Addressing Innovation Gap in Co-operative Societies | July 4, 2018

1. INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF KENYA ADDRESSING THE INNOVATION GAP IN CO-OPERATIVE SOCIETIES 4TH JULY 2018 MERICA HOTEL, NAIROBI BY: CPA SOLOMON A. ATSIAYA Credibility . Professionalism . AccountAbility

2. WHY INNOVATION? • Kenya has over 40.5 Million mobile subscribers • Mobile data remains the key contributor to data/Internet subscriptions at over 88%. ... of the Kenyan population is covered by the digital broadcasting signal (I have a laptop, tablet and two smart phones, but i am only one person).

3. WHY INNOVATION? • Smartphone penetration in Kenya has grown to more than 60 per cent of • By 2050 70% of Kenya population will be urbanised • There are more I phones or Samsung Galaxies sold than born babies every day i.e. 78 Million I phones sold in the 4th quarter in 2017.

4. LAUNCH OF MOBILE SOLUTION The Chief Guest, Former Co-operative secretary Mr. Daniel Maanzo, CBS officially launching the M-SACCO (Mobile Solution)-2011.

5. SOME WISDOM “He who innovates will have for his enemies all those who are well off under the existing order of things and only a lukewarm support in those who might be better off under the new” (Niccolo Machiavelli, The Prince)

6. Need for Creativity and INNOVATION? Why should Co-operatives be concerned with fostering creativity and innovation?

7. RATIONALE An innovation can increase profits on the value side (customers value an innovation enough to pay more for it) OR On the cost side(the Company produces a product offering in a more efficient way)

8. FROM WHICH SIDE • Innovation can occur anywhere in the Co-op Business and by anyone. There is great potential • There is no shortage of ideas and invention in the work. The challenge is to introduce these successfully to a market.

9. THINK OF THIS? • If you are not growing you are dying • Innovate or die • To be number 1, you must innovate • If you remain small you will disappear

10. Need for Creativity and INNOVATION?

11. Need for Creativity and INNOVATION? • Superior performance is associated with innovation. • Evidence from WCOs • Customers are increasingly demanding innovation. • Customers are continuously experiencing innovations all around them and have, therefore, come to expect further innovation.

12. Need for Creativity and INNOVATION? • Competitors are increasingly getting better at copying innovations • Presence of innovation copiers(copycats!) further drives the need for innovation. • Hence the need for continuous innovation! • New technologies enable innovation • Aren’t new technologies actually innovations? • New product/process technologies continue to be available.

13. Need for Creativity and INNOVATION? • What used to work, doesn’t anymore! • Every new solution will eventually become a solution that no longer works! • Hence solutions to problems in the past are no longer effective. • Ever-increasing complexity of our environments demands new innovations.

14. TYPES OF INNOVATION Revolutionary Innovation Value Innovation Service Innovation Business Model Innovation Management Innovation Structural Innovation Market Innovation • Process Innovation Strategic Innovation Product Innovation Technological Innovation Brand Innovation Disruptive Innovation

15. PROCESS OF INNOVATION?

16. PRINCIPLES FOR INNOVATION • Be action oriented • Make product, process or service simple and understandable • Make the product process or service customer based • Start Small • Aim high • Try, Test, Revise • Learn from past failures

17. BENEFITS • Reduces waste and environmental damage • Creates growth, increase productivity, Economic wealth (avoids stagnation) • Provides better goods and services at cheaper price-standard of living • More interesting work for employees • Survival –Remember KODAK

18. KENYA SACCO PERSPECTIVE The Sacco movement has evolved in the past over 45 years into a formidable force for the social and economic transformation of Kenyan people. In Kenya we have over 7,000 registered Sacco's i.e. 44% of total 17,000 Co-operatives

19. KENYA SACCO PERSPECTIVE Out of the 7000 Saccos only 176 (2.5%) Saccos are licensed. All Sacco's have mobilised over KSH.600 Billion in savings i.e. more than 20% of the National Domestic savings. (The SACCOs with FOSAs account for over 80% of the savings KSH.480 Billion)

20. SACCOS MISSION • Mobilize savings, • Provide diversified financial products & services • Maximize returns to stakeholders • Vehicle for Investments

21. KENYA POLICE SACCO • Kenya Police Sacco society was registered in 1972 under the Co-operative Societies Act (Cap 490) of the laws of Kenya. • The Society started on a humble beginning with membership of 690 to the current of over 62,000 and an asset base of Kes.26 Billion • The Society is licensed for 2018 as a Deposit taking SACCO by SASRA.

22. GOVERNANCE

23. KEY MILES STONES Membership - Over 62,000 Assets - Kes.26 Billion Loan Book - Kes. 22 Billion Core Capital - Kes. 6 Billion (22%) Revenue - Kes. 3.9B (2017) Annual expense ratio- 25% (2017)

24. STRATEGIC POSITIONING2015-2019 VISION A SACCO that empowers members for improved quality of life. MISSION We exist to facilitate the mobilization of savings and provision of cost effective financial and non-financial products and services to our members and customers in Kenya and beyond. MOTTO United for Prosperity

25. STRATEGIC OBJECTIVES • Governance & Transformative leadership • Membership & Product development • Operations and Service excellence • Financial Mgt & Banking services • Human Capital & Work Environment • Research and Information Management

26. FINANCIAL INNOVATION • Building financial capacity; • Capital @ 22% of assets • Separation b/t shares & deposits • Loan provisioning-IFRS9 • Dividend policy/Retention • Benevolent fund • Inter SACCO borrowings?

27. WHY FINANCIAL INNOVATION • Enhance liquidity position of the society (15%) • Finance the INFRASTRUCTURAL DEV projects i.e. TECHNOLOGY, BRAND CAPITAL, RESEARCH, SECURITY & otherwise. • Operational EFFICIENCY- • PRODUCT development i.e. Long-term & Mortgages • RISK MANAGEMENT • Achieve PRUDENTIAL Requirement for core capital of 10% & Institutional Capital 8% of the total assets

28. CAPITAL PROJECTION

29. FINANCIAL INNOVATION

30. PROSPECTIVE INNOVATIONS • Develop financial instruments raise capital-internal & external i.e. Sacco Bonds, Commercial papers etc • Create a ‘stock market’ to encourage permanent capital • Deposits from non-members?

31. PRODUCT INNOVATION • BOSA PRODUCTS • FOSA PRODUCTS • MICRO CREDIT PRODUCTS • INVESTMENTS

32. FOSA INNOVATION In early 1990’s Kenya experienced difficult economic times forcing commercial banks to demand higher minimum operating balances-from Kshs.500.00 to Kshs. 20,000.00 TWO THINGS HAPPENNED; • Low and middle income persons unable to operate Bank accounts • SACCOs responded by introducing FOSAs which offered quasi banking services at competitive rates

33. FOSA INNOVATIVE PRODUCTS • Savings /Fixed Deposit Account • Holiday/Children Accounts • Children Account • Share boosting, • loan clearing (Loan Bridging). • M-Pesa Services • Cheque clearing • Salary Processing • Salary advances/Dividend advances • ATM Services-Visa branded • M-SACCO-Mobile banking solution • Agency Banking-POS

34. KPS Investments • Asubsidiary co-operative society for investment needs for the members to bridge the gap for the unique investments needs. • Affordable housing-Quality middle income homes • Mortgages-Affordable Mortgages plan • Other life transforming investments

35. TECHNOLOGICAL INNOVATION • Improves operational efficiency; • Society processes i.e. Loan, FOSA' • IT based products i.e. • Mobile solutions, -deposits, withdrawals, balance enquiries etc. • Visa branded debit cards-SACCO Link Card , POS • On line statements • Document Management System-DMS • What of Mobile loans?

36. TECHNOLOGY • Core-Banking, Internet, Mobile solutions which include additives i.e. Customer Relationship Management (CRM), Business Intelligence system & Agency Banking • Document Management System-DMS • Members portal- On line statements etc. • Integration of a CRM & IVR (Call center)

37. QUALITY INNOVATION • Customer satisfaction • Continuous improvement-Kaizen • Quality • Delivery • Flexibility • Cost reduction

38. BENOVELENCE • UBF operates where members pay Kshs. 350.00 per months to cater for the following benefits; • Clear the deceased members loans • Pay double the members deposits upon death • Pay the principal member Kshs. 70,000.00 upon death • Pay retirement, termination & removal cases Kshs. 50,000.00 • Pay spouse Kshs. 40,000.00 upon death • Pay for child death Kshs.30,000.00 (4 Children)

39. BRAND INNOVATION NEW LOGO OLD LOGO

40. BEST MANAGED SACCO NATIONAL POLICE SACCO SOCIETY LIMITED Mr. D. Mategwa National Chairman & CEO Mr. Solomon Atsiaya Receiving A trophy from the Former Minister of Co-operative Development & Marketing Hon. Joseph Nyagah During Ushirika Day Celebration in July 2011.

41. CONCLUSION Credibility . Professionalism . AccountAbility

43. SACCOS PERFOMANCE CAN BE IMPROVED THROUGH INNOVATION. THANK YOU Credibility . Professionalism . AccountAbility