SACCOs
2.5.1 At Board Level The Board oversight and management operational responsibilities are inadequately defined in the by-laws. The major concerns include: • Some of the elected board members would frequently be non-professional volunteers yet they assume highly technical responsibilities such as loan analysis and disbursement, budgeting and financial expenditure control. • Lack of clear guidelines on where, for example the Credit Committees authority ends and where the Executive Committee begins, and where the staff members authority begins hence delayed decision making. • Board members succumbing to political pressure from external forces to implement activities that counter the management ethics and standards. • Unrealistic office tenure that ends up being costly in mainstreaming governance interventions in respect of training and instilling professionalism
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• Board members and Supervisory Committee may collude to protect one another’s interests, e.g. insider loans and high managers’ salaries.
2.5.2 At Staff Level • Weak terms and conditions of service leading to job insecurity and poor performance • Unprofessional process of recruitment that encourages favourism, tribalism, and nepotism sometimes attracts incompetent personnel • Absence of appropriate personnel, administration and accounting policiesand procedures, human resource manual, job descriptions, specifications, and performance appraisal tools compound the problems of governance.
2.5.3 At Member Level • Inadequacy of resources and lack of Education and Training force members to exert pressure on the Board members to implement issues in a manner that abuses thespiritof good governance • Salaries for the staff are not as competitive as those paid to other financial institutions because members reject offering salaries that appear higher than what they earn from their employers. This makes attracting and retaining better-qualified managers difficult. • During periods of phenomenal growth of the SACCO, members fail to look closely at the prudential actions of their Board members. • The one member one vote principle at times undermines the genuine concerns of the minority. The academic and patronage criteria are at times overlooked in favour of other minor considerations.
2.5.4 ICT Challenges Intense competition, reduced margins and increased customer expectations have largely compelled MFIs to adopt new technologies. Technology cannot be ignored any longer as it is sweeping through the financial services industry. Its adoption has largely improved the outreach by Micro- finance institutions, improved efficiency and brought about flexibility in operations. Most SACCOs have introduced mobile money transfer platform as one of their products and are thus thinking on how to use the facility to enhance their Microcredit operations. The benefits resulting from the adoption of technology include enabling SACCOs to: Offer more services; establish and strengthen the relationship with its customers; develop new products in response to the changing market needs that are a key factor in retaining customer loyalty; diversify delivery channels; enable better management of risks; provide online real-time customer information which is available throughout and any change is reflected throughout the SACCO immediately; provide customer delight - customers are provided with a quick, unified view of their account information and achieve higher employee productivity.
2.5.5 Capital Adequacy • Most SACCOs cannot meet the minimum capital requirements and ratios • Lack of separation between capital and members deposits • Difficulties in comprehending constitution of the core capital and subsequent calculation of the capital ratios
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2.5.6 Liquidity Ratios • Overdependence on short term external borrowings • Lack of good systems to enable submission of liquidity returns • Unwillingness to disengage from prohibited business
2.5.7 Credit Management • Lack of comprehensive loaning policy that conforms to requirements • Inability to generate member statements as required • SACCOs have surpassed the regulatory requirement of minimum external borrowing of 25% of the total assets • High level of non-performing loans
2.5.8 Investments • Too much focus on investment in properties and buildings • Investments have gone beyond regulatory requirements • Unwillingness to divest and focus on core business of serving members • Acquisition of large parcels of land that are not being utilized • Engagement in foreign trade
2.6 Performance of UN SACCO Limited The performance of UN SACCO Limited for the last three years is summarised in the table below:-
Table 3: performance of UN SACCO Ltd 2011-2014 Performance % % % 2011 2012 2013 2014 Area Change Change Change Active membership 3,944 4,088 4% 4,387 7% 4,731 8%
Total Assets 5,610,570,727 6,547,006,193 17% 7,553,609,809 15% 8,820,121,311 17%
Deposits 4,724,584,873 5,374,384,513 14% 6,231,636,509 15% 7,158,079,069 15%
Loans 4,832,582,691 5,840,225,640 21% 6,453,383,482 10% 7,019,226,729 9%
Investments 11,036,250 14,626,214 33% 6,318,326 -57% 9,562,738 51% Core Capital 255,602,169 392,364,230 54% 465,587,345 19% 1,000,814,506 115% Share Capital 139,773,843 216,095,197 55% 260,024,554 20% 461,253,733 77% Institutional 115,828,326 176,269,033 52% 205,562,791 17% 539,560,773 162% Capital Total 775,932,543 960,941,197 24% 10% 1,231,177,970 16% Revenues 1,057,257,016
Employees 10 19 90% 17 -11% 19 12%
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From the table it is evident that between 2011 and 2013 the Society has been able to record significant growth in membership, loans, deposits which has in turn resulted into a large surplus that gives an opportunity for investment.
2.7 Compliance levels for UN SACCO Limited As indicated earlier, the SACCO Regulations have identified key areas that SACCOs are required to comply with to make them viable businesses and provide required benefits to members.
Loans and advances to total assets ratio stood at 80% for the year 2013 compared to 90% for the year 2012. The loans and advances constitute the largest portion of the SACCO assets. However, the growth patterns exhibited by the loans and advances indicate a decline from 20.53 in 2012 to 10.54 in 2013. Further, interest income from loans declined from a growth rate of 20.13 in 2012 to 15.48 in 2013. This is a direct effect of having a huge portion of net savers. However, SASRA observes that these category demands for huge returns on savings while the SACCO is not generating sufficient interest on loans to meet this demand because of low uptake of loans. There is therefore need to review strategies and policies that will ensure an appropriate balance while fully complying with regulatory requirements. Secondly, the regulator notes that the SACCO pays high interest rebates and this is heavily burdening the SACCO leading to a decline in the growth of the Core Capital. This, the regulator notes is because the capacity to generate sufficient capital is linked to the ability to retain adequate earnings as an efficient, competitive and sustainable business strategy.
On capital adequacy, the table below shows the performance and compliance of UN SACCO:
Table 4: Compliance levels for UN SACCO ltd
Performance in KES
Particulars Stds 2010 2011 2012 2013 2014 Remarks
Core Capital 10m 203.7 m 255.6m 392.4m 465.6m 1.00 B Compliant
Core Capital to Assets Min. 10% 4% 5% 6% 12% 14% Compliant
Core Capital to Deposits Min 8% 5% 5% 7% 8% 14% Compliant
Institutional Capital to Assets Min 8% 2% 2% 3% 3% 6% Non- Compliant
From the performance listed above, the SACCO is yet to comply on capital adequacy, one of the key prudential requirements. Regulation 84(1)(c) on transitional provisions provides that a SACCO shall build up its core capital of not less than 4% of the total assets which shall graduate to 10% by the fourth year. The performance of the SACCO indicates that the SACCO is still at 7.4% which is way below the required standard. One of the key contributors to the above is the lack of the required policies that would ensure all the financial ratios are met as required by law.
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2.8 Customer Analysis The UN SACCO draws its membership mainly from the staff and spouses of members of staff of the different UN Agencies located in Kenya and beyond. The membership draws from both international and local staff. Generally speaking therefore, the SACCO serves members with relatively good incomes. Operations of the SACCO are however currently restricted to the office located within the UN complex in Nairobi, Kenya. The SACCO membership is also open to staff of diplomatic missions and staff from international organizations affiliated to the UN and operating in Kenya. However, there is need to reach out into this huge market that remains largely unexploited.
2.9 SWOT Analysis of UN SACCO Ltd The Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis of UN SACCOLtdare analysed below:
Table 5: UN SACCO Ltd SWOT Analysis
STRENGTHS WEAKNESSES
• Clear demarcation between the board and • Poor communication between Board and management roles staff • Lateral coordination between staff and CEO • No succession plan in place for Board and Management
• Efficient ERP system • No clear career progression for staff members
• Document Management System in progress • Inadequate ICT staff capacity
• Open office set-up which allows for • Lack of an Enterprise-wide Risk Management consultations Framework • Staff Roles well defined • Execution and monitoring of Board resolutions is ineffective • Skilled manpowerr • Inadequate Staff Motivation • Secure location • skills mix at board level missing
• Well defined market • Inadequate of adequate sector exposure for board and management staff
• High liquidity • Non compliance in key indicators
• Shared Values • Inadequate communication to members
The Opportunities and threats were drawn from the PESTEL analysis where potential opportunities and threats to UN SACCO were identified.
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Table 6: Opportunities and Threats for UN SACCO ISSUE OPPORTUNITIES THREATS ECONOMIC High Inflation • Increases investment in • Reduces savings government papers hence high • Reduces demand in loans. income returns. Low Inflation • Stability in the market especially • Reduced income from in expenditure when doing large alternative investments e.g. and long investment. government papers. • More savings due to more disposable income. Fluctuating Currency • Lending in dollar denominated • Lose of members who may currenc opt to deal with other credit unions for example UNFC Global economic • Positive growth increases funding • Negative growth affects changes to UN agencies hence more funding to UN agencies members for recruitment. hence less employment and members for recruitment POLITICAL Political instability • More borrowing by locals for • Relocation of UN offices to resettlement other countries • Increased borrowing on assets • Laws in different counties can due to enhanced property value affect operations in the county towns and ease of charging process. • Increased investment opportunities in the counties open avenues for partnerships. • Up take of loans for investments in devolved towns. SOCIAL Member preferences • New market opportunities for • Failure to keep pace with membership and products changing member needs can uptake. lead to member attrition Insecurity • Partnerships with reputable • Reduces demand for security firms to offer services to investment hence borrowing members Religious groups • Opportunity to develop religious • Complex product based products e.g. Islamic management requirements products which may not be compatible with regulatory requiremen
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ISSUE OPPORTUNITIES THREATS TECHNOLOGICAL Technology • New products and services e.g. • Cyber crime alternative banking solutions • Keeping up with rapid hence alternative income streams, changes in technology Social Media Marketing • High initial acquisition cost • Improved member communication • Enhanced service delivery • Automation hence reduced operation ENVIRONMENTAL Environment • Secure environment within the • Limited accessibility to the complex SACCO by the members • Opportunity to improve outside the complex. environment by going paperless. • Not able to expand due to • Relying on platform that’s limitation in office space regulated by Host • Overreliance on host platform • Availability of a large pool could pose a threat to members to use for penetration innovation and data security • Customer base is beyond the catchment in Kenya-allowed to get members from all over the world/ Diversity to recruit members in other towns and countries • Goodwill created by the brand name enables easier member recruitment LEGAL AND REGULATORY SASRA and • SASRA regulations are improving • Some SASRA laws threaten the Government governance and controls. business. When we struggle to Ministries. • Increased confidence and stability comply we may have capital to the sector flight through withdrawals. • Compliance costs in terms of taxes. • Limitations in product development. • Over regulation from SASRA/ Ministry limiting the speed of decision making and implementation.
2.10 Stakeholder Analysis UN SACCO limited works with various stakeholders to achieve its business objectives. Table7 below identifies some of the key stakeholders highlighting what they provide and what the SACCO can provide for them.
United Nations SACCO Society Limited • Your Financial Anchor 25 in decision making them promptly by guaranteed and general meeting resolutions Society and participate in looking for solutions in line with corporate are resolutions strategy Rules and By-laws and prudent Acts, business practices implementation of regulations the Societyby enhance business to growth for regulatoryrequiring approval execution Attending meetings and takingAttending part them or loans advanced to Repaying acts rules, with by-laws, Complying spirit good cooperative Showing the affecting Bring out problems the Society leadership to Providing discussions and Ensuring board Observing in all their transactions the Guiding the Society in the given feedback to Being responsive matters any for approvals Timely Expectation of the SACCO from the from Expectation of the SACCO stakeholders • • • • • • • • • • •
per the law service communication a retain the business to advantage competitive members deposits to on maximum return ensure investment to regulatory requirements business safeguard implementation of the plan and policies strategic members get ensure to their investments value for members interests with the regulatory safeguard to requirements the business Good lending policies as class customer World Clear and timely for innovation Continuous of investment Better with Compliance Ensuring successful of the Safeguarding serviceEfficient customer Ensuring compliance Obligation of the SACCO to to of the SACCO Obligation the stakeholder • • • • • • • • • • service a competitive retain business to advantage maximum ensure deposits to on investment return safeguard to requirements business ensure management to by their for return members enjoy investments requirements the impactto of the regulations their businesses Safeguarding of SACCO business of SACCO Safeguarding effective customer Efficient and Communication Effective the for innovation Continuous of members investment Better with regulatoryCompliance implementation Strategy Implementation of policies with the regulatoryCompliance on the SACCOs from Feedback Expectation of stakeholders • • • • • • • • • • the business with in place regulations of the and review regulations Ensure compliance of Ensure monitoring Continuous Role of stakeholder/ or functionmandate as and borrowing Savings the key of the mandate SACCO planning and Strategic the for formulation Policy SACCO • • Name of stakeholder Members of Board Directors Regulatory Authorities SASRA e.g. Table 7: UN SACCO Stakeholder Analysis Stakeholder 7: UN SACCO Table
26 United Nations SACCO Society Limited • Your Financial Anchor STRATEGIC PLAN 2015 - 2017 agreements of the insurance policies environment environment Provide conducive policy conducive Provide policy conducive Provide Supply of quality goods and services supply level to Adherence the terms and conditions to Adhering Integrity work Diligence, and hard Guidance and advise Timely execution of agreements execution Timely Expectation of the SACCO from the from Expectation of the SACCO stakeholders • • • • • • • •
and services as per specifications and/or SLAs applicable where of the vendor vendor loss as per the policy insurance business safeguard terms and conditions of service information regulations and regulations Compliance with laws with laws Compliance Delivery of goods support vendor Timely Competency on the side Honesty on the side of Speedy settlement of any Honesty on the part of the Advisory services to and remuneration Proper adequate Provide and with laws Compliance of agreements services rendered Compliance and execution and execution Compliance the for payment Timely Obligation of the SACCO to to of the SACCO Obligation the stakeholder • • • • • • • • • • • • • specifications of the goods and services vendors they need from services SACCO to delivered satisfaction honesty contract/policy with the signed insurance policy requirements Affairs and regulations and regulations Adherence to the policies, laws laws the policies, to Adherence laws the policies, to Adherence SACCO to have clear have to SACCO goods and for payment Timely relationship-Good customer Clear understanding of the with the contract/Compliance Honesty the SACCO from Good working environment management of SACCO Prudent infrastructure and resources for for infrastructure and resources service provision Provision of necessary Provision Expectation of stakeholders • • • • • • • • • • • services enable to running of business maintenance the SACCO by incurred as per the contract between the signed two parties operations and SACCO activities of Director for environment thrive businesses to at the Cooperatives county level Providing a conducive a conducive Providing of Regulator Supply of goods and Support and loss for Compensation of the Execution Oversight on the Board Role of stakeholder/ or functionmandate • • addition services Value e.g. insurance, Vehicle Motor Services, Mortgage M-Pesa services, ATM provision, Valuation services,Legal services • • • • • Name of stakeholder Vendors Business Partners Insurance UN SACCO Staff Supervisory Committee National Government County Government
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2.11 Competitor Analysis In its quest to provide services to its members and remain profitable as a business venture,UNSACCO is faced with a lot of competition from other financial institutions. The table below presents the institutions that UN SACCO Competes with highlighting generic strengths and weaknesses of each of the institutions.
Table 8: Competitive Analysis of players in the financial sector Category of Strengths Weaknesses Competition Banks • Presence of a clearing house • High and volatile interest • High liquidity rates • Higher individual loan amounts • Hidden charges • No shares/savings for the loans • High security requirements, • Prompt issue of loans? • High marketing strategy • Technology • High staff motivation • Diversified product portfolio • Good governance structures thus more goodwill from customers • Wide branch network hence easy accessibility of services SACCOs • Stable and predictable interest rates • Low liquidity – have limits • Location and accessibility of the in lending banking premises • Better and spacious banking halls • Loan queuing • Advanced and stable investment co- • Low investment in operatives technology • Delegates governance system for faster decision making • More ATM channels e.g.PesaPoint Micro finance • Diversified products • High interest rate Institutions • Prompt issuance of loans • Loan decision making is • Marketing and follow-up centralized in Nairobi for • Tight loan repayment schedule most closely monitored • Issuance of cheques • Liquidity is high • High default rate
2.12 Risk Analysis UN SACCO is exposed to risks in terms of threats to service provision and potential of lost opportunities. The risks which are likely to affect business have been identified, as summarized in Table 9 below, and their attendant mitigation measures considered in the formulation of this Strategic Plan. Risks have been categorized depending on their potential impact as high, medium and low. The summary identifies risks that were classified as high and medium and the mitigation measures therein.
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Table 9: Risk Analysis Type of risk Description of risk from Rate the level Mitigation of risk SACCO’s perspective of risk (High, medium, low) Credit risk Default in loan repayments High Adequate credit policies and procedures
Operational risk Lack of appropriate policies High Ensuring adequate and procedures policies and control procedure in all business processes
Technological Failure to keep up High Investing in modern risk with rapid changes in technological innovations technology leading to e.g. mobile banking unstable core banking system
Market Risk Risks due to fluctuations in High Make sound investment the money and investment decisions that are backed market by adequate data
Legal and Risks of Non-Compliance High Ensuring compliance Regulatory Risk could lead to penalties with all the laws and regulations
Liquidity Risk Risks due to the High Ensuring most of the cash depreciation of the KES, is used in lending and inflation and interest rates investments
Reputation Risk Loss of reputation in the High Ensure that there SACCO sector is a proper crisis communication system in place
Financial Risk Debt; penalties High Ensure all financial obligations are fulfilled in good time
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3.0 STRATEGIC FRAMEWORK
3.1 Introduction This chapter presents the strategic direction that UN SACCO limited seeks to pursue in the next four years and beyond. The strategic direction is based on the analysis of the current performance, the operating environment including the economic outlook, stakeholder analysis, customer profiles, competitor’s analysis and a SWOT analysis. In this chapter, the main issues are identified and corresponding strategic goals and objectives are developed based on the Vision and Mission developed.
3.2 Vision “The financial solutions provider of choice”
3.3 Mission To uplift the socio-economic status of our members by offering them high quality, affordable and diversified financial services.
3.4 Core Values In all our services to members and customers we shall be bound by the following values: - 1. Integrity by: upholding the highest level of integrity in our dealings including acting in a transparent and professional manner; 2. Accountability by: accountable to our members and the general public; 3. Customer Focus by: ensuring that the customer is at the centre of all our work; and 4. Team Work working as a team to deliver results and value to our members
3.5 Summary of Strategic Themes 1. Membership diversification 2. Corporate Governance 3. Business Growth 4. Compliance These are discussed below:-
1. Membership diversification Despite being in existence for over three decades, the SACCO has not attracted majority of the employees within the UN agencies. The current membership only represents a paltry 43% of the total potential within the UN agencies. Additionally, the SACCO is yet to recruit other category of members including spouses and children of UN staff, staff of the diplomatic missions and staff of international organizations affiliated to the UN and operating in Kenya. The slow growth in membership affects the ability of the SACCO to build more capital as well as reduces the loan uptake since the current membership is saturated with different products. A growth in membership will definitely see an increase in revenues as a result of uptake of the different products.
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2. Corporate Governance The success of any institution largely depends on the governance structure it adopts and the subsequent decisions therein. The good governance enables the SACCO to prevent risks such as governance challenges that may restrict membership participation; increase the risks of fraud; poor investment decisions; wrong business decisions; poor quality of staff; reduce productivity and increase instances of maladministration. In the long run the SACCO may lose money through fraud; fail to comply with statutory and legal requirements and may record reduced growth. There is therefore need to improve governance through amendments to the by-laws to provide for a leaner and efficient governance structure; set criteria for board members appointments; adopt and ADM system as opposed to an AGM system; develop a new organizational structure for the secretariat; acquire new office premises; develop appropriate policies and procedures and provide for delegation of responsibilities and authority.
3. Business Growth Business growth for the SACCO prevents it from recording reduced business growth rate in all its financial indicators including loan book, deposits, revenues, costs and core capital. There is an urgent need to ensure growth in these key indicators. This can only be achieved through increasing customer service, diversifying the range of products available, improving internal systems and processes and developing staff capacity.
4. Compliance Compliance has been a big challenge for UN SACCO since the coming into effect of the SACCO Regulations. While the SACCO has managed to achieve compliance in some indicators such as core capital requirements and core capital to deposit ratios. According to SASRA, the non-compliance with capital norms is mainly due to a non-sustainable business strategy of paying interest rebates way above the industry average. There is therefore need for the SACCO to review its business strategy to ensure an approach that addresses the needs on the savers by paying realistic but sustainable returns, while retaining a reasonable amount of earnings for the SACCO’s long term competitiveness and prudential compliance. Other areas that require compliance include the development of the requisite policies as well as governance.
3.6 Summary of Strategic Objectives From each strategic theme, strategic objectives were identified that would drive the SACCO into productivity and increased growth. These are summarized below:-
Table 10: Summary of Themes and Objectives
STRATEGIC THEME OBJECTIVES Membership 1. Increase membership to 8,000 members 2. Enhance retention of members Business Growth and operational 1. Loan book growth excellence 2. Grow deposit base
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3. Revenue growth 4. Cost optimization 5. Growth of core capital 6. Improve customer satisfaction 7. Customer retention 8. Product improvement 9. Business process automation 10 Review Policy & procedure manuals 11. Create office space 12. BCP (Business continuity) 13. Capacity building of staff, board and members
Corporate Governance and 1. Ensure compliance with SASRA Requirements Compliance 2. Enhance information access for customers 3. Improve Corporate governance of the SACCO 4. Improve operational efficiency 5. Improve organizational capacity levels
4.0 IMPLEMENTATION OF THE PLAN
4.1 Introduction Implementation of the plan is also dependent on key Strategic Plan implementation enablers which include:- a. Have enhanced ICT based Systems in place. This includes developing an interactive website and email accounts for all staff and Board. Installing tailor made software for operations and management. b. Management and Financial Information System: An MIS that has a communication module and supports publications for the SACCO. Financial Information Systems that incorporate accurate financial reports arising from implementation and monitoring of SACCO activities. Monitoring and Evaluation Systems for specific projects and for operations which should be developed and reviewed regularly. c. Human Resource: The SACCO should aim to have a human resource base that is informed, motivated and results driven. For this to take root, an aggressive capacity building strategy and training programmes should be adopted and coordinated in areas such as: i. ICT skills ii. Performance management skills iii. Project planning, implementation and M&E skills iv. Training for personal development d. Funds: The SACCO’s aim should be to attain funding sustainability through resource diversification and mobilization approaches. e. Accountability: The key to successful implementation of the plan is anchored on three factors; i. Efficient Mobilization of Resources
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ii. Timely Execution of Programmes iii. Effective Monitoring and Evaluation of the entire process
4.2 Implementation Approach The SACCO has undertaken to use the Balanced Score Card approach in the implementation of the strategic plan. BSC is an Integrated Strategic Planning and Performance Management System for establishing and communicating an organization’s vision, mission and strategy to stakeholders and employees and for aligning day-to-day work to the strategy. It serves as both a management and a communication tool. It also uses performance measures to monitor progress, provide guidance in budgeting, and better inform strategic decision making. A balanced scorecard should reinforce the objectives of the organization by measuring the things that are important to achieving strategy – not just the ones that are easy to measure. BSC enable companies to link corporate strategy with key performance indicators (KPIs) at the divisional, departmental, and employee level, and communicate them across the enterprise”.
In the BSC, the organization strategies and goals are viewed from four perspectives which are the Customer perspective; the Financial Perspective; the Systems and Processes perspective and the Learning and Growth perspective. The diagram below summarizes the perspectives under the BSC:-
From the strategic themes identified, objectives were then categorized into the various perspectives. The specific measures and targets were then identified as well as the corresponding initiatives that would be undertaken in achieving the objectives. Areas of responsibility for each initiative were identified and specific costs to each initiative were also attached. This is summarized in the implementation matrix in 4.3 below.
United Nations SACCO Society Limited • Your Financial Anchor 33 Y3 2,880,000 400,000.00 4,500,000.00 1,200,000.00 2,000,000.00 4,000,000.00 2,500,000.00 Y2 BUDGET 350,000.00 2,640,000.00 4,000,000.00 1,000,000.00 1,500,000.00 3,500,000.00 2,200,000.00 Y1 2,000,000. 300,000.00 800,000.00 1,100,000.00 3,500,000.00 3,000,000.00 1,000,000.00 By When By 1ST QUARTER 2015 CONTINUOUS CONTINUOUS CONTINUOUS CONTINOUS QUARTERLY . QUARTERLY CONTINUOUS By Who By HOM/ FOSA HOM/ FOSA HR HOM HOM HOM HOM CEO/ HOM Initiatives segmentation Agency and mapping. Reach out to members potential HR focal through points. Enhanced Personal Selling: Recruit 4 Commission Direct Sales Staff. and Empower UN SACCO recognize champions. Use Market Impact for - MITs Teams Agency visits (within Nairobi). (Outside Visits Agency Nairobi) Visits Agency (Diaspora) Recruitment Drives Incentives (Novelty or token of items new to appreciation) members and those them who introduce during promotion time. Target UN 1,500 from agencies; 500 Diaspora; from 1,000 from spouses and of staff children and 500 from Diplomatic Missions and Staff Measure Number Objective Increase membership Implementation Matrix Matrix Implementation GOAL: Membership Growth by 70% of the current membership (8,000) 70% of the current by Membership Growth GOAL: Perspective CUSTOMER 4.3 Matrix 11: Membership Growth Table
34 United Nations SACCO Society Limited • Your Financial Anchor Y3 200,000. 300,000.00 500,000.00 1,000,000.00 1,000,000.00 100,000 Y2 200,000. BUDGET 700,000.00 250,000.00 500,000.00 1,000,000.00 100,000 Y1 200,000. 500,000.00 200,000.00 1,000,000.00 500,000.00 100,000 By When By CONTINUOUS CONTINUOUS CONTINUOUS CONTINUOUS CONTINUOUS CONTINUOUS By Who By HOM/ FOSA HOM/ FOSA HOM/ FOSA HOM HOM HOM/ ICT Initiatives Recruitment through - Reward referrals UN SACCO Loyalty/ Advocates. Exhibition / Stands/ Tables Banners/Posters at UN organized conferences. Campaigns. Above-the-line – promotion (ATL) Newsletters Below-the-line – promotion (BTL) Banners, Brochures, etc. Posters Fliers, Online Marketing – Website, Social Media, ISEEK, Automated Notifications etc Telemarketing and M-marketing potential - Call members or send product/ service to notification SMS customers. Target Measure Objective GOAL: Membership Growth by 70% of the current membership (8,000) 70% of the current by Membership Growth GOAL: Perspective
United Nations SACCO Society Limited • Your Financial Anchor 35 – – Y3 300,000. 4,000,000 4,000,000. – – Y2 250,000. BUDGET 3,500,000 4,000,000 – Y1 500,000 200,000. 3,000,000 4,000,000. By When By CONTINUOUS CONTINUOUS QUARTERLY EVERY 1ST&2ND QUARTER. CONTINUOUS CONTINUOUS By Who By HOM/ ICT CEO/ HODS CEO/ HOM CEO/ HOM HOM HOM Reporting (FiRe). Agency Heads Associations Staff Ushirika Day Financial MSK etc. Governance Initiatives Offline marketing – address website Add all literature to & publications, items, promotional Newspaper adverts, etc. voicemail Endorsement and – Awards • • • • • • – Publicity CSR Philanthropy/ activities that market and enhance the visibility of the Society. / Week Open Week. Education Documentary of Success UN SACCO Stories. Exhibition / Stands/ Tables banners/Posters at UN organized conferences Target Measure Objective GOAL: Membership Growth by 70% of the current membership (8,000) 70% of the current by Membership Growth GOAL: Perspective
36 United Nations SACCO Society Limited • Your Financial Anchor Y3 4,000,000. 200,000.00 5,000,000.00 2,000,000.00 Y2 BUDGET 3,500,000 500,000.00 200,000.00 2,000,000.00 Y1 1,500,000 3,000,000 200,000.00 2,000,000.00 By When By CONTINUOUS CONTINUOUS CONTINUOUS CONTINUOUS By Who By HOM HOM HOM/ PROC HOM Initiatives In-shop branding of Service –FOSA areas with the preferred brand symbols of the Society. in all Brand harmony materials including office websites, stationery and all marketing materials and promotional item Branded office stationery – Flash Envelopes, Note Pens, Disks, etc. Folders pads, Branded novelty folders, e.g. items cups, caps, pens, keycalendars, Bags T-Shirts, holders, etc. Education/Training Information booklet / Manuals be given to new members to upon recruitment. Target 7,500 Measure Number Objective of Retention members GOAL: Membership Growth by 70% of the current membership (8,000) 70% of the current by Membership Growth GOAL: Perspective
United Nations SACCO Society Limited • Your Financial Anchor 37 – Y3 500,000.00 250,000.00 2,000,000.00 1,000,000.00 – Y2 BUDGET 500,000.00 150,000.00 2,000,000.00 1,000,000.00 Already budgeted above budgeted Already Budgeted under Direct Sales Reps Budgeted – Y1 500,000.00 100,000.00 2,000,000.00 1,000,000.00 Already budgeted above budgeted Already By When By YEAR 1 PER CONTINUOUS TRAINING ONE ANNUALLY IMMEDIATE IMMEDIATE JUNE 2015 BY CONTINOUOS DEC. 2015 BY By Who By CEO/ HOM HOM HOM HODS CEO CEO HOM Initiatives Annual Education enlighten to days Financial on members Management, etc. Entrepreneurship In – house training for Staff and Champions, on Products Directors & Services, Selling Skills & Customer Service. Initiate trainings for Clubs Investment & Junior Account Holders. Reduction or of post sales removal dissonance through Education. programs Follow-up new members for any remove to post recruitment (Phone dissonance. etc.) SMS emails, calls, Establishing a Advisory Financial Centre. Benchmarking with other financial institutions. Documentary UN showcasing members’ SACCO Success Stories. Target Measure Objective GOAL: Membership Growth by 70% of the current membership (8,000) 70% of the current by Membership Growth GOAL: Perspective
38 United Nations SACCO Society Limited • Your Financial Anchor – – – – – – Y3 – – – – – – Y2 BUDGET – – – – – – Y1 By When By JAN. 2015 BY CONTINUOUS QUARTERLY CONTINUOUS JUNE 2015 BY 2015 MARCH BY ANNUALLY ANNUALLY CONTINUOUS By Who By HOM HOM HOC/ FOSA/ HOM HOM HOM/ HODS HOM HODS HOC HOC HOM/ FOSA Initiatives the marketCluster variousinto categories according member needs. to Developing tailor made products to suit the different needs. customer Undertake surveys field and walk-in, for customers. website Exit Questionnaires withdrawing for members. Developing and implementing complaints customer and feedback mechanisms. Carrying out needs customer surveys regularly Develop a Customer service charter. of reviews Periodic Deposit Banding of reviews Periodic lending conditions Deploying to staff competent service counter Target Measure Objective GOAL: Membership Growth by 70% of the current membership (8,000) 70% of the current by Membership Growth GOAL: Perspective AND SYSTEMS PROCESSES
United Nations SACCO Society Limited • Your Financial Anchor 39 – – – Y3 500,000.00 – – – Y2 BUDGET 500,000.00 – – – Y1 500,000.00 To be budgeted under Customer Service under Customer be budgeted staff To By When By CONTINUOUS JAN 2016 BY DEC 2015 BY CONTINUOUS JAN 2015 BY CONTINOUOS CONTINOUOS CONTINOUOS 2015 MARCH BY By Who By HOM H/ICT HOM CEO/ HOM HOM/ FOSA HOM HOM/ICT HOM CEO Initiatives Business Partnerships value and alliances for increase addition, to the range of products Establish a comprehensive contacts database for customers. Establish a Staff Bulletin. Establish an online Members Bulletin for Appoint Dedicated to respond to Staff emails and members’ Social media queries. and Recognize send Birthday & messages to Festivity members to Issue Notifications dormant members. of Recognition during Savers Top Member Forums Develop and implement a communication strategy. Target Measure Objective GOAL: Membership Growth by 70% of the current membership (8,000) 70% of the current by Membership Growth GOAL: Perspective LEARNING WITH GROWTH
40 United Nations SACCO Society Limited • Your Financial Anchor Y3 Y2 Y1 above budgeted Already above budgeted Already above budgeted Already above budgeted Already 2015 2015 2015 2015 2015 2015 2015 2015 2017 By when By By Whom By HOM HOM/ HOFOSA HOC HOC HOM HOFOSA HOFOSA HOM HOM Initiatives New member recruitment drive New product development FOSA e.g. Review existing product offerings Review existing credit policy promotion Aggressive of deposits on rates Review interest accounts fixed/savings deposit/ of Fixed Promotion Junior/Kin accounts New member recruitment drive and Joint Partnerships Ventures Commissions-ATM aggressive & M-Pesa marketing Introduction of new UN from income segments Plaza SACCO Target 10.5B by 2017 11B by 2017 2.5B by 2017 Measure Kshs Kshs. Kshs. Objective book Loan growth deposit Grow base Revenue growth Area Financial GOAL: Business growth and internal processes efficiency processes and internal Business growth GOAL: No 1. Table 12: Business Growth Matrix 12: Business Growth Table
United Nations SACCO Society Limited • Your Financial Anchor 41 Y3 2000000.00 Y2 Y1 under Business above budgeted Already Development & Benchmarking 2,000,000.00 above budgeted Already above budgeted Already above budgeted Already above budgeted Already 2015 2015 2015 2015 Monthly By when By Annual 2017 By Whom By HOM BOARD HOF BOARD HOM HOM BOARD BOARD Initiatives New product development from rates Review interest loans budget Vs Monitor cost Increase minimum share Kshs 30,000 to capital from Kshs 50,000 Reduce high pay-out on on deposits interest Retain Kshs 300 million per in 2014, 2015, 2016 & year 2017 Carry out education to members satisfaction Customer survey Champions UN SACCO Branding forums Education members Training Regular and timely communication Target Full compliance 2016 by 100% 100 Measure Ratio Kshs Index % Objective Cost optimization of core Growth capital Improve customer satisfaction Customer retention Area Customer GOAL: Business growth and internal processes efficiency processes and internal Business growth GOAL: No 2.
42 United Nations SACCO Society Limited • Your Financial Anchor GOAL: Business growth and internal processes efficiency
No Area Objective Measure Target Initiatives By Whom By when Y1 Y2 Y3 Driving awareness on Already budgeted above product and services
Product Number 3 Promotions HOM/HOC/ 2015 Already budgeted above
United Nations SACCO Limited Society Improvement HOF Aggressive marketing HOM 2015 Already budgeted above drives Undertake product review/ HOM – re-engineering
3. Internal Business process Number 10 DMS implementation HOICT 2017 7,000,000 process automation ISO certification CEO 2015 2,500,000
CRM implementation ICT 2015 3,000,000
Credit Referencing HOC 2015 150,000 • Your Financial Anchor Procurement and HOICT 2015 250,000 250,000 250,000 Finance process automation Enhance internet HOICT 2015 and mobile banking platforms Formulate and Enhance HOICT 2015 2,100,000 policies and procedure
43 Upgrade of Navision 10,000,000 System Y3 9,600,000 300, 000,000 27,249,224 Y2 500,000 9,600,000 300, 000,000 21,975,229 Y1 1,000,000 for budgeted Already 15,000,000 450, 000,000 17,174,498 By when By March 2015 March 2016 2017 2015 Continuous Continuous Continuous Continuous Continuous Continuous By Whom By BOD BOARD BOARD HOICT CEO CEO CEO CEO CEO CEO Initiatives Implement DRP (Disaster Recovery Plan) Roll out interactive to communication platform members Review policy & procedure manuals Rent additional office space office current adjacent to Plaza UN SACCO Pursue Project Implement DRP Training-staff/board forums Investment Workshops day Education Benchmarking through Exposure international trainings Target 20 500sq mtrs 100% 18 Measure Number New Plaza Office space % Number Objective Review Policy & procedure manuals shortAcquire term additional office spac Develop long term office space BCP (Business continuity) Capacity building of board staff, and members education Area Learning & growth GOAL: Business growth and internal processes efficiency processes and internal Business growth GOAL: No 4
44 United Nations SACCO Society Limited • Your Financial Anchor Y3 250,000 1,400,000.00 BUDGET Y2 250,000 1,200,000.00 Y1 250,000 above budgeted Already 1,000,000.00 above budgeted Already CEO Head of Head ICT Head ICT By when By BOD/MGT Marketing Action earnings Increase the retained - 300M in 2014, 2015 and 450M in 2016 online banking, Automate mobile banking app), (create customer milestones, SMS for alertsfeedback Implement DMS, enhance interactivitywebsite & content and implement a Formulate Strategy Communication Customers to Communication Publicity Social Corporate Responsibility Target Capital/Assets Core – 10% capital/ Institutional – 8% Assets capital/Total Core Deposit – 8% double To the number of processes automated June 2015, 50% by 100% 75% Perception index Measure Ratios Number of processes on available automated platform Stakeholder Perception Objective Ensure compliance with SASRA Ratios Enhance information access for customers Improve image Corporate of the SACCO GOAL: Improve Corporate Governance Corporate Improve GOAL: Perspective Financial Customer Table 12: Business Growth Matrix 12: Business Growth Table
United Nations SACCO Society Limited • Your Financial Anchor 45 Y3 250,000 BUDGET Y2 250,000 Y1 above budgeted Already 250,000 CEO CEO CEO CEO BOD BOD Head By when By Marketing Action SurveyCarry out a Perception every two years statutory requisite Formulate & other policies and Dec manuals by procedure 2014 an all-inclusive Formulate enterprise-wide risk management & internal frameworkSept by control 2015t a BCP and test Formulate the for which is adequate by growth business envisaged June 2015 Implement business partnership formulation with a Standard process Jan by Operating Procedure 2015 a staff & BOD Formulate policyremuneration for provide to Amend bylaws of appointment procedure Members of Board and tenure Target 15% 90% Measure Increase in productivity index % age Objective Improve operational efficiency Improve organizational capacity levels GOAL: Improve Corporate Governance Corporate Improve GOAL: Perspective Internal Processes & Learning Growth
46 United Nations SACCO Society Limited • Your Financial Anchor GOAL: Improve Corporate Governance BUDGET
Perspective Objective Measure Target Action By when Y1 Y2 Y3 Formulate and implement BOD adequate BOD manuals such as; BOD Annual work-plan, BOD Rules of procedure,
United Nations SACCO Limited Society BOD Charter (Manual), TORs for BOD committees, BOD meetings calendar of events, BOD & AGM resolutions tracker
Formulate an organization BOD structure with requisite no. of departments, positions & job descriptions, succession planning.
• Your Financial Anchor Undertake member education BOD on the importance of changing the governance system to a delegates system to drive business growth and enhance value addition to members
Ensure compliance to BOD ethical standards as set out in; Governance rules by the Ethics Commission,
47 Confidentiality requirements STRATEGIC PLAN 2015 - 2017
5.0 FINANCIAL REQUIREMENTS To implement the strategic plan, the SACCO requires approximately 1.123billion over the next three years. This however excludes any recurrent expenditure since a strategic plan is a development document and focuses mainly on development expenditure. The costs are summarized in the table below:-
Table 14: Financial Requirements Summary
STRATEGIC THEME OBJECTIVES BUDGET Membership Increase membership to 10,000 43,900,000.00 Enhance retention of members 14,600,000.00 Business Growth and Loan book growth 3,300,000.00 operational excellence
Grow deposit base 1,500,000.00 Revenue growth - Cost optimization - Growth of core capital - Improve customer satisfaction 500,000.00 Customer retention - New product development - Business process automation 18,000,000.00 Review Policy & procedure manuals 2,500,000.00 Create office space 1,000,000,000.00 BCP (Business continuity) 1,500,000.00
Capacity building of staff, board and members 22,767,855.00
Corporate Governance and Ensure compliance with SASRA Ratios - Compliance
Enhance information access for customers 2,000,000.00
Improve Corporate image of the SACCO 1,000,000.00
Improve operational efficiency 7,000,000.00
Improve organizational capacity levels 2,350,000.00
TOTAL BUDGET 1,120,917,855.00
48 United Nations SACCO Society Limited • Your Financial Anchor STRATEGIC PLAN 2015 - 2017
6.0 MONITORING AND EVALUATION Monitoring, evaluation and reporting will form a critical feature of the implementation of this strategic plan. The plan will be implemented by the respective departments. The effective monitoring of the implementation of programmes, projects and activities within the strategic plan period shall make use of participatory monitoring, evaluation, and learning approaches. These approaches include: provision of a feedback system on progress, awareness of impacts, transparency and accountability. An M&E framework (in Annex 2) will have the main purpose of focusing on those responsible for implementing various projects and programmes on the anticipated outcomes and or results.
The Strategic Plan activities will be monitored and evaluated during the plan period through the annual work plans to gauge the extent of achievement of the intended results. The evaluation will be useful and will be used to inform a mid-term review of the plan. An implementation framework will be developed to assist in the tracking progress of the implementation.
United Nations SACCO Society Limited • Your Financial Anchor 49
FY17P FY17P 32,051,185 52,533,292 12,863,741 57,442,279 37,073,058 57,442,279 344,753,644 139,940,001 190,191,659 646,464,464 910,518,104 797,547,313 1,863,292,900 1,134,002,202 1,134,002,202 589,022,185 2,208,046,544 1,561,582,080 2,139,035,643
FY16P FY16P 25,640,948 39,396,344 12,909,550 42,236,970 35,009,432 42,236,970 255,759,527 880,924,700 119,506,635 168,724,647 561,400,786 880,924,700 728,414,483 664,622,761 1,552,744,083 519,163,816 1,808,503,611 1,247,102,824 1,686,585,585 STRATEGIC PLAN STRATEGIC
FY15P FY15P 20,512,758 29,822,683 12,669,850 32,489,977 33,060,676 32,489,977 198,965,307 706,949,382 100,961,250 147,029,727 474,973,059 706,949,382 582,731,587 553,852,301 1,293,953,403 442,483,082 1,492,918,710 1,017,945,651 1,355,231,621
FY14A FY14A 2,451,500 3,413,820 17,093,965 68,579,611 18,622,860 22,216,716 31,220,394 152,883,468 556,387,941 159,821,822 408,220,270 626,593,522 485,609,655 461,253,733 1,078,294,502 822,957,699 386,003,554 1,231,177,970 1,146,837,391 0 FY13A FY13A 1,664,918 5,210,704 63,026,109 13,634,704 57,488,217 13,584,198 87,997,406 77,246,671 23,359,747 994,230,907 805,640,902 805,610,175 341,101,769 260,024,554 72,035,967 980,010,346 1,057,257,017 1,170,071,691 INCOME STATEMENT INCOME income Interest Other income Income Total accounts on members savings Interest on member deposits Interest Staff costs costs Directors costs Administrative & amortizationDepreciation expenses operating Total tax Surplus before expense Tax Surplus after tax LIABILITIES on members' deposits Interest and other payables Trade Members' accounts savings payable Tax Liabilities & Provisions Current Total capital Share 1 2 Liabilities & Provisions Current Liabilities Current Non ANNEXES 2015-2017 for and Projections Trends 1: Financial Annex
50 United Nations SACCO Society Limited • Your Financial Anchor
0 0 0 FY17P 39,598,932 15,648,327 473,342,741 9,627,686,099 1,280,941,357 2,750,571,734 3,242,955,502 8,251,715,202 1,754,284,098 6,033,126,168 10,425,233,412 14,318,553,152
0 0 0 FY16P 39,429,162 19,840,473 942,648,162 355,538,304 8,520,076,194 2,340,912,114 2,724,374,955 7,022,736,342 9,184,698,954 1,298,186,465 5,104,716,231 12,169,471,005
0 0 0 FY15P 39,260,120 23,383,769 638,087,569 251,705,540 7,539,890,437 2,018,027,684 2,174,938,128 6,054,083,053 889,793,109 8,093,742,737 4,232,225,933 10,338,767,468
0 0 0 0 0 0 FY14A 39,091,803 11,860,815 376,351,850 163,208,924 6,672,469,413 1,754,806,682 1,734,542,871 5,264,420,046 539,560,774 7,133,723,146 8,820,121,311 3,528,441,356 0 0 0 0 0 FY13A 4,013,720 4,495,361 86,008,213 16,369,917 119,554,578 5,890,534,740 1,613,345,870 1,040,844,117 4,840,037,611 205,562,791 6,150,559,294 7,526,193,776 2,674,573,624 Members deposits Liabilities Current Non Total Retained earnings Statutory reserves Other reserves Equity Shareholders' Total Operating lease members to Loans Receivables and prepayments and cash equivalents Cash parties related Amount due from Taxation Assets Current Total Operating lease members to Loans Bond premium Equipment Equity Shareholders’ Equity Liabilities & Shareholders' Total ASSETS Assets Current Assets Current Non
United Nations SACCO Society Limited • Your Financial Anchor 51
FY17P 5,335,451 -3,400,000 12,728,004 17,099,165 646,464,464 518,580,548 -698,821,079 1,088,266,572 1,107,609,905 2,724,374,954 518,580,548 -1,638,638,480 8,272,698,980 1,220,801,627 3,242,955,502 14,318,553,152
FY16P -1,417,600 10,607,046 11,570,913 11,526,708 561,400,786 850,545,379 980,185,757 549,436,826 -561,266,486 2,174,938,128 549,436,826 -1,291,537,718 7,053,183,861 1,112,120,912 2,724,374,954 12,169,471,005
FY15P 18,555,702 10,519,012 30,748,121 -36,912,150 474,973,059 686,172,982 867,421,024 440,395,257 -529,123,770 1,734,542,871 440,395,257 -1,052,884,009 6,096,022,524 1,006,431,176 2,174,938,128 10,338,767,468
FY14A 5,836,355 9,562,738 -10,562,702 -14,884,457 408,220,270 536,507,318 781,934,673 693,698,755 -565,843,247 -441,673,101 1,040,844,117 693,698,755 5,282,117,216 8,820,121,311 1,150,256,313 1,734,542,871
FY13A 768,853 6,318,326 7,727,095 -2,558,381 77,246,671 802,282,094 764,235,644 669,603,440 371,240,677 -613,157,842 -664,534,603 371,240,677 4,845,301,825 7,526,193,776 1,028,048,186 1,040,844,117 Intangible assets Investments (CONDENSED) CASH FLOW tax Surplus before Net changes in working capital Adjustments members in loans to Net increase in member deposits Net increase operations from flow Cash activities investing from flow Cash financing from activities flow Cash cashNet flow balance Cash Opening balance Net cash inflow balance Closing Total Assets Total 3
52 United Nations SACCO Society Limited • Your Financial Anchor 6% 2% 1% 9% 18% 24% 12% 22% 20% 35% 18% 18% 13% 25% 13% 84% 16% 51% 71% FY17P 7% 2% 1% 9% 16% 21% 11% 21% 20% 29% 18% 16% 13% 25% 17% 86% 14% 49% 69% FY16P 9% 7% 2% 1% 14% 18% 21% 20% 30% 17% 15% 13% 20% 15% 87% 13% 47% 10% 68% FY15P 6% 8% 9% 6% 2% 1% 11% 14% 16% 17% 13% 42% 88% 12% 45% 13% 67% 143% 436% FY14A 6% 7% 3% 6% 5% 1% 1% 8% 10% 15% 15% 10% 15% 37% 94% 76% 93% -36% -18% FY13A RATIO ANALYSIS RATIO adequacyCapital assets capital/Total Core deposits capital/Total Core assets Institutional capital/Total Growth trends (%) trends Growth income Total income Interest Other income assets Total portfolio Loan Member deposits accounts Savings Surplus after tax income a % of total As income Interest Other income Staff costs Directors costs Directors Interest on deposits Interest on member savings Interest Administrative costs Administrative operating costs Total 4
United Nations SACCO Society Limited • Your Financial Anchor 53 REPORTING will it be Where reported? ReportBoard to the AGM Monthly reports the Board to Quarterly report the Board to Monthly reports the Board to Monthly reports the Board to Monthly reports the Board to Quarterly Report the Board to Monthly Report the Board to RESPONSIBLE will Who it? measure CEO HoM HoM HoC HoM HoF HoF HoF FREQUENCY often will How measured? be it Annually Monthly Quarterly Monthly Monthly Monthly Quarterly Monthly DATA SOURCE SOURCE DATA will it be How measured? Computation of annual of statements accounts of Computation new members being recruited Number of members that active remain of Computation in loans Growth Computation in of Growth deposits Computation in of Growth revenues Computation Vs of the costs Income analysis quarterly of Computation growth Capital TARGET is the What (3 value target Years) 80,678,928 8,000 7,500 11,002,286,936 10,538,204,203 2,208,046,544 65% 18% 24% BASELINE is the What value current 414,770,663 4,731 4,731 7,019,226,729 7,158,079,069 1,231,177,970 67% 11% 14% DEFINITION is it How calculated? in %age growth after tax surplus in %age increase the number of active members Number of active Members in %age increase the loan book in %age increase deposits in %age growth revenues Operating Total as a %age of Cost income the total in Core Growth to capital relative Assets in Core Growth to capital relative Deposits KEY PERFORMANCE INDICATOR an Achieve business overall of 40% growth Increased membership Enhanced membership retention book Loan growth in Growth deposits Revenue Growth Cost Optimization capital Core growth Goal Outcomes Annex 2: Monitoring and Evaluation Framework and Evaluation 2: Monitoring Annex
54 United Nations SACCO Society Limited • Your Financial Anchor KEY DEFINITION BASELINE TARGET DATA SOURCE FREQUENCY RESPONSIBLE REPORTING PERFORMANCE How is it What is the What is the How will it be How often will Who will Where will it be INDICATOR calculated? current value target value (3 measured? it be measured? measure it? reported? Years) Growth in 6% 12% Institutional capital relative to Assets United Nations SACCO Limited Society Improved Customer - 75% Customer Quarterly HoM Quarterly Report customer Satisfaction Index Satisfaction to the Board satisfaction Survey New products Number of - 3 Number of Quarterly HoM/HoFOSA Quarterly Report developed New Products New products to the Board Developed developed and launched Review of Repackage - 4 Number of Quarterly HoM/HoFOSA Quarterly Report Existing products and re-launch products to the Board existing products repackaged and launched Business process Number of - 10 Computation Quarterly HoICT Quarterly Reports automation business of business to the Board • Your Financial Anchor processes processes automated available on an automated platform Reviewed Policies Number of - 20 Computation Monthly CEO Monthly Reports and procedures policies and of policies and to the Board manuals procedure procedure manuals manuals developed available Additional Office %age increase in 1,900 SqMtrs 500 SqMtrs Computation Quarterly CEO Quarterly Board Space acquired the area available of the new area Reports for office space available for UN
55 SACCO Offices Business Completion of - 100% by 2015 %age completion Monthly HoAudit Monthly Reports Continuity Plan the Business of the BCP to the Board in Place Continuity Plan REPORTING will it be Where reported? Quarterly Board Reports Monthly Report the Board to Quarterly report the Board to Annual Report Annual Report Annual Report RESPONSIBLE will Who it? measure CEO CEO HoM CEO CEO CEO FREQUENCY often will How measured? be it Quarterly Monthly Quarterly Annually Annually Annually DATA SOURCE SOURCE DATA will it be How measured? Computation of the number of activities undertaken capacity towards development of Computation month month to compliance Information access survey amongst the members of Computation the stakeholders index perception in a survey the Compute staff productivity 1 index in year and compute annually to increase measure Organization Capacity Assessment TARGET is the What (3 value target Years) 18 100% 100% 75% X+15% 90% BASELINE is the What value current - 90% 50% - X X DEFINITION is it How calculated? Number of Capacity building activities for and Staff Board %age compliance with SASRA Ratios proportionThe of members accessing on information the SACCO of Perception Stakeholders on the SACCO Increase in Productivity index Organization Capacity levels KEY PERFORMANCE INDICATOR Capacity building and Board for Staff with Compliance SASRA Ratios/ Requirements Enhanced Information access by members Improved ImageCorporate Improved Operational Efficiency Improved organization Capacity
56 United Nations SACCO Society Limited • Your Financial Anchor