Position Of Cooperative Movement in Kenya’s Economy

Savings and Credit Cooperative Organizations (SACCOs) are arguably the oldest form of banking in Kenya. Most of these organizations began as traditional table-banking groups with little or no formal organization but with structures of leadership, unwritten policies and a circuit of meetings in which deposits were received from members. Today, many such groups have formalized and are registered with Sacco Societies Regulatory Authority (SASRA). This development in the financial service sector has transformed Kenya’s economy through the convenience of savings and access to credit that is in SACCOs. In rural areas where agriculture creates the most number of jobs, the cooperative movement has been recognized by the government as a vital institution for mobilization of material resources for development. At a minimum, SACCOs offer savings accounts and loans. Deposit-based loans are usually sized at three to four times the amount of the member’s savings held at the SACCO. What makes the model unique is that loans are secured by the members’ deposits, and oftentimes by guarantees who also have deposits in the SACCO. The loans are fairer in their pricing and easier to access when compared to bank loans. Moreover, SACCOs pay higher interests on deposits than Banks, and members with SACCO shareholding enjoy guaranteed dividend payment annually. SASRA’s 2019 report highlighted resilience in SACCOs despite COVID-19 related constraints in the economy. For instance, total deposits held by Deposit Taking (DT) SACCOs stood at Kes.545 billion in 2020, a 13.4 % improvement on Kes.380 billion recorded in 2019. The growth reflects resilience in Saccos despite a difficult year that saw economic activates crippled by the global pandemic. Gross loans stood at Kes. 474.8 billion in 2020 from Kes.429.6 billion in 2019 being a record growth of 13.2%. The government of Kenya has been driving reforms to enhance governance, financial soundness, and sustainability of SACCOs consistent with policy developments articulated in cooperatives development policies (CDP) of 2019. Some of policy reforms that were initiated include: creation of a central liquidity facility and a shared technology platform, operationalization of deposit guarantee fund for SACCOs, establishment of SACCO Fraud Investigation Unit, and prudential supervision of non-deposit taking SACCO commodity referred to as Back Office Services Activities (BOSA SACCOs). These legal amendments have been drafted and submitted to National Treasury which has been included in Financial Bill for 2021. This is a milestone in ensuring that the capital investment in Saccos is protected.


With technological advancements in the 21st century, the market has been described as ‘explosive’ in nature. Small businesses are taking advantage of their ability to cause disruption, have independence of action, and be increasingly diversified to become big corporations, and in some instances, control the market space. These aspects allow them to exercise a given degree of advantage over other market players, which they leverage over time. However, this is not necessarily true. The quest to become more prominent, better, and faster in the field has resulted in occasional economic bubbles that bring about anxiety in any market. This increases the probability that corporations can move from positions of muscle to vulnerability and faintness. The question is, how does this happen?

Concern on market dominance in any sector has grown over the years, with some big corporations termed monopolies.  This situation is due to control over the prices, production, supply, and distribution of more than one-half of the total goods of any description, all to stifle competition. The competition regulator in such markets establishes regulations to limit such power by capping the percentage mark for market share. This move is unpopular since it restricts the ability to innovate for fear of being declared dominant.

Consumers have not been left behind in shying away from markets that are controlled predominantly by big businesses. The general feeling is that their ability to choose is constrained by the market behavior to only favor one business entity on aspects such as quality and quantity of commodities. Consequently, they tend to react against the market leaders by turning away from what they offer, thus creating room for new entries in the market.

The political environment has not been any kinder to big businesses as each election year; they become a punching bag for political outfits who believe that they are ruining the moral fabric of the society. Calls to hold corporate leaders accountable for wrongdoing to concern about the corrosive influence of corporate money in the politics of culture have stained the ability of big businesses to become more prominent, with most legislation targeting their expansion capability.

The quest to become more prominent is no longer feasible. Corporations should angle their strategies towards becoming better in aspects such as serving customers and attracting investments. Focusing more resources on future opportunities rather than preserving past successes creates the cutting edge for small businesses to become big and remain relevant in a world that is hungry for new.

Paul Oreje | Columnist, IGBR. pauloreje@gmail.com

Opportunities in the digital economy

The ongoing industrial revolution swings on the hinges of tech-powered innovation. The rise of big tech companies in California’s Silicon Valley has greatly impacted how business is done and will be done going forward. Google, Microsoft, Facebook, Cisco, Adobe, Oracle, Intel, Apple and Hewlett Packard are some of the companies whose contribution in the fast growing digital economy is largely significant. These companies, among other non-silicon valley big tech players have set up regional headquarters in Kenya purposely to fill the market gap.

In his state of the nation address, delivered on the 12th of November, President Uhuru Kenyatta reported that an average of 300 companies are registered in Kenya every day. Looking at this figures in the light of job losses during the covid-19 pandemic, it is clear that many employees are now considering to venture into ‘side-hustles’ and those who have lost their jobs to the pandemic are starting their new companies. If we try to connect dots, we will realize that the cost of starting a company and running one has reduced thanks to the digital migration to e-commerce.

Inasmuch as millions of websites and social media accounts for business have already been established, it is critical for the investor to learn that the digital economy is still largely unexplored. There are market gaps all over from production, to storage, distribution and selling in every industry. There is also a large space for intellectual enterprise for consultants who wish to meet their customers on their handsets and personal computers.

Opportunities to Invest in the Counties

The city county of Nairobi accounts for over 17% of Kenya’s total GDP. Other counties that significantly contribute to the national GDP are Nakuru (6.31%), Kiambu (5.15%), Mombasa (4.05%), Nyandarua (2.99%), Machakos (2.84%), Meru (2.80%), Kisumu (2.37%), Bungoma (2.24%), Kakamega (2.23%), Narok (2.19%, Nyeri (2.13%), Murang’a (2.11%), Kisii (2.00%), and Uasin Gishu (1.98%) According to a survey conducted by the Kenya National Bureau of Statistics in 2017, these fifteen urbanized counties have a cumulative GDP of USD 95,544 and collectively form 58.38% of Kenya’s GDP. Between 2017 and today, being three years of compound average growth of the Kenyan economy, these counties have recorded tremendous expansion in size of trade and cultural exchange.

With the ongoing robust conversations to increase allocation of revenue to county governments, the counties are expected to be more efficient in service delivery. Infrastructural development in counties is another major factor that will make it possible for production to take place in the counties rather than Nairobi. Currently, the Nairobi – Nanyuki meter gauge railway is operational and the Nairobi – Kisumu Port line is also opening up the lake basin corridor for trade. There is also a record increase in industrial parks outside of Nairobi, business parks, commuter buses between major towns, connectivity to electricity and water. Furthermore, there is a larger resource of skilled labour from fresh college, technical institutes and university graduates in the counties than in Nairobi.

With all this data, the investor would end up asking which sectors exactly have higher returns on investment in the counties. The general answer would be agriculture. Agriculture is the economic backbone of most major towns in Kenya other than coastal towns. There are now more incentives in practicing agriculture for export thanks for deliberate efforts to market Kenyan goods in the international markets by export promotion department in the ministry of trade. While some counties may not have the competitive advantage of attracting agribusiness investors, they have lots of other natural resources whose exploitation must be subjected to sound government policies and meaningful Public Private Partnerships (PPP). A vibrant network of agricultural economy between counties will steer growth in other key service sectors. For coastal and inland tourist towns, Kenya has still a long way to go to become the most visited tourist destination on the continent. Investors should seize the opportunity to invest further in tourist facilities. This will boost both domestic and foreign tourism.

In summary, there are many reason why investment flows should go to counties. The goal of any entrepreneur other than maximizing profits is to minimize losses. In this column, I make a conclusion that it is easier to minimize losses when running production from the counties than from Nairobi. This conclusion is considerate of proximity to markets, factors of production and sound environment for doing business.

Kenya’s Next Cities

Nairobi has for a long time been Kenya’s epic city due to its role as the administrative capital of the country and indeed the East African region. It has attracted a large population of Kenyans for hosting administrative offices, academic institutions, industries and for being a key transport hub. This has made the town grow to an economic hub accounting for at least 21.7% of the country’s GDP. In the dispensation of a new constitution that was promulgated in August 2010, new cities are expected to rise in the spirit of devolution. Each county headquarter town is expected to be regarded as a city. Therefore, county governments are supposed to take a front row seat in actualizing creation of 47 cities countrywide. This means that fiscal decentralization must be a major focus on devolution. Resources in each county need to be optimally utilized to promote even economic growth and to build better planned cities. In this review, we opinion that Nairobi is a colonial city with an old urban plan that no longer works for its large population. The country needs iconic offices of governors that represent independence of each county, state of the art county assembly buildings, airport and railway terminals in each county headquarters, prestigious learning institutions in the counties, industries, modern health facilities and city parks that will characterize cities born out of the 2010 constitution. While Nairobi, Mombasa and Kisumu are the only cities in Kenya so far, Uganda has elevated seven of its towns to join Kampala as Cities. President Museveni has been criticized for announcing seven new towns as cities without upgrading their infrastructure and social amenities to city status. Kenya needs not to take the same path. Face lifting current major towns through building of well-designed roads and parks should be the beginning of this journey. Major municipalities like Nakuru, Eldoret, Kakamega, Nyeri and Kisii are already close to becoming cities except for administrative negligence such as poor drainages, lack of consistency in garbage collection, poor road networks, lack of bus and railway terminals, grounded stadia and unkept people’s parks. Other than these cities, there are other suburbs of Nairobi that have immensely grown into major towns but in the interest of fiscal decentralization, they should not be given priority when increasing the number of cities in the country. Creation of cities will mean that more businesses will be able to thrive as new markets will be created across the country. Cities create enabling environments for enterprise growth as factors such as population increase, transport and communication networks, accommodation and conferencing facilities, education and knowledge, strong service sectors and proximity of business people to local governments will improve efficiency of production and distribution of goods and services.