THE EVOLUTION OF FINANCIAL CO OPERATIVES IN AFRICA: MAPPING OUR FUTURE PROSPECTS CONTENTS Why Co operatives in Africa Brief Background of the history of SACCO s in Africa including early promoters The Failure of ACCOSCA and the Credit Union System The New ACCOSCA CONTENTS Challenges Separate Legislation for SACCOS Are SACCOs Operations still relevant in Africa? The importance of Youth in SACCOs 1
WHY CO OPERATIVES? The recognition of cooperatives as crucial means for poverty alleviation and, therefore, African development has been widely acknowledged. It is for this reason that cooperatives have been promoted in virtually all African countries since the colonial period. GOVERNMENT & COOPERATIVES Most African countries continued with the colonial framework that enabled the state to intervene in cooperative affairs, thereby enabling it to control cooperative development. Government Control The perceived potential of cooperatives to mobilize local human resources, to serve the entire nation and to transcend the existing i class and/or ethnic divisions, i i saw cooperatives promoted by governments as part of their populistnationalist strategy for nation building. 2
Government Control While in most cases the role of promotion, control and guidance of the movement was vested in special co operative development departments or ministries, state participation in cooperative affairs became a matter of general government policy (Develtere, 2008). The Evolution of SACCOs in Africa The SACCO Concept was introduced to the Gold Coast now Ghana by an Irish Canadian Catholic Priest in September, 1955 by name Reverend Father John McNulty (Kirsch and Goricke, 1977). The Evolution of SACCOs in Africa He established the first SACCO at Jirapa in the present Upper West Region. Father McNulty had studied in Canada where he learned about Savings and Credit Co operatives Societies. 3
The Evolution of SACCOs in Africa It was the success of Jirapa savings and credit co operative that was exported and is now being replicated throughout the African Continent. Presently, there are 28 countries operating the credit union concept in Africa. JIRAPA ST. JOSEPH The Evolution of SACCOs in Africa Below are the years in which other African countries recorded the organization of their first savings and credit co operatives: operatives: Tanzania 1954 First Private C U 1961 Registration of first CU Mauritius 1960 4
The Evolution of SACCOs in Africa Lesotho 1961 Malawi 1962 Cameroon 1963 Kenya 1964 Sierra Leone 1974 Liberia 1966 The Evolution of SACCOs in Africa The early pioneers of credit unions in Africa were mostly missionaries who probably found it very important to use the credit union concept asa a tool for human development. The early credit unions were very successful especially when they operated under the guidance of the missionary pioneers. The Evolution of SACCOs in Africa The second stage of development of credit unions emerged in the late 60s and early 70s. This time the development changed hands from missionaries to promoters like teachers unions, government officials, trade unionists, nongovernment organizations and social organizations. 5
The Evolution of SACCOs in Africa These were periods of credit union boom in most of the African countries that were receiving a lot of financial and technical support from Governments and Donor Organizations. The Evolution of SACCOs in Africa Dependency on the part of credit union practitioners in Africa collapsed all initiatives at primary level because they expected a continuation i of free services from either the Government or the National Association (Apex). The Evolution of SACCOs in Africa On the other hand, any time a major partner pulled out from the support of the apex, the whole movement experienced a downward trend. 6
The New Model In the late eighties and the early nineties, WOCCU and ACCOSCA embarked on a major research activity in the form of institutional analysis to determine why the credit union movement in Africa was not experiencing a steady growth over the years. The New Model MAJOR FINDINGS Poor Legislation Low or no capital base Poor Image Lack of vision and mission Poor accounting records Negative attitude of Governments towards cooperatives The New Model MAJOR FINDINGS CONT Lack of business orientation Entrenched leadership Lack of competitiveness Lack of long term Planning No or low returns on deposits 7
The New Model Lack of financial management techniques High loan delinquency Lack of regular audits Lack of education and training at all levels The findings were discussed at a Biennial Meeting in Seychelles and a Managers Conference in Rwanda. The New Model Participants agreed that reaching the goals of the future would require changes in the present credit union system. The Movement as a whole agreed upon a plan for achieving this change, called Plan Africa 2000. The New Model The World Council of Credit Unions (WOCCU) demonstrated to the African Movement how a model credit union should be operated by initiating a six year project financed by the USAID. 8
The New Model The purpose of the Africa Revitalization Project (ARP) was to transform approximately eighty credit unions into model credit unions through hthe selection of eight countries. The eight countries selected were: Ghana, Malawi, Uganda, Ethiopia, Kenya, Zambia, Senegal and Zimbabwe. The New Model The necessary toolkits were developed, in country awareness was created, local technicians were trained and the whole program started in earnest. However, the project did not meet its expectation because it ended haphazardly. The New Model However, National Associations that understood the concept and implemented it on their own witnessed a fast growth and development of the credit unions. 9
Formation of ACCOSCA The Africa Confederation of Co operative Savings and Credit Association (ACCOSCA) headquartered in Nairobi, Kenya was formed in1968 by 12 National Credit Union Associations existing at the time. This was at a meeting held in Nairobi, Kenya from 13 16 September 1968. ACCOSCA The delegates who signed the ACOSCA Charter came from: Cameroon, Ethiopia, Ghana, Kenya, Lesotho, Liberia, Mauritius, Nigeria, Sierra Leone, Uganda, Tanzania andzambia Zambia. Its purpose was to assist member countries to increase and improve their services to SACCOs. ACCOSCA The role of ACCOSCA was crucial to the development of credit unions in the African continent. In the 70 s it was ACCOSCA that promoted the credit union concept in the remaining 16 African countries and assisted in building strong National Associations. 10
ACCOSCA The donor dependency made ACCOSCA s role limited to the management of donor funds thus meeting the needs of partners. In 1998 the business of ACCOSCA came to an end without resources to pay any of the staff entitlements. WOCCU Initiating Regional Meetings In 2000 2008, WOCCU staged a comeback and started promoting at least one African Congress annually. The WOCCU ld led Africa fi Congress rotated among the following countries: Kenya, Malawi, Uganda, Ghana, Malawi, the Gambia Evolution of SACCOs Challenges Political Instability In the late 80 s and 90 s, there were series of civil wars in Liberia, Sierra Leone, Cote D Ivoire, Rwanda and Congo that destroyed all the credit union structures, making revival a challenge to the African Movement. 11
Evolution of SACCOs Challenges In the 1970 s and 1980 s the then Government of Tanzania closed all the co operative apexes and placed them under the Co operative operative Union of Tanzania (CUT) which was under the ruling party. SCULT was reorganized in 1992 with the assistance from ACCOSCA. Evolution of SACCOs Challenges In Ghana, the then Government in the late 1950 s to the mid 1960 s abolished all co operatives and confiscated all their assets without considering that they were purchasing and marketing about 40% of cocoa internationally. Evolution of SACCOs Challenges In the 1980s the Zambia credit union movement was one of the strongest in Africa. However, the Government in power decided to channel agricultural credit through the SACCO Movement. CUSA Zambia and the credit unions deviated from their core business of mobilization of savings to a loan collecting agency thus destroying the CU system. 12
Evolution of SACCOs Challenges In the same year 1980 s,lesotho received financial support from USAID for some time. Later, the funding agency provided the National Association with a $6 million Agricultural fund for on lending to farmers. The system experienced over 90% delinquency. The credit union system collapsed and its revival had been a challenge for several years until now. Evolution of SACCOs Challenges CIVIL WARS Credit Unions in Liberia and Sierra Leone had a steady and average growth respectively. Cote d Ivoire had a strong credit union system in place. However, the civil wars that took place in these countries for over a decade destroyed all the gains that were made for several years. Evolution of SACCOs Challenges LACK OF SUSTAINABILITY COMPONENTS IN PROJECTS Donor dependency without sustainability component affected some of the apexes. Anytime a key partner ended a project it impacted negatively on the activities of the apex concerned. 13
ARE INSTITUTIONS LIKE SACCOs STILL RELEVANT IN AFRICA? THE ANSWER IS YES! POVERTY SYMPTOMS AS DEFINED BY THE UNITED NATIONS IS ON THE INCREASE IN AFRICA. Poverty as Denial of Choices and Opportunities According to the United Nations, fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. It means lack of basic capacity to participate effectively in society. Poverty as Denial of Choices and Opportunities It means that one does not have enough to feed and clothe a family, not having a school or clinic to go to, not having the land on which to grow one s food or a job to earn one s living, not having access to micro financing. 14
Poverty as Denial of Choices and Opportunities It means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to violence, and it often implies living on marginal or fragile environments, without access to clean water or sanitation. (Human Right Facts (94) ) POVERTY TYPE A This type is about insufficient resources to meet basic needs, such as nutrition, shelter, health and education. This insufficiency can result in the following material symptoms of poverty: Low income or consumption levels Low average calorie intake levels High infant mortality rates TYPES OF POVERTY ( CONT.) Low life expectancy rates High illiteracy rates High unemployment Widespread d diseases, especially curable ones Famine or high risk of famine High rates of economic migration 15
Poverty type B This type is about absolute and relative poverty. Absolute poverty is defined as the lack of sufficient resources. It measures the number of people living i below a certain income threshold or the number of households unable to afford certain basic goods and services. The following are the characteristics POVERTY TYPE B Feelings of loss of dignity Low self-esteem Feelings of relative powerlessness Feelings of lack of participation in culture and politics Feelings of discrimination and resentment. Poverty type C This kind of poverty is vulnerability, the actual risk of future poverty. There following are the characteristics Fear, stress Feelings of insecurity Irrational precaution measures Lack Family planning decisions Migration. 16
The new trend THE BIRTH OF THE 2 ND ACCOSCA In 2008 in the Gambia, member countries decided to reorganize ACCOSCA once again because the negative impact was much more than just organizing regional meetings. An interim Board was put in place. The new trend THE BIRTH OF THE 2 ND ACCOSCA The Second ACCOSCA was thus born in October 2010 in Swaziland when a new Board of Directors was elected by member countries under the chairmanship of Doctor Hologwane. A secretariat was established and a new Executive Secretary engaged. SEPARATE LEGISLATION FOR SACCOs In the late 90 s it became apparent that The Co operative Act which regulates the activities iii of cooperatives as well as SACCOs was either outdated or inadequate to meet the current needs of SACCOS. 17
SEPARATE LEGISLATION FOR CREDIT UNIONS The need for separate legislation for SACCOs was initiated by Ghana, Kenya, South Africa, Malawi etc. Central banks of various countries became more visible and more interested in placing SACCOs under their supervision. NEW LEGISLATION FOR CREDIT UNIONS Kenya was the first to enact a credit union law in 2008, followed by South Africa in >>>and then Malawi????? COMPETITION The challenge that we are confronted with now is how to determine together where the Credit Union Movement will be tomorrow to meet challenges in the current changing competitive environment. 18
COMPETITION SACCOs are now being confronted with a number of competitors. They include rural banks, micro finance institutions, financial i NGOs, loan and savings companies, insurance companies, Money Lenders, susu companies etc. COMPETITION Commercial banks are now entering the microfinance field. The banks large infrastructures, internal systems, and capital make them very capable of expanding microfinance rapidly. To be able to sustain the SACCOs for now and in the future The Board and Management must examine: COMPETITION Increased Technology The need to increase the Capital base Shares and Reserves The need to increase the membership base The need to increase the membership base The need to introduce new products and services based on members needs. 19
COMPETITION The need to improve of savings mobilization methods The need to be profitable Theneedto manageyour loan portfolio effectively The need to be efficient in managing your liquidity OTHERS OTHERS INCLUDE: Pricing of Products and services (Market Rates) Human Resource Development Leadership Ability to Accept Changes Building Strong Net works YOUTH IN SACCOs With all the millions of dollars being spent on poverty alleviation, nothing is being taught in the universities and training colleges let alone the junior and senior high schools about poverty and some of the causes. 20
YOUTH IN SACCOs Young graduates, artisans and young farmers will still go through or repeat the same mistakes of their parents that led them into poverty. Targeting the youth in SACCOs is a sustainable solution to poverty and the credit union long term sustainability THE END THANK YOU 21