Investment lessons from a teachers’ Sacco and the quest to transform beyond the classroom
By DERRICK VIKIRU AND SAMMI NDERITU
The year 1974 a group of teachers and staff of the Teachers Service Commission (TSC) came together to start a Sacco. The law dictated that to start such an entity, a minimum of 10 members had to append their signatures. Their main objective was to put their resources together and thereafter benefit from borrowing from a common pool and foster personal growth. This gave birth to Mwalimu Sacco. In the course of time, post primary school teachers were invited to join the Sacco. From that humble beginning 44 years ago, Mwalimu Sacco, which later rebranded to Mwalimu National boasts of more than 85,000 members.
“Mwalimu National is born of the premise that we are who we are because a teacher believed in us. We are the largest African Sacco with a membership drawn from teachers all over Kenya. We seek to enable the people who made all of us who we are today – the teachers – access to affordable financial services,” says Alphonse Kaio, Chief Executive Officer, Mwalimu National.
The organisation strictly targets teachers, although it has exceptional circumstances in which spouses and children of member-teachers can be admitted. The Sacco has class A membership for people over 18 years of age and class B membership for children below 18 years. A class B member has limited access to services.
“Individuals who were once teachers or worked with TSC and may have left the profession can also continue as members. Membership to the public has not been opened up because we feel we have not exhausted our target market,” says Kaio. He adds that even though the organisation’s membership is 85,000, that only accounts for 30 per cent of the teachers’ population who have been employed by the TSC.
From the CEO’s office on the 10th floor of Mwalimu Towers, an imposing building within Nairobi’s Upper Hill, the aerial view of the city centre is breath-taking. And like the busy road intersection below controlled by a single traffic police officer, Kaio’s single biggest
role is to ensure that Mwalimu National’s products and services are offered seamlessly. He is aware that governance is a vital component in delivering the organisation’s mission of mobilising savings and providing financial services to its customers at competitive terms.
“The governance structure has been a key factor in attaining our success. We have 40 branches and members in these regions elect their leaders and delegates who elect members of the board at the headquarters,” explains Kaio.
He adds that the board is responsible for setting policies and the CEO, management and members of staff have clearly demarcated roles and responsibilities which ensure that business is done in a prudent manner and loans are allocated to members in a fair way.
In its quest to expand its business portfolio, Mwalimu National has diversified into banking, insurance, asset management and Data Centre. “The law limits us on what we can do as a Sacco and we thought of diversification. We were torn between starting a bank from scratch and finding an institution that is struggling so that we can buy it off and turn it around to profitability,” explains Kaio. The organisation obtained majority shares at the Equatorial Commercial Bank.To execute the deal, Mwalimu National Holding was formed which consequently acquired 75 per cent of Equatorial Commercial Holding – the parent company for Equatorial Commercial Bank and Equatorial Insurance Brokerage. “We now own and control Spire Bank, formally known as Equatorial Commercial Bank,” adds the CEO.
Through the Equatorial Insurance Brokerage, Mwalimu National hopes to provide insurance brokerage to thousands of its members. Kaio notes that the Sacco is now able to negotiate for good premiums. “When taking insurance cover for their property, members using the firm can negotiate for better terms. They will be at liberty to use any insurance firm as an underwriter and our job will be to negotiate for better terms on their behalf.”
The Data Centre
Additionally, in 2015, Mwalimu National registered Mwalimu Assets Management (MAM) as a subsidiary of Mwalimu National Holding and used the company to acquire land in Juja, Kiambu County, and Kisaju, Machakos County.
“In Kisaju, we have so far completed 872 one-bedroom town houses with amenities such as a shopping mall, swimming pool, water treatment plant and kindergarten. However, the uptake from members has been low so we opened it up to members of the public and other investors. We are also looking to develop the land in Juja but through a strategic partner,” he says.
Kaio adds that through Mwalimu Assets Management, members can identify, acquire and develop parcels of land in different places.
On why the organisation has ventured into information and technology through the establishment of the data centre, Kaio says that Mwalimu National’s initial plan was to have its own data backup centre and the thought of going commercial was driven by a need to utilise part of it in generating revenue.
“We could not use the entire data center on our own. As a market leader, we noticed that some saccos were struggling to run their operations due to cash flow problems, and they could not invest in their own data centre. We made a decision to host them at a commission,” explains Kaio. Besides Saccos, two commercial banks are using the facility for their data back-up.
No Double Burden
With all these business ventures, Kaio admits that continuous recruitment of new members is an ongoing initiative despite misconceptions that the Sacco has to contend with. “People believe that in Saccos, you are forced to save or borrow but that is not the case. Some of our competitors, especially financial institutions such as banks will at times misinform customers that saving with a Sacco while servicing a loan is a double burden, and they would rather use the saving to service a similar loan with a bank,” explains Kaio.
He says members should understand that as much as you may be servicing a loan, it is also important to empower yourself economically through savings.
Secondly, Kaio observes that it took time before people developed trust on Saccos in regards to savings. The formation of the Sacco Societies Regulatory Authority (SASRA), he says, has boosted the confidence of customers in the sector.
SASRA is a semi-autonomous Government Agency under the Ministry of Industrialisation and Enterprise Development. It is a creation of the Sacco Societies Act 2008 charged with the prime responsibility of licensing and supervising Deposit Taking Sacco Societies in Kenya.
As Mwalimu National heads into the future, Kaio notes that the organisation is not just focused on business but also on transforming lives through its ChildHope Foundation. “Registering the Foundation was inspired by our shared dream and conviction that the destiny of young people left behind after the demise of our devoted members is not tied to their current circumstances of lacking,” he notes.
Kaio says these children should be able to continue with their studies through secondary and university level, just like they would have done had their parents been alive. “We provide scholarships to needy bright students to complete their studies up to university level. So far, we have received positive feedback and we believe we are impacting the lives of the beneficiaries in a big way,” says Kaio.
Sammi Nderitu is the editor and photographer and Derrick Vikiru is the sub-editor, both of Management Magazine. Email: email@example.com and firstname.lastname@example.org Twitter @SammiNderitu and @DerrickVikiru