Cooperatives in Kenya Essays

Cooperatives in Kenya Essays Cooperatives in Kenya Essay Cooperatives in Kenya Essay Co-operatives are user-owned, user-controlled and user-benefited organisations. They could be agricultural, non-agricultural, unions, or Savings and Credit co-operatives. They operate in different sectors of the economy including, agricultural, handicraft, Jua kali, transport, housing development, building and construction, banking and many other such spheres of the economy. Clearly, the cooperative movement has had its tentacles in every possible sector of the Kenyan business world. These co-operatives, and more strongly established, the agricultural cooperatives , play a major role in production, especially in the marketing bit. However, the broad objective of the co-operative concept is to promote the economic interests and general welfare of members in accordance with co-operative principles, and thus, pivotal in economic growth and alleviation of poverty. The policy objective of the Kenyan co-operative movement is to spur sustainable economic growth by focusing on achievement of desired outcomes through strengthening of the movement, improving operation extension service delivery, corporate governance, access to markets and marketing efficiency (International Monetory Fund 2007). The co-operatives have an immense potential to deliver goods and services in areas where both the public and the private sector have not ventured into. In most cases, co-operatives are local institutions that address local needs, employ local talent and are lead by local leaders, either directly or through branches. The co-operatives in Kenya are organized into service and producer co-operatives. The producer co-operatives’ objectives are to promote the use of modern technology and contribute to national development through production. The service co-operatives are responsible for procurement, marketing and expansion services, loan disbursement, sale of consumer goods and member education. The co-operatives have made remarkable progress in agriculture, banking, credit, agro-processing, storage, marketing, dairy and housing. Service co-operatives are the closest to communities and are organized on a shareholder basis, formed by individual members of organizations voluntarily working in a specific geographical area. For instance, primary level sugarcane farmers co-operatives provide a collection point for ,the farmers’ prooduce and even negotiate the per ton cost of sugarcane. Considering the substantial benefits that the cooperative movement has to our economy, and considering its significance to the livelihood of many, the Government recognizes the need for urgently improving management structures and accountability of co-operatives, so as to create a sustainable environment for their existence and operations. Just some few numerical facts to back my case as to influence of co-operatives to the society: -The cooperative is almost 103 years old, having started with the Dairy Societies in 1908. -In Kenya, we have about 12,000 registered co-operatives out of which 5000 are SACCO’s (Savings and Credit Co-operatives). -The Co-operative movement in Kenya has a membership of over 7 million individuals, making it the largest in Africa. It impacts directly and indirectly on 70% of Kenya’s population. SACCOS themselves have mobilized over 150 Billion Kshs in savings, more than 30% of the National Domestic Savings. -There is an entire Ministry, Ministry of Co-operative Development that provides enabling policy, legal and institutional framework. The co-operative movement in Kenya is organized into a system comprising of primary and secondary societies. The structure coalesces into a four tier structure of primary co-operatives, Unions, National co-operative Organizations (NACOs) and one Apex body, the Co-operative Alliance of Kenya (CAC). At each level, different functions can be performed. While the structure is stable, the performance and linkages within the various levels is weak, but there is room and potential for the co-operatives to work together much more through local, national, regional and international structures than the current prevailing situation. Historical Origin of Co-operative movement in Kenya – A Timeline survey 1908 – The first co-operative in Kenya formed, exclusive to the white settlers. 1945 – A new Co-operative Societies Ordinance was enacted allowing African participation. 946 – A department of co-operatives was established and a Registrar appointed. 1952 – Colonial civil servants began joining the movement. About 160 co-operatives registered. 1954 – Application of the Swynnerton plan boosted the co-operative movement. 400 registered. 1963 – Upon independence, co-operative movements were the key cornerstone of nation building. Around 1000 soc ieties had been registered. 1967 – The Government initiated KNCDP (Kenya Nordic Co-operatives Development Program), which was funded by Nordic countries and also the World Bank. 974 – Kenya had a fully fledged Ministry of Co-operative Development. 1997 – A new policy was formulated to provide for a member based, autonomous and member controlled movement, through Sessional Paper no. 6 of 1997. 2004 – The Co-operative Societies Amendment Bill, 2004 sought to re-introduce Government control while recognizing a free market economy. Principles upon which the Co-operative movement is founded. Voluntary and Open membership – There should be no limitation to membership in a co-operative society. Limitations may only be placed where a certain skill or profession is required. Therefore, co-operative membership is open to all who are willing to accept the responsibilities of membership without gender, social, political or religious discrimination. Democratic member control – It works on the following principles: 1)Members must have the final authority in making decisions concerning their society. 2)Every member has one vote notwithstanding his or her share contributions. 3)There must be a small group of members elected by other members which forms the committee which manages and administers the society. Autonomy and Independence – Co-operatives are self-help organizations controlled by members. All contracts entered into by the co-operative is done without external influence and by collective decision of the members themselves. Member economic participation – A co-operative is formed not for the motive of profit, but to provide services. This is branched into 2: 1)Limited rate of interest on capital – A share capital of a co-ope rative gets a limited rate of interest. Key aim is to benefit members collectively and thus applying capital generally to development of the co-operative. 2)Disposal of surpluses – In a co-operative there should be a fair and just system of distribution of surplus. Therefore surplus is either reinvested for the benefit of the society in general, or distributed in proportion to a member’s business transaction with the society. Promotion of education, training and information – A member of a co-operative must be informed of everything about the co-operative organization. This includes his rights, obligations, the principles that guide the society, the management and administration and its activities. Co-operation among co-operatives – This principle was established to strengthen the co -operative movement through mutual assistance at local and international level so as to bring about social and economic development of people regardless of their background. Concern for the community – Co-operatives work for the sustainable development of their communities through policies approved by the members. The general upliftment should be the key thought upon co-operative decision making. Moral values upon which the Co-operative movement is found Self-help – A Co-operative is formed by members to help themselves achieve a certain objective or benefit which would be difficult, or almost impossible to achieve as individuals. Chief concern is to help members themselves. Self responsibility – A co-operative movement is self-sustained, it has its own management, makes its own decisions and undertakes its own responsibilities. Every member accepts the risks associated thereto, and in case of a mishap, every member shall bear the brunt of it collectively. Democracy – Every member has 1 vote in decision making regardless of the proportion of shares held. All decisions and resolutions made by a co-operative are made collectively with maximum member participation. Majority rule prevails. Equality and Equity – A co-operative treats all members as equal regardless of their capital or investment. All members are given equal rights and are subject to the same obligations. Rules and principles of a co-operative are also applied uniformly, and decision making is also every member’s right and not a decision of a chosen few. Solidarity – All members of a co-operative are very adamant and firm on their cause and purpose for which the union was formed. There is a sense of unity that binds them together. Moreover, every co-operative helps another co-operative for furtherance of the collective co-operative movement. Honesty – Members are required to come to the co-operative with truth and honesty. They should also be willing to undertake their duties with due diligence, and report every profit or benefit gained personally in the pretext of the co-operative. Openness – Co-operative members are required to be open to each other in the sense that they should disclose information in their possession which would have been beneficial to the co-operative, and even to share ideas and thoughts of other members amongst themselves, not for personal gain, but for mutual benefit. Social responsibility – The chief aim of the co-operative movement is to promote the economic welfare of the members and even the general public at large. A co-operative movement should ensure the development and poverty alleviation of the people of the region where it is situated. Benefits of Co-operative organizations to the community at large When it comes to agricultural co-operatives, they help farmers in the collection, transportation, processing and marketing of agricultural produce. A common example would be the Kenya Co-operative Creameries (KCC) which has over the ears helped dairy farmers get value for their milk. Co-operatives enable many individuals pool their funds, to undertake bigger projects and investments which they would otherwise not be able to do, e. g Cashew nut farmers came together to form a co-operative through which they erected a plant to process their produce, since the Government had banned exports of raw cashew nuts abroad. The co-operatives could distribute farm inputs more efficiently and thus boost agricultural production while cutting costs. A common example would be the import of seeds. Many farmers would get access to high quality highbred seeds which would be imported by the co would be to purchase a common item used by every member in bulk, so as to enjoy quantity discounts. Previously, small-scale farmers used to sell their produce to middlemen who would be the link to the actual buyers. This would mean, a substantial portion of the profits would be chewed up by the middlemen. After the establishment of co-operatives, the co-operative eliminated the middlemen. This meant, the entire profits would be retained by the members themselves. Social control mechanisms become an acceptable substitute for physical assets as collateral for loans. The co-operative may also allow its assets, upon agreement by other members, to be used as collateral to seek loans for the upliftment of one of their members. Poverty can be alleviated by planning, organizing, implementing and managing income-generating activities. Co-operatives promote even the smallest of farmers to gain a fair value for their produce. This encourages many individuals who are below poverty lines to farm for themselves. Single and widowed women even have a way to earn for themselves. They are catered for through their co-operatives. Development funds are channelled to individual members. Individuals with exceptional ideas are motivated and encouraged where funds are commonly pooled via the co-operative and distributed to those requiring them. Members can be educated on economic and social issues affecting the industry, including development of entrepreneurial skills. The co-operatives organize workshops and trainings for their members to build their knowledge and skills in their areas of expertise. The co-operative also undertakes to solve common problems together. E. g KCC (Kenya Co-operative Creameries) helping dairy farmers save their cattle from ticks. Wealth and capital can be created and owned jointly by large groups of low income earners. There is a common pool through which capital is owned and invested in specific areas for profit generation for all the members of the co-operatives. The co-operative concept encourages a common sharing of ideas. When members come together, they exchange ideas to come up with ingenious solutions for their problems, or clever solutions for their common investments. Challenges facing co-operatives in Kenya Lack of integrity on the part of the union, society committee members and employees. The corrupt people in management mismanage and misapply funds which act to the detriment of other members. Some co-opera tives have even been opened as a con, a money making scheme for the certain few. Excessive costs in handling member produce, and high administration costs. Sometimes the administration costs of the co-operative tends to supercede the profits and gains of the co-operative, this renders a co-operative not viable, and eventually spell its dissolution. Poor management. Some of the co-operatives, especially the ones for low income individuals are poorly managed, since those in management of the co-operative are illiterate and not well educated, therefore there would be serious lapses and judgemental errors and inefficiencies in their decisions. Lack of basic understanding among the co-operatives about the purpose and functions of the movement. Some of the members do not understand the purpose of the co-operative movement, hence they are unaware of how exactly to capitalize on the co-operative for their own benefit.. Inadequacy of resources. Majority of the co-operatives are formed by low income earning individuals whose very quest is wealth upliftment. Therefore the investment of such individuals in the co-operative is minimal, and thus, leaves the co-operative handicap – with a lot of ideas, but few resources to cater for its implementation. Some of the co-operatives fail to reach up to the standard acceptable by consumers and most importantly, acceptable by export standards. Therefore, many co-operatives, due to poor delivery of quality, do not get value for their products. This greatly hampers their income generating ability. Government involvement. Sometimes the government involvement is too excessive, and thus it makes some of the co-operatives too dependent on Government support and foreign aid. Such an attitude prevents the co-operative from operating on its 100% capacity and ability. Some co-operatives face stiff competition for their products, from rich investors who deal in the same product. This would not allow the small co-operatives to grow into being businesses to enable them to compete with the rich investors. SUGGESTED REFORMS The Ministry should undertake constant training and workshops for members of co-operatives and most importantly the management of the co-operatives to enable the co-operative to be steered in the right direction, in the most efficient of manners. Help co-operatives to deal with technological changes by informing them of new developments, and also to undertake research which would help the co-operatives to deliver quality products. The Government should easen up their lending rates for co-operatives to enable them access easy finance, to enable them to undertake larger projects so as to grow enough to compete with other investors in the same industry. Corrupt managers and co-operative members be subject to the stringent of rules, and punished severely for their misdeeds, so as to curb con men from using the co-operative movement as their money mint. Threaten to deregister any co-operative which con ducts its operations with low integrity. This would instil more confidence of the public into the co-operative movement, and encourage them to be part of it. POWERS OF THE REGISTRAR OF DISSOLUTION OF SOCIETIES. If the registrar after holding an inquiry or making an inspection or receiving an application made by at least three quarters of the members is he of the opinion that the society ought to be dissolved he may in writing order its dissolution and subsequent cancellation of registration. Any member who feels aggrieved by this order may within two months after its making appeal against it to the Minister with a final appeal to the tribunal. Where no appeal is filed within the prescribed time the order shall take effect on the expiry of that period but where an appeal is file within time the order shall not take effect unless confirmed by the minister or by the tribunal. When the registrar makes that order, he must make a further order relating to the custody of the books and documents of the society and the protection of its assets. It should be noted that no society shall be dissolved or wound up except by an order of the registrar. Where a society has less than the prescribed number of members the registrar may in writing order its dissolution and that order takes effect immediately and where registration is cancelled the society ceases to exist as a corporate body from the date the order takes effect. It should also be noted that Section 64 applies the provisions relating to winding up of companies to winding up of cooperative societies. Where a registration is cancelled the registrar may appoint one or more persons to be liquidator or liquidators of that society and all the property of such a society vests in him from the date upon which the order of cancellation takes effect CONCLUSION To reach large numbers in the low income sector, requires an able and strong co-operative ministry, which has a firm co-operative policy guiding it. The co-operative policy should be capable of meeting diverse needs of different segments of the population and varied speres of the economy. Co-operatives and strategic alliances are very important in setting pace for individuals to venture into entrepreneurship, or self wealth creation, especially for low income households, a sector of the economy which has been severely neglected by the commercial Kenya. These households would get a blessing in disguise in the shape of a co-operative. Promotion of the co-operative movement should be seen as one way of promoting social and economic justice, especially in developing countries which are ravaged by poverty, diseases and hunger. In Africa, co-operative development is certainly the nest frontier for low income earners who want to strike it big. This is a movement which has enormous potential for expansion and growth. Once again, I emphasize that the cooperative structure and the cooperative philosophy are very effective and flexible in satisfying the needs of the poor. This makes the cooperative model very idea for channelling agricultural products, and the idea of farming into the masses. I wish the cooperative movement in Kenya a fruitful future, and wishing them luck in their battle against poverty eradication coupled with high inflation. ******************************** REFERNCES: -Class Notes -Article by Nelson Kuria of CIC Insurance Ltd in the Daily Nation -www. cooperative. go. ke -www. ilo. org -Handout by Mr. Mweseli, from the KLSS Bureau -Nutshells – Business Law