Saccos need revamp of banking systems

This digital age has welcomed a myriad of technological inventions that have aided operations and enhanced processes in many sectors across the production value chain.

However, it is critical to note that there are many industries that have for the longest time continued to use specific solutions to manage their operations out of convenience.

The sacco ecosystem in Kenya is one such industry. It is obvious that for decades they have been central not only to individual development but also community progress. Because of low interest, and the fact that it is being managed by its members, the sector has played a critical role in the country’s financial sector.

This should, therefore, inform us that even with the overall regulation being provided by the Sacco Societies Regulatory Authority (Sasra), stakeholders need to streamline systems in saccos so as to ensure that we get it right as an industry in terms of operations.

It is laudable that many are on the digitisation journey. As a sector with a total asset increasing to Sh442.27 billion in 2017 and growth rate of 12.4 percent from the previous year, deposit-taking saccos can no longer be ignored.

Many experts say the sector is ripe for technology-driven efficiencies and innovation. And the big ones know better the importance of really embracing this digital agenda. It has made them increase productivity and operational efficiency through reduced costs, and also satisfied customer needs. Start-up and growing saccos should also borrow the same mentality to realise the benefits of optimised processes.

That said, we need to look deeply into some of the solutions some have employed to aid processes on the digitisation terrain. And despite the advancements in technology and innovations that have welcomed simple, secure and affordable Core Banking Systems, most of our saccos still use Enterprise Resource Planning (ERP) solutions to run their day-to-day banking businesses.

For long, ERPs have been used to support overall organisational effectiveness not only in the saccos but also in inventory-heavy institutions. They have provided an alternative to the otherwise tedious paperwork. However, their structure provides a lot of limitations in respect to their functionalities.

For now, saccos need digitisation to re-shape its Core Banking Systems to operate effectively and meet the ever-changing member needs. And later seek to leverage the Blockchain technology. Core banking platforms are the necessary disruptors that have boosted operations and productivity in saccos. They have stimulated agility and innovation and continue to help drive insights into meeting member needs and experiences, hence meeting operational excellence.

This is because they are fit-for-purpose.

Covid-19 has changed consumer preferences and behaviour.

What members need is a system that guarantees them efficiency and security. A system that integrates member data, channels, products and automated financial processes in a simple secure platform that enhances experience.

Sacco staff also need a platform that will facilitate easier data reconciliation, automated financial calculations, faster response to member inquiries and an automated service. This is what core banking platforms have presented to a number of saccos.

The industry should therefore have a more robust conversation about this to ensure saccos are using the proper digital tools.

This need not be at the expense of existing investments into ERPs, rather, a complementary approach that harnesses the full power of digitisation.

In as much as saccos have continually relied on ERPs, it is now time to have the narrative about procuring a reliable Core Banking asset alongside to offer more services and tap into the opportunities that such platforms provide that are needed by any financial institution of this age.

The writer is a professor of entrepreneurship at University of Nairobi’s School of Business.