MOHAMED ABDULLAHI

DBM/5731/22

MOI UNIVERSITY

I. DBM18; CO-OPERATIVE MANAGEMENT

ASSIGNMENT 1

Questions

1(a). Discuss the basic principles of cooperatives

1. Voluntary and Open Membership

Cooperatives are voluntary organizations, open to all people able to use their services and
willing to accept the responsibilities of membership, without gender, social, racial, political
or religious discrimination.

2. Democratic Member Control

Cooperatives are democratic organizations controlled by their members – those who buy the
goods or use the services of the cooperative – who actively participate in setting policies and
making decisions.

3. Member Economic Participation

Members contribute equally to, and democratically control, the capital of the cooperative.
This benefits members in proportion to the business they conduct with the cooperative
rather than on the capital invested.

4. Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled by their members. If the co-
op enters into agreement with other organizations or raises capital from external sources, it
is done so based on terms the ensure democratic control by the members and maintains the
cooperative’s autonomy.

5. Education, Training and Information

Cooperatives provide education and training for members, elected representatives, managers
and employees so they can contribute effectively to the development of their cooperative.
Member also inform the general public about the nature and benefits of cooperatives.

6. Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative
movement by working together through local, national, regional and international
structures.

7. Concern for Community

While focusing on member needs, cooperatives work for the sustainable development of
communities through policies and programs accepted by the members.
b). Define the following terms;

I. Co-operative management

Cooperative management means single or multiple use management by more than one

agency so that each utilizes its particular expertise in order to achieve a particular
management goal.

II. Co-operative

Cooperatives are people-centred enterprises owned, controlled and run by and for their
members to realise their common economic, social, and cultural needs and aspirations.

III. Management committee

 It’s a group of people who are chosen or elected to make decisions about how a club or
charity is run, and to make sure that particular jobs are done

IV. Institutional capital

It is the capacity of the formal institutions of a territory to concentrate on the solution of the
problems, their capacity for action, the speed of the decision process, the degree of
information of the organizations and their flexibility and, finally, the type of existing
relationship between the different organizations.

V. Patronage

It’s the support and money given by someone to a person or a group such as a charity.

2(a). Discuss the process of registration of co-operatives in Kenya according to the

co-operative societies act

Step 1 : Organize yourselves as a group with a an intent of forming a cooperative

 Coordinate people to form up a cooperative society. The start-up cooperative

members must be at least enough to form a Society Board in a full cooperative.
 Qualification for membership to a cooperative society are as follows;
 One must have attained the age of eighteen years;
 The members employment, occupation or profession falls within the category or
description of those for which the co-operative society is formed;
 The member must be a resident within, or occupies land within, the society’s area of
operation as described in the relevant by-law.
 Essentials for registration of a co-operative society are as follows:-
 In the case of registration of a primary society, it should consist of at least ten
persons all of whom shall be qualified for membership of the co-operative society.
 In the case of a co-operative union, it must have at least two registered societies as
its members.
Step 2 : Write letter of intent

 Thereafter, you should write a letter to the Province Cooperative Officer (PCO)
through the District Cooperative Officer (DCO) requesting to be registered as a pre-
cooperative society indicating their intention to do so.
 The letter should state who the cooperative is made of and what they plan to
accomplish.
 The following information should also be sent to the cooperative office
o The organization’s contact people (2)
o A list of members – not less than 15 with their ID numbers and signatures
o The amount that is to be contributed monthly
o The DCO will meet the group and verify whether the group is viable to register
or not.
Step 3 : Meeting with cooperatives officer

 After receiving the letter of intent, the District Cooperative Officer (DCO) will meet the
group to verify whether the group is viable to register or not.
 If the DCO finds the group viable for registration, he will give the group an approval
for registration.
Step 4 : Hold meeting to form a formation board and elect a chairman and
secretary

 The three most important slots to be filled are the Chairman and Secretary
 It’s important to have these positions occupied for accountability and organisation
purposes of the group.
Step 5 : Drafting of the cooperative’s constitution, objects and by-laws by the
Formation Board.

 After election, the Formation Board the board should decide on the type of society to
be formed, prepare by-laws for the society and assess founder members level of
business.
 A constitution is the cooperative’s guide which should be drafted. Once this has been
drafted and approved, every member should get a copy which they sign and commit
to the terms and conditions. The constitution identifies the cooperative’s mission,
goals, and objectives.
 The formation board should look in to the future and estimate number of future
members and levels of business to be done by the society in future;
 A feasibility study of the cooperative should be carried out and feasibility report
prepared.
 Record and details of founder members, their share capital and contributions should
be taken. Also record details of prospective members, their probable share capital
and contributions should be taken
 At commencement, the formation board should begin to keep accounts to allow
periodic assessment of the group’s activities; and
 Must appoint a delegate in charge of representing the group in all civil matters
Step 6 : Make application of registration with the Ministry of Industry, Trade and
Cooperatives

 Visit the Provincials/District cooperatives offices to make the application for

registration.
 The application may be handled by the District Cooperative Officer at District level or
the Assistant Registrar at Regional level.
 The application for registration forms are provided at these offices
 The following document should be attached and submitted together with the
registration application.
 o Name of the Proposed Society
o Proposed by-laws of the society
o A Draft Constitution
o Names of a minimum of Ten Proposed Members (Including Copies of Their
ID Cards. KRA Pins. Passport Sized Photos. Telephone Numbers. Physical
Address. Occupation and Age)
o Names of A Minimum Of Three Officials – Treasurer, Secretary General and
Chairperson
o The Postal and Physical Address (Plot Number Nearest Road/Street And
Location) Of The Society
o Minutes of the meeting seeking registration and showing elected officials
o Copies of National Identity Cards of all group members
o Application fee proof of payment receipt
 A processing fee of Khs 500 is charged for the registration
Step 7 : Obtain letter of recognition as a pre-cooperative society

 After assessment and satisfaction of the application, the registrar will issue a letter of
recognition which will allow the group to operate as a pre-cooperative society for
three (3) years.
 During the given three (3) years members of the formed pre-cooperative society must
be working hard to fulfil the conditions required to become a full cooperative society.
Step 8 : Obtaining Registration Certificate and a Certified Copy of by- laws

 When all requirements are fulfilled at the end of the three years, the society shall
then be registered as a full cooperative society however, if at the end of the three (3)
years the pre-cooperative society has not fulfilled the conditions, the letter of
recognition will be cancelled.
 Upon full registration, the registration then issues a Registration Certificate and a
Certified Copy of by- laws.

(b). Why are co-operatives formed

Cooperatives are organized to:

1. Improve bargaining power

2. Reduce costs

3. Obtain products or services otherwise unavailable

4. Expand new and existing market opportunities

5. Improve product or service quality;

6. Increase income.

3(a). Give the detailed explanation of the process of formation as far as

cooperative societies are concerned
Step 1 : Organize yourselves as a group with a an intent of forming a cooperative

 Coordinate people to form up a cooperative society. The start-up cooperative

members must be at least enough to form a Society Board in a full cooperative.
 Qualification for membership to a cooperative society are as follows;
 One must have attained the age of eighteen years;
 The members employment, occupation or profession falls within the category or
description of those for which the co-operative society is formed;
 The member must be a resident within, or occupies land within, the society’s area of
operation as described in the relevant by-law.
 Essentials for registration of a co-operative society are as follows:-
 In the case of registration of a primary society, it should consist of at least ten
persons all of whom shall be qualified for membership of the co-operative society.
 In the case of a co-operative union, it must have at least two registered societies as
its members.
Step 2 : Write letter of intent

 Thereafter, you should write a letter to the Province Cooperative Officer (PCO)
through the District Cooperative Officer (DCO) requesting to be registered as a pre-
cooperative society indicating their intention to do so.
 The letter should state who the cooperative is made of and what they plan to
accomplish.
 The following information should also be sent to the cooperative office
o The organization’s contact people (2)
o A list of members – not less than 15 with their ID numbers and signatures
o The amount that is to be contributed monthly
o The DCO will meet the group and verify whether the group is viable to register
or not.
Step 3 : Meeting with cooperatives officer

 After receiving the letter of intent, the District Cooperative Officer (DCO) will meet the
group to verify whether the group is viable to register or not.
 If the DCO finds the group viable for registration, he will give the group an approval
for registration.
Step 4 : Hold meeting to form a formation board and elect a chairman and
secretary

 The three most important slots to be filled are the Chairman and Secretary
 It’s important to have these positions occupied for accountability and organisation
purposes of the group.
Step 5 : Drafting of the cooperative’s constitution, objects and by-laws by the
Formation Board.

 After election, the Formation Board the board should decide on the type of society to
be formed, prepare by-laws for the society and assess founder members level of
business.
 A constitution is the cooperative’s guide which should be drafted. Once this has been
drafted and approved, every member should get a copy which they sign and commit
to the terms and conditions. The constitution identifies the cooperative’s mission,
goals, and objectives.
 The formation board should look in to the future and estimate number of future
members and levels of business to be done by the society in future;
 A feasibility study of the cooperative should be carried out and feasibility report
prepared.
 Record and details of founder members, their share capital and contributions should
be taken. Also record details of prospective members, their probable share capital
and contributions should be taken
 At commencement, the formation board should begin to keep accounts to allow
periodic assessment of the group’s activities; and
 Must appoint a delegate in charge of representing the group in all civil matters
Step 6 : Make application of registration with the Ministry of Industry, Trade and
Cooperatives

 Visit the Provincials/District cooperatives offices to make the application for

registration.
 The application may be handled by the District Cooperative Officer at District level or
the Assistant Registrar at Regional level.
 The application for registration forms are provided at these offices
 The following document should be attached and submitted together with the
registration application.
o Name of the Proposed Society
o Proposed by-laws of the society
o A Draft Constitution
o Names of a minimum of Ten Proposed Members (Including Copies of Their
ID Cards. KRA Pins. Passport Sized Photos. Telephone Numbers. Physical
Address. Occupation and Age)
o Names of A Minimum Of Three Officials – Treasurer, Secretary General and
Chairperson
o The Postal and Physical Address (Plot Number Nearest Road/Street And
Location) Of The Society
o Minutes of the meeting seeking registration and showing elected officials
o Copies of National Identity Cards of all group members
o Application fee proof of payment receipt
 A processing fee of Khs 500 is charged for the registration
Step 7 : Obtain letter of recognition as a pre-cooperative society

 After assessment and satisfaction of the application, the registrar will issue a letter of
recognition which will allow the group to operate as a pre-cooperative society for
three (3) years.
 During the given three (3) years members of the formed pre-cooperative society must
be working hard to fulfil the conditions required to become a full cooperative society.
Step 8 : Obtaining Registration Certificate and a Certified Copy of by- laws

 When all requirements are fulfilled at the end of the three years, the society shall
then be registered as a full cooperative society however, if at the end of the three (3)
years the pre-cooperative society has not fulfilled the conditions, the letter of
recognition will be cancelled.
 Upon full registration, the registration then issues a Registration Certificate and a
Certified Copy of by- laws.
(b). Analyze the role of cooperative societies in economic development

• Cooperatives movement have been acknowledged by WB, ILO and ICA of its economic and social
role its plays in the world and especially in developing countries thereby creating the e necessary
capacity of fighting poverty and promoting equity.

• Cooperatives have been forefront in mobilizing savings and investments through provision of
affordable loans. It has resulted to huge impact in financial deepening among Kenyans.

• Cooperatives had mobilized over $6 billion (about half of country’s GDP as deposits and asset base
worthy over $5 billion.

• The WB report has revealed that 9 out of 10 housing units in Kenya are constructed through
cooperatives.

• The government of Kenya under Vision 2030 has envisaged that cooperatives will provide 25% of
housing stock in urban areas.

• The cooperatives have been identified as one of the best model in enhancing agricultural and non-
agricultural productivity through trade in large volumes of inputs, engagement in the distribution of
farm inputs

. • Cooperatives have the capacity of realizing industrialization in rural areas through the value
addition of agricultural products and marketing. Example includes dairy and coffee sectors.

5. The management of cooperative societies faces different challenges. Discuss this challenges and
ways the can be tackled
 Management challenges facing cooperatives in Kenya are same across board in the
Banking Sector. You see, we’re in the 21st Century customer is more informed than
the service providers in most cases.
 Due to the political influence and interests in the country, there are lots of Increased
Regulatory Pressures, Increased Capital Demands which is hindered by the Slow
Economic growth.
 Technology Platforms play a major role in the business environment today. Most
cooperatives are slow to adopt to especially being weary of the increased cyber-
crime in the country. We however cannot ignore the available alternative
Competition.
 For years, development projects have emphasized the strategy of organizing
smallholder farmers into producer organizations and co-operatives in order to
increase their bargaining power in the market and empower individual producers
through a commonly-owned enterprise. This seemingly logical strategy is often
encouraged by development projects without thoroughly understanding the
challenges such co-operative formation and support creates.
 There is mistrust among co-operative members as well as amongst general
members and the management / board. A key challenge within co-operatives is a
lack of transparency between the governing board and the general members.
 There are often a lack of leadership and managerial and financial management
skills,

CENTRALIZED LOCATION

Most SACCO’s are based in one region without branches across the country. This
makes it next to impossible for members outside the region to access the SACCOs
and their services.

For instance, a SACCO that started as a farmers’ group in a particular town has
grown in membership and revenues over the years. Some of the members decided
to move to other parts of the country for their own reasons.

As a SACCO will it be economical to open branches across all the regions just to
serve a few members?

If not, how will those members get access to their savings and your services?

THE SOLUTION

Make use of alternative channels like mobile banking, agency banking, and even
members portal.

These solutions will help the SACCO to;

 Increase revenues through members transactions

 Offer SACCO members more convenient services
 Makes members more active than before
 Increase in membership due to the convenience offered
 Reduce operational costs, ie opening and running physical branches
With other options like agency banking, you will be able to reach the unbanked
populations. Get the unfair advantage and capitalize in places where other financial
institutions have abandoned.

With agency banking, you will help in solving the unemployment challenges by giving
people an opportunity to serve as your agents with lower operational costs.
 

DELAYED SERVICE DELIVERY

SACCO members complain of slow services such as delayed loan approvals. This
may be caused by the use of manual processes, unreliable technologies, and
internal bureaucracies.

Customer convenience is a key element in any financial service institution.

Delayed service delivery may end up depreciating the value or relevance of services
you offer to members.

For instance, a member applies for an emergency loan, which means that they need
the funds ASAP to solve an urgent matter.  If he/she ends up getting the loan a week
later, that makes it irrelevant considering the time factors.

SOLUTION

Use a reliable core banking solution that will quicken your SACCO’s operations. It’s
better to get a cloud-based and multi-platform solution that can be accessed from
anywhere at any time by authorized users.
For instance, the people responsible in the final approval stage are not in the office
at that time, using core banking systems like CooPMIS will enable them to make
approvals at any time from anywhere.

SACCOs that have used good core banking systems have had great growth and
improved their customer experience.

You can check out how Total SACCO improved their customer experience by 50% using
CoopMIS.
 

POOR MARKETING APPROACH

SACCOs face a lot of competition from other financial service institutions and digital
lending solutions.

Low-interest loans are no longer a selling point therefore SACCOs need to

understand the market needs and act upon them.

Be honest to yourselves as a team and find the answers to these questions;

 Do you understand what your members’ needs, your target market needs, and what you can offer
to solve their problems?
 How unique and valuable is are your products and services compared to other institutions?
 How equipped are you to adapt to the changing trends and customer needs?
 What are the weaknesses that you need to improve on and the strengths you can capitalize on?
To serve better and to stay relevant, you need to have the answers to the above
questions.

SOLUTION

Use systems with business intelligence and analytics capabilities to understand your
members and your products better.
Such reports will help you understand the products that do well and what members
really need and which products to capitalize on.

Also, your sales and marketing teams need tools that will make their work easier and
efficient. You can equip them with POS systems (Point of Sale) for easier member
registration helping them capture the right data in real-time.

REPORTING CHALLENGES

Use solutions with better data management and reporting capabilities.

A good core banking solution enables SACCOs to use data to their advantage, and
automated reporting will help in compliance and quick decision-making process.

For SACCO executives with busy schedules, it can be a challenge if they can’t
access the reports at their convenience.

As key decision-makers, SACCO executives need to have the financial position of

the SACCO at their fingertips at all times.

SOLUTION

Use solutions with better data management and reporting capabilities.

A good core banking solution enables SACCOs to use data to their advantage, and
automated reporting will help in compliance and quick decision-making process.

SACCO executives will be able to check on the status of the SACCO and other
important reports on any device, any time from wherever they may be.

Also, the reports will be real-time and can be customized hence more relevant.

INCOMPATIBLE SYSTEMS

Some SACCOs have been limited from innovation because they use incompatible
systems.

For instance, they are unable to integrate their core banking system with mobile
banking or agency banking.

Most of the time this happens in cases where the system vendor wants to be the
sole system provider to the SACCO.
 

SOLUTION

Use systems that can be integrated with other systems regardless of the service
provider.

In the process of procuring a system, ensure the system meets your requirements
and it is future-proof ie, it will still be relevant for many years to come.