INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OF KENYA

THE FUTURE OF SACCOS AND FINANCIAL REPORTING IN KENYA

BY CPA SOLOMON ANGUTSA ATSIAYA

CEO KENYA POLICE SACCO

Credibility . Professionalism . Accountability

KENYA SACCO PERSPECTIVE

The Sacco movement has evolvedin the past over 45 years into aformidable force for the social andeconomic transformation ofKenyan people.In Kenya we have over 7,000registered Sacco's i.e. 41% of total17,000 Co-operatives

SACCO SECTOR IN KENYA

Has over 7,000 but only 177 are deposit

taking (Do FOSA business)-Originally 251 DT

SACCOs

15 DT SACCOs with Assets over Kshs. 5 B

58 DT SACCOs with Assets BT Kshs. 1-5B

103 DT SACCOs with Assets less than

Kshs. 1B

Credibility . Professionalism . AccountAbility

SACCO SOCIETY’S MANDATE

To provide an opportunity for accumulating savings.To provide an investment opportunityTo create a source of funds for on lending at fair and reasonable rate of interest.To provide a platform for economic and social development.To provide credit facilities for purposes of providence and production.Provide affordable financial services

LEGAL FRAME WORK

The Co-operative Societies (Amendment) Act of

2004 (cap 490)-Act of parliament-(All)

The Sacco Societies Act, 2008-Act of parliament

(SACCOs)

The Sacco Societies Regulations-SASRA

The Co-operative societies rules-Minister

The SACCO Society’s By-laws-Internal

ADM Resolutions

CONSUMER RATIONALE

1.Gone are the days of the business offering what they

think is good for the customer and at their own terms.

2.Gone are the days of monopoly and duopoly where

the customer would have no choice.

3.Effects of Interest Capping.

4.Today’s customers are more enlightened, more

educated and very much exposed in many areas be it

technology, education, politics media etc.

CONSUMER RATIONALE

5. Customers are becoming more demanding and

are demanding value for their money.(quality)

6. Customers are looking for new solutions.

7. Customers are looking to feel valued and

appreciated.

8. Customers are spoilt for choice.

9. Customers have a voice that is loud, clear and

very influential.

10.It costs 9 times more to attract a new customer than to retain an existing one

GROWTH PILLARS

Governance and Transformative

leadership

Membership-Growth & Retention

Financial Performance/Capabilities

Products and Services

Operational efficiency- Systems

Human Resources/Capital

;INNOVATION AS WAYFORWARD?

Innovation is the profitableimplementation of ideasImplementing new ideas thatcreate value “Innovation Network, US”The intersection of invention andinsight, leading to the creation ofsocial and economical value “US, National

Innovation Initiative”

RATIONALEAn innovation can increase profitson the value side (customers valuean innovation enough to pay morefor it)OROn the cost side(the Companyproduces a product offering in amore efficient way)

FROM WHICH SIDEInnovation can occur anywhere inthe firm business and by anyone.There is great potentialThere is no shortage of ideas andinvention in the work. Thechallenge is to introduce thesesuccessfully to a market.

BENEFITSReduces waste and environmental damageCreates growth, increase productivity, Economic wealth (avoids stagnation)Provides better goods and services at cheaper price-standard of livingMore interesting work for employeesSurvival –Remember KODAK

TYPES OF INNOVATION

Management

Innovation

Revolutionary

Innovation

Value Innovation Service Innovation

Process Innovation

Product Innovation

Technological Innovation

Market Innovation

Business Model Innovation

Brand Innovation

Strategic Innovation

Structural Innovation

Disruptive Innovation

Revolutionary

Innovation

PRINCIPLES FOR INNOVATION

Be action orientedMake product, process or service simple and understandable Make the product process or service customer basedStart SmallAim highTry, Test, ReviseLearn from past failures

WISDOM“He who innovates will have for his enemies all those who are well off under the existing order of things and only a lukewarm support in those who might be better off under the new”(Niccolo Machiavelli, The Prince)

MOBILE TECHNOLOGY

Kenya has over 38 million mobile subscribers in year 2017-Kenya has the highest mobile money usage in the world -88%Kenya has an estimated 5.5 million face book & 2.5 Million twitter usersKenya has 37.7 Million internet users most of them on mobile-Internet users in year 2,000 was 200,000.

RATIONALE?Kenya is 1st highest tweeting nation 77% on mobile in AfricaBy 2050 70% of Kenya population will be urbanisedThere are more I phones or Samsung Galaxies sold than born babies every day i.e. 74.5 Million I phones sold in the 1st quarter in 2015.

NEW DEVELOPMENT

FOSA (Quasi Banking )InnovationMicro Credit services to the CommunityWealth Creation through InvestmentsLong term financial products i.e.

Mortgages Technological Developments-Virtual

Banking, Mobile, ATM, Agency Banking

NEW DEVELOPMENT

Sharia Compliant Products- Current Government policyFinancial Products-Share Capital,

Bonds, Fixed income, Commercial PapersSinking Benevolent Funds for Co-ops

WHY FINANCIAL REPORTING

Financial reporting is the act of

reporting on the financial performance,

and the financial handling of a specific

Co-operative

It provides the owners with information

on how funds are used and allocated.

It provides a level of transparency in the

a Co-operative financial system

RATIONALEMeasure financial soundness & growth

Measures profitability/loss of the

business

Analyzed & interpreted-reflect areas of

strengths & weakness

Indicate periodic performance/growth

Prepared at the end of the financial year

in preparation of the General meeting

Legal requirement

LEGAL MANDATE

CSA sec 25 & SSA sec 40

Every Co-operative society shall keep

proper accounts which shall;Prepared in accordance with IAS/IFRS

Reflect the true and fare state of the

financial affairs

Explain transactions i.e. receipts &

payments, Assets & liabilities

RESPONSIBILITY

Reg.60 (2).

The BOD shall ensure that

management maintains proper and

accurate records that reflect the

true and fair position of the Sacco

society’s financial condition.

BASICSSource documents: receipts,

payments, purchases, sales, etc

Processed/posted to General

Ledger

General Ledger summarised to

produce trial Balance

Trial Balance used to generate final

accounts

Flow of Accounting Information

The Trial Balance used to produce

Statement of Financial position

Statement of comprehensive Income

Statement of Changes in Equity

Cash Flow Statement

The System based on Double entry

bookkeeping

Statementof Comprehensive IncomeMatching Incomes and Expenses=Surplus(Loss)

•Helps Invent ways to grow income;

-Widen the product base with new products

-Introduce other activities i.e. FOSA,

Microfinance, financial investments & otherwise,

•Costs Management i.e. depressed costs

-Budgetary controls i.e. Within budgetary limits

-Computerization i.e. Efficiency

-Economies of scale i.e. Increase Volumes

-Quality Management- Quality is free

Statement of Financial position

A classified summary of the value of the society

entity i.e. it depicts the business financial state of

affairs or position.

Accounting equation where Assets=Capital

+Liabilities

-Assets- Resources controlled by the society

-Capital-Contribution from the owners i.e.

Share Capital, Retained earnings, Statutory

Reserve fund, General Reserves e.t.c. It is very

strategic to heavily capitalize your society.

Statement of Financial position

Liabilities-Contribution from the

outsiders i.e. Members deposits,

external loans & otherwise

The financial strength of a society

can be reflected through the Balance

sheet items.

Adaption of IFRSMany countries moving towards

adapting IFRS-

IFRS allow greater comparability and

this helps investors better determine

where there investments should go

IFRS are principle based rather than

rule based, hence more flexibility in

adaptation

WHY IFRS FOR SACCOS

IFRS provides a set of principles

to be followed while accounting for

transaction and events in financial

statements. IFRS was adopted by

IASB with the objective to have

uniform accounting standard across

all countries.

WHY IFRS FOR SACCOSProvides mgt greater discretion and

flexibility in preparing financial

statement

Value relevance of accounting

information

Comparability

Decision Making

Investors options

WHY IFRS FOR SACCOS

Trade across border and raise

capital globally

Provide consistent presentation of

financial statement along with

uniform measures for recognition,

measurement and disclosures of

financial transaction

Part IX-FINANCIAL PERFOMANCE REPORTING

Reg. 52-58

Issues;

Internal Auditor-review internal controls & financial

matters of the society

External Auditor appointment -3 years

Submission of audited accounts within 3 months after

the end of the year, before publication-

Authority return at end of every quarter on or before

the 15 day of the following month.

Part IX-FINANCIAL PERFOMANCE REPORTING

Authority return on Statement of Income &

Expenditure and a Statement of financial

position showing results of its operations for

the preceding month by the 15 day.

The Sacco shall submit to the authority on

the quarter date & year date Financial

Statements in the prescribed format without

deviating from Form 6,7& 8.

LONG LIVE THE CO-OPERTAIVE MOVEMENT

IN KENYA

Contacts-mail solotsa@gmail.comMobile; 0722-381327

Credibility . Professionalism . AccountAbility