The New Vision Staff Savings & Credit Coop – an
organization I am intimately familiar with, last week released its financial
results for 2018.
The organization which turned 13 last month has seen the
savings of its members grow to sh4.6b from sh62.4m at the end of the last year;
its top line has exploded to sh1.3b from sh2.4m and its profitability following
suit to end last year at sh701m from sh2.3m in 2005. Its asset base now stands
at sh7.8b from sh66.1m in its inaugural year.
These results which represent double digit compounded annual
growth over the last 13 years, have come from collecting member savings – now
about 1,500 strong, lending the same monies back to them and any surpluses are
invested in government paper – The coop’s account with the central bank stood
at sh2.3b at the end of last year.
Growth has slowed in recent years, a natural progression as
any organization grows bigger, but even using conservative estimates, continued
growth would see it double its asset base over the next ten years.
If you had told the founders of the SACCOS those many years
ago that the enterprise would be a 100 times bigger by assets today, they would
have laughed you out of town.
There several pointers I take away from this SACCOS’ “success”.
1.
1 + 1 =11
The minimum savings per member per month is sh60,000, some
savings multiples of this figure and most save more than that. It is just
enough to ensure members save regularly but not enough to expect a huge pot at
the end of the year. But spread across 1,500 members this comes to a minimum of
sh90m per month, what is actually received maybe double that amount in savings
alone.
The incentive to save is real as members can only borrow up
to three times their savings. Which means the more you save the more you can
borrow.
Most members have benefitted from this lending to further
their academics, buy land, build homes and help with their household
necessities. While they would have eventually come around to achieving all
these, I believe, it would have taken a lot longer. By getting some of their
base needs out of the way they can now move to planning for more serious
investments, which as the coop grows will be able to help them finance.
The larger point is that the whole is larger than the sum of the individual parts. That synergy works and when it does one plus one is not two, but 11...
2.
Keep It simple, stupid!
Everything that the SACCOS does is dictated by three
objectives – to provide a safe savings space for its members, to avail credit
at affordable rates and finally to serve as an investment vehicle for them.
As the SACCOS has grown in its capacity to help its
members save and borrow, it has also grown as a viable investment for its
members – probably the best they have ever had.
A recent revaluation of the shares showed that the members who had bought their shares by 2008 had seen the value of their sh10,000 investment grow to sh1.59m by the end of 2016 or a 88 percent compounded annual growth rate during the period.
But there is no rocket science in achieving these results. As
stated above members saved, they borrowed money from the same pool and any
surpluses were invested in government paper, which has been offering double
digit returns throughout most of the life of the Coop.
Could they have seen higher returns if they had dabbled in
more esoteric investments? Maybe. But the risk would have been higher, losses
more frequent and performance more volatile.
But who is going to
lose his job for consistent double digit returns in a depressed economy?
3. Service first, profits later
Profit is good, but it is only an opinion and only comes
after the delivery of a service. While we all budget for profit the best way to
get it is indirectly, by focusing on service.
Members can withdraw or borrow any working day of the week.
Going forward with the technologies available there is no reason by this time
next year it’s not a 24-hour, seven day a week service. Interestingly the more
available their money is available to them members will save more, lending will
go up and as long as costs are managed and our asset allocation doesn’t go
haywire, profits should continue to roll in.
4. It’s the vision thing
The vision of the New Vision SACCOS is “To be a vehicle for
financial freedom for our members”.
The simplicity of it belies the enormity of the task. Financial freedom for the members means that the income they would get from the SACCOS – interest on their savings, dividend payouts and the appreciation in the value of their shares, sometime in the future would be enough that they would not need a salary from anybody else.
This year the coop will pay out sh380m in interest and
dividends, which if split evenly among the 1500 members should come up to just
under sh255,000. But the lowest paid staffer at the New Vision grosses about
sh10m annually. There is still a long, long way to go.
Thirteen years is but a blip in the greater scheme of
things. Given the enormity of the task, this is not the time for the SACCOS to
rest on its laurels. In the pursuit of our elephant we cannot be distracted by
the smaller game meat that crosses our path.
