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DO WE REALLY HAVE SACCOS IN AFRICA?
















The 17th century was a watershed period for North America as European immigrants boarded ships and crossed the Atlantic Ocean in order to escape the servitude, abject poverty and hunger that was prevalent in Europe at that time.  A principle that travelled these many miles was one borne out of the need to bring the working classes together while dragging them out of poverty through commerce.



More than 200 years later, with many unsuccessful attempts and subsequently the unearthing of the “Rochdale Principles” the cooperative movement is firmly entrenched around the world.

There is nowhere this movement has found such success as in North America, with more than 45% penetration and figures exceeding 1 trillion dollars in savings and shares. It almost seems like the cooperative was invented in America and not in the Scottish City of Aberdeen.

Why so much success in North America and where does Africa sit with all this?

According to the 2012 statistical report by World Council of Credit Unions (WOCCU), Africa holds the second largest number of SACCOs in the world only after Asia.  While this is the case the membership of the African SACCOs are a distant fourth behind North America, Latin America and Asia. Additionally, Africa only has a 6% penetration and close to 5 billion dollars under savings, which is a miniscule 0.4 % of the world’s total.

It is imperative to note that the cooperatives in the developed world had two centuries to contend with industrialization, two world wars, and an empowered middle class. Through this time they were able to wade through mistakes and discover an approach that has brought great success and influence to the cooperative movement. In UK for example, the Co-operative party fields MPs through the Labour Party and holds extensive stake in Agriculture and Retail.

In many ways a cooperative system has to be protected by the policy and legislative framework within a country for it to be a success, similar to what business enterprises call “an environment conducive for business”.

The barometer that we use for measuring SACCOs in Africa and ultimately whether they are well governed or failing on various fronts needs to heavily borrow from the International Co-operative Alliance (ICA) principles, which are based on the Rochdale Principles originally set forth in 1844. These principles form the cornerstone of how a successful SACCO should operate, proven and tested over time.

According to the principles,” a co-operative should be a voluntary organization, open to all people of the public, who are willing to accept and uphold the responsibility of membership”. In Africa, in a rush to alleviate abject poverty governments and donor agencies set up or supported co-operative themed federations, which were preferentially treated. They were neither self-driven, or market oriented. The end result is that many of these failed in the 1990s.

This observation points to another principle, “co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions”. While this is a good aspiration most credit unions in Africa are regulated by a ministry in government, or by a governmental authority. The move to regulate was driven by the need to protect the millions of low-income earners who depend on SACCOs for financial services. What this does in the long run is take away the participatory ability of most members demoting them to observers in their own SACCOs.

This then takes us to another principle of importance,  “a co-operative is also required to provide training for its membership and engage the general public in order for them to effectively contribute to the development of their co-operative”. In Africa, most SACCO members are not educated on their responsibilities and their rights this creates fertile ground for corrupt board members who want to manipulate SACCO’s resources to do so. To counter this, governments set up policy and legislation to institute and protect members’ rights, but unfortunately training and education still needs to be a crucial requirement for SACCOs around Africa.   

There was a time in the 1990s when cooperatives in Africa were dependent on state patronage and acted as state agents or clients of the state. This behavior directly contradicted the principle of autonomy and independence, which requires cooperatives to be autonomous, self-help organizations controlled fully by their members. They are to only enter into agreements with government and other institutions while ensuring they are democratically controlled by their members and show co-operative autonomy.

The truth is that very few SACCOs in Africa have adopted the ICA principles to the letter, and while many publications state that the models being taken up in Africa are innovative and allow for financial inclusion. Innovation does not trounce good governance, education and sound theory.  

So while we celebrate the benefits SACCOs have brought countries like Kenya. We have to charge all stakeholders to go back to the drawing board and adopt a model that will still enact the ICA principles, while bringing about development through financial inclusion for the millions in Africa who need to become self –reliant economically, as set out by the UN in the Millennium Development Goal #1 of eradicating extreme poverty and hunger.

Article written for Management Magazine  

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