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Inside Unaitas’ quest to grow asset base to Sh32bn in three years

CEO

Unaitas CEO Martin Muhoho. PHOTO | COURTESY

From humble beginnings in Murang’a in 1993, Unaitas Sacco has expanded to become the seventh largest savings and co-operative society (sacco) in Kenya in terms of asset base. CEO Martin Muhoho spoke to the Business Daily on the challenges and opportunities in the next phase of growth.

UNAITAS HAS BEEN GROWING FOOTPRINT FOR CLOSE TO THREE DECADES NOW. ANY ROOM LEFT FOR MORE?

This year we are planning on two new branches. We are doing feasibility studies in Kitengela, Kiambu and Narok. Next year up to 2022, we have a plan of opening at least three branches every year. So far we are on the 27th branch which is coming up in Kongowea, Mombasa to serve the larger coastal region.

WHAT DOES MORE BRANCHES MEAN TO THE SACCO?

Our strategy is to establish branches then use agents and satellite offices to support the branches and cover wider areas. We want to have an asset base of Sh32 billion by 2022 and this requires growing loan book, deposits and membership. Currently we have an asset base of Sh14 billion and serving about 300,000 members.

We came up with strategy in 2008 to double membership in three years by expanding beyond the 10 branches we had that time and we think we can do more with our 2019/2022 strategy.

YOU ARE EXPANDING BRANCHES AT A TIME THE FINANCIAL SECTOR IS MOVING AWAY FROM BRICK AND MORTAR. ODDITY?

It is always a compromise between branches and technology. You need physical presence even as you work on technology. Those established players switching to digital already have enough branches that can usher customers into digital products.

We have invested over Sh1 billion in the last three years in technology and we are looking at creating more convenience through means such as agency banking where we already have over 600 registered agents.

DIGITAL PRODUCTS HAVE BEEN ASSOCIATED WITH HIGH FRAUD CASES. WHAT HAS BEEN UNAITAS’ EXPERIENCE?

We have created enough security layers to ensure members’ funds are secure. We have had challenges before from some of the service providers because of third party mobile applications and so we decided to invest in our own platform.

We have secured it for our members as well as other saccos’ members who may come on board. We are using the same platform and therefore it is in our interest to have a secure system.

YOU HAVE AN AMBITION OF SHARING THIS PLATFORM WITH OTHER SACCOS. ANY TAKERS?

The platform can host up to 100 million members. We are engaging a number of saccos but we are still at preliminary stages. We are very optimistic. We have also had discussions with the ministry and there are good prospects. Our system is interoperable and allows other saccos to plug in and we arrange on income sharing as opposed to them incurring capital expenditure on their own system.

HOW HAVE YOU DIVERSIFIED MEMBERSHIP AT UNAITAS GIVEN THE MANY SACCOS HIT BY SECTOR-SPECIFIC CHALLENGES?

We saw that problem in 2005 when we had a common bond of members. We were attracting tea farmers but realised the tea sector was not expanding. We believe we are diversified enough. There is no single business that can significantly affect Unaitas’ business. We started to diversify and now have members from diverse sectors such as agriculture in which we have those growing tea, cereals coffee and dairy. These form about 27 percent of our Sh11 billion loan book to members. We also have personal lending, which targets employees. We have a diversified portfolio of salaried people who form about 30 percent of our loan book. SMEs form the bulk of our portfolio. We also have 10,000 chamas having accounts with us.

THE SECTOR HAS HAD CHALLENGES OF GROWING UP WITH MEMBERS THEN LOSING THEM TO BANKS. HOW DO YOU ADDRESS THIS?

Our model is built in a way that ensures that apart from forex business, there is no other service offered by commercial banks that we don’t offer.

Saccos lose members to banks when there are services they can’t access. We partly solve this through partnerships for services such as access to the national payment system.

We keep growing with members to avoid a situation where we tell them that there is a loan threshold we can’t handle.

IN 2018, YOU CUT DIVIDEND PAYOUT. WHAT INFORMED THIS DECISION?

We can’t say we reduced. From 2015, we have been paying between seven percent and eight percent. But in 2017, we paid nine percent. The share capital was at Sh2.5 billion that year.

By 2018, the share capital had risen to Sh3.3 billion and this informed the change in payout. The total payout went up but the percentage dropped from nine to eight percent. What we have been promising is that our payout will always be between seven and 10 percent.

This year, we are introducing loyalty programme dividend that will be as high as three percent. The dividend we will pay in March, will have base and loyalty dividends.

WHAT WILL BE THE CRITERIA FOR PAYING THIS LOYALTY DIVIDEND?

We have come up with a rating criteria based on among other things how one transacts with us, how active their savings account is, whether they have loans, the repayment history and the type of transactions that pass through one’s account.

HOW BIG IS THE CHALLENGE OF NON-REMITTANCES FROM EMPLOYERS?

That has become a common problem and is affecting almost all saccos. One of the challenges is when the employer is not performing well. We have even had instances where a certain number of people are removed from the payroll then reintroduced.

It is more difficult when dealing with the private sector because the company can go down or employees can exit yet you have an MoU with such firms.