Perceptions and Experiences on the Performance of Savings and Credit Co-operatives: Evidence from Kenya and South Africa

Abstract

The poor performance of savings and credit co-operatives (SACCOs), known as co-operative financial institutions (CFIs) and co-operative banks (CBs) in South Africa is a cause for concern to government and stakeholders.  This study investigates exogenous factors that may have contributed to this poor performance relative to the success story of SACCOs in Kenya; investigates lessons that can be drawn from SACCOs in Kenya; contributes to debate, existing literature and knowledge, and informs policy. The methodology used is autoethnography and draws on multiple data sources: a questionnaire, interviews, observations, focused discussions, case studies, desktop research, and autoethnographic analysis. Results suggest that exogenous factors that contributed to success of SACCOs in Kenya include extensive participation of government and the pursuit of a political ideology of African socialism; having support structures in place; effective regulation and supervision; and broadening the common bond. Endogenous factors include use of technology, having strong lobby groups, provision of diversified products and embracing innovation. In South Africa, exogenous factors which may have contributed to the poor performance of CFIs and CBs include the adoption of neoliberal policies; implementation of Black Economic Empowerment (BEE) policies; access to finance; inadequate political will; some policy inconsistencies; inability to compete; loopholes that exist in the laws and regulations; and stringent regulatory environment. Endogenous factors include use of manual processes, limited products and capital, ineffective representative body and absence of lobby groups. Many lessons can be drawn from SACCOs in Kenya. However, country-specific circumstances of South Africa should be considered in drawing those lessons.