Product Innovation

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Shelter Afrique Building – P.O. Box 25965 – 00100 – Nairobi, Kenya Phone: (+254) 0705585561, e-mail: [email protected] www.africa.procasur.org

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Product Innovation Responding to members’ needs

Ndetika Rural SACCO Your Development Partner

(NRS SACCO)

Location: Ondiri House Kikuyu Township, Kikuyu Division Kiambu County Contact: P.O. Box 575-00902 Kikuyu Tel: +254 66 33170 /+254 724 261 90 Email : [email protected] Contact Person: Joan Mbesya, CEO

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Table of Contents

Historical Background .................................................................................................. 1

Location ....................................................................................................................... 5

Operations Of The Sacco ............................................................................................ 6

Vision, .......................................................................................................................... 6

Mission ........................................................................................................................ 6

Values .......................................................................................................................... 6

Objectives .................................................................................................................... 7

Lr Innovations - Market Segmentation ........................................................................ 9

Market Segmentation - Products And Services ......................................................... 21

Main Achievements, Challenges And Coping Strategies .......................................... 11

Individual Member Testimonies On The Business Relationship With Ndetika. ......... 13

Case Studies 1 .......................................................................................................... 13

Case Studies 2 .......................................................................................................... 15

Case Studies 3 – Handing Over To The New Generation ......................................... 18

Lessons From Ndetika ............................................................................................... 19

Conclusion ................................................................................................................. 20

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Location Background

Kiambu District is one of the seven districts in Central Province. The district covers an area of 1,323.9 sq Km! and is the smallest district in Central Province. It borders Nairobi City and Kajiado District to the south, Nakuru District to the west, Nyandarua District to the northwest and Thika to the east. The district lies between latitudes 0°75" and 1° 20" south of Equator and longitudes 36° 54" and 36° 85" east.

The District is divided into 7 divisions namely Kiambaa, Limuru, Ndeiya, Githunguri, Kikuyu, Lari and Kiambu Municipality, thirty-seven locations and one hundred and twelve sub-locations. Table 1 below shows the various administrative divisions, their population and population densities.

Division Area (sq. km!)

Population Density Location

Kiambu Municipality 99.4 724 71,925 11 Kiambaa 91.1 1,275 116,127 17 Limuru 155.5 577.9 89,870 12 Ndeiya 125.2 189.4 23,708 4 Githunguri 175.2 779.4 136,554 20 Lari 441.1 252.3 111,302 22 Kikuyu 236.4 822.8 194,521 26 Total 1,323.9 562 744,010 112

Table 1. Administrative units, population and population densities.

The largest Division is Lari with an area of 44.1 km!. However, a large portion of the division is covered by forest. The smallest division is Kiambaa with an area of 91.1km!. There are five local authorities in the district namely Kiambu County Council, Kiambu Municipal Council, Kikuyu Town Council, Limuru Municipal Council and Karuri Town Council. The district has five constituencies; Kiambaa Constituency embraces Kiambu Municipality and Kiambaa Divisions whereas Limuru Constituency comprises Limuru and Ndeiya Divisions. Kabete constituency covers Kikuyu Division while Githunguri and Lari Divisions respectively. The map in the following page illustrates the distribution of population density across the greater Kiambu District that includes Thika.

Demographic and Population Profile The district is quite densely populated except for the semi-arid areas of Ndeiya Division and Karai Locations, Kikuyu Divisions. These locations also have the highest poverty levels in the district. Kiambaa, which is the smallest division, has the highest population density of 1,375 persons per km! whereas Ndeiya Division has

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only 204 persons per km!. Other divisions with high population densities include Kikuyu, Githunguri and Kiambu Municipality. Due to the high population density in most parts of the district, land has been fragmented into small pieces resulting in a decline in productivity.

Figure 1 Population Pyramid - Kiambu

Rural/urban population Density in Kiambu County

Figure 2 Kiambu Population Distribution Vs National Average

Its proximity to Nairobi makes Kiambu County the most urbanized county in Kenya. This is due to the demand for housing by the persons working in Nairobi.

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Welfare Indicators Education

Kiambu District has 316 primary schools. The district has primary school enrollment of 89.7% for boys and 89% for girls. The primary school dropout was reported to be 30%. The Primary school going population (6-13 years) was 142,669 in 1999. This cohort increased to 161,890 in year 2004. It is expected to rise to 179,635 by the year 2008. Although the enrollment rate is high (89%) the district will need to invest in the provision of additional educational facilities.

The district had 113 secondary schools and an enrollment rate of 46.4% for boys and 53.3% for girls. The secondary school drop out rate was estimated to be 25%. The population of secondary school aged persons was 73,094 in year 2002 and is estimated to increase to 85,310 by year 2008. Many children drop out of primary school due to the high cost of education and the limited number of secondary schools with the boys being affected most. Out of about 35,508 boys falling within this age group, only 16379 are enrolled in secondary schools. Poverty Analysis

The Welfare Monitoring Survey II report of 1994 indicates that in 1992, 32.6% of the Kiambu District’s population was living below poverty line. This decreased to 29.3% and 25% in 1994 and 1997 respectively. Currently it is estimated that 25.08% of the district’s population is poor. This implies that there are 198,598 poor persons in Kiambu District. The contribution to national poverty is 1.48%.

Poverty situation in Kiambu District is manifested in various forms such as inaccessibility to education and in adequate education facilities. The average dropout rate of 30% is attributed to poverty in various parts of the district. High dropout rate are also caused by child labour in the tea and coffee plantations. Among the age group affected by poverty is the 15-64 (labour force). This comprises of female population of 15-49. The table below summarizes some of the social-economic indicators of Kiambu District

Total number of Households 189,706 Average Households size 4 Number of female headed households 31,681 Number children headed families N/A Number of disabled groups 6 Children needing special protection 324 Absolute Poverty (Rural & Urban) 25.08% Income from Agriculture 17.4%

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Income from Rural/Urban Self employment 19% Wage employment 63.6% Number of unemployed 35,641

Table 2. Socio-Economic Indicators

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Historical background

The idea to form a rural SACCO was conceived from the demands of the members of Nderi Farmers’ Co-operative Society for affordable and convenient savings and credit services. Hence, the formation and registration of Ndetika Rural Farmers SACCO, in 1993.

Its name was derived from the milk collection centres of Nderi, Tiebea, Karai and Kamuguga. To date, the SACCO has transformed into a community based institution, deriving its membership from the residents of Kikuyu Division. In the 2010 AGM, members agreed to change the name to NRS SACCO recognizing the urbanization and changing business environment in Kikuyu Division and also the need to venture out of the division in future.

Location

The SACCO is located in Kikuyu Town in Kikuyu Division of Kiambu County, which is adjacent to the northern border of Nairobi and has a population of 822,800.. The County is

predominantly rural but its urban population is increasing as Nairobi expands. The Division

covers 236.4sq.Kms, the

population density is 194521 / sq km Kikuyu

town is located 20km northwest

of central Nairobi, the capital of Kenya. This is about 20 minutes’ drive ` from Nairobi. Kikuyu hosts a town council and an administrative division in the Kiambu County. The town itself has an urban population of 4100, but the surrounding densely populated rural territory brings the total population to 165,594. Due to its geology and rich soil texture, there is much livestock and crop farming. However due to increasing population and the proximity to Nairobi, most of the farm lands are being turned into residential use.

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Operations of the SACCO

Figure 4 Ndetika Rural Branch

Ndetika SACCO is located in Kikuyu Township and operates branches in Wangige, Kinoo, and Nderi.

Vision: To be the leading financial service provider in Kenya.

Mission: We raise the standards of living of our members through provision of affordable customer focused prudent financial services.

Motto “ Your Development partner’

Values:

P- Professionalism in our business

R- Relationship - value our relationships and respecting our customer.

U- Unite our members through unlimited service delivery to all

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D – Development of customer focused products,

E- Efficient use of resources and effective management

N- Nurture our customers’ financial growth, and proactively respond to their needs

T- Team work and Talent development to all our stake holders

Objectives The society objectives are to promote the economic and social interests of members in accordance with co-operative principles and more particularly to:

a) Perform money and credit transactions

b) Promote thrift, self help co-operative generally among members, to promote the development of co-operative ideas and to improve their economic conditions by means of better and efficient business

Governance Structure

The SACCO as is the case with all SACCOs in Kenya has the Annual General Meeting – AGM, as the supreme organ. The AGM elects 9 Board members to oversee the operations of the SACCO. The Board members are elected for a term of 3 years and are qualified for re-election at the end of their term. After the AGM, the Board elects a Chairman, Vice Chairman, Secretary and Treasurer who are the authorised signatories for the SACCO. Every year, two board members will retire to allow the AGM to elect new members.

The AGM also elects 3 Supervisory committee members who audit the Board’s performance. Given the requirements of the Sacco Societies Act 2008, the SACCO has also formed an Audit Committee drawn from the members of the Board though excluding the Board Chairman. The CEO also sits in the Board as an ex –officio member.

Management Structure

The SACCO is managed by a CEO who oversees the day –to –day activities. At the head office, the SACCO has the Internal Auditor, Accountant, and the Loans manager. The CEO manages the HR as well as the marketing portfolio.

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The Branches are headed by the Branch managers. Other Staff include the loan clerks, Tellers and Customer Service officers.

Organizational Structure

Membership Composition.

The members of Ndetika SACCO are residents and property owners of the Kikuyu Division. These include landowners, traders, farmers, artisans, Matatu operators, women groups, youth groups. The SACCO also draws its membership from the Kenyans in the Diaspora who are original residents of Kikuyu Division.

Fig. 4 Ndetika’s organizational chart

Land owners.

The demand for housing in and around the SACCO’s area of operation for people working in Nairobi has created a huge market for the residents of Kikuyu. This is because of the proximity to Nairobi as well as affordability. Most of the agricultural

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land within Kinoo, Wangige has been converted into residential use. As such a big number of the members of Ndetika have become land lords.

Public Service Commuter Transporters (Matatu)

As in the case for demand of residential housing units, there is also a huge demand for passenger commuter transport services to and from the City. Ndetika SACCO attracts members as individual Matatu owners or as Matatu / transport SACCOs.

Artisans

There is a large pool of furniture makers, stone masons, metal fabricators within the membership. These are existing because of the demand for furniture , and building and construction workers,

Small Scale traders / retailers.

Generally the community around Kikuyu are known for their business acumen and nature. Wangige market is one of the largest open air markets in Kenya. This as is the case with the other classes of economic activities, is driven by the proximity to Nairobi. These traders range from market stalls operators, kiosk owners and shopkeepers.

Women Groups and Youth Groups.

This category of members was formed after the introduction of economic stimulus packages by the government channelled through register women and youth groups. These are the National Women Fund and the National Youth Fund.

Members of these groups had to join Ndetika so that they could get access to these funds. As time went by, they got assimilated into the SACCO. Some of the activities the youth are engaged in include, car wash services, Motor bike taxis, etc.

To be able to satisfy the demand for services from this diverse membership, the SACCO had to research and introduce innovative products suitable for each group.

Focus is on improving service delivery and ensuring an individualised experience for each client.

Learning Route Innovations - Market Segmentation

1. Customization of savings and credit products to suit the different economic segments the SACCO serves. The SACCO has created Small average KShs 2,000 (USD 22) immediate disbursement loans to huge facilities over KShs 4 Million (USD 44 4000).

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2. Combining the Grameen financing concept with the Co-operative Business Model.

3. Market segmentation

Ndetika has broken away from the traditional menu of loan and saving products in most SACCOs .

In the marketing strategy of the SACCO, the different clientele served have been segmented in three categories

a) Economic activity, ( business , landlords, petty traders )

b) Gender ( Youth and women groups)

c) Non- natural persons ( schools, churches , businesses )

Each segment has tailor made products to suit their specific needs as illustrated in the table below

Figure 5 Member’s activity

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Main achievements, challenges and coping strategies Membership trend over the years.

The SACCO’s focused marketing strategy has resulted to a steady growth in membership over the years. Between 2006 and 2010, the number of members with loans doubled. This growth can be attributed to the introduction of a wide range of products.

Details 2006 2007 2008 2009 2010 Total members 4377 5239 5889 6312 6635 Members with loans

2200 2700 3302 4002 4455

Table 3 Membership trends. Source Ndetika SACCO audited accounts

In particular, the decline in women membership has been noticed. This could be due to the establishment of the Kenya Women Finance Trust in Kikuyu and other commercial banks including Equity Bank. However in the latest customer service survey (June 2011) it was noted that members preferred the SACCO to most commercial banks because of its flexibility and approachable staff and management. To continue the growth trends, the SACCOs marketing strategy has been revised to include use of local commercial radio stations, direct approach to schools and churches, collaborating with the local authority to brand some local landmarks and expansion of services to locals leaving in the diaspora.

Figure 6 Member’s activity 2

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Emphasis is also being put on rebranding, (the SACCO has changed its name from Ndetika Rural SACCO to NRS SACCO and changed the corporate logo). The SACCO has also installed integrated (linking BOSA and FOSA) operating software linking up all the branches. They are in the process of acquiring visa branded ATM cards which will enable the members to access their accounts anywhere in the world.

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Individual Member testimonies on the business relationship with Ndetika.

Case Studies 1 Name: Beatrice Wanjiku. Age 65 Member since 2000. Economic Activity : Land lady, Farmer Product: reviewed: Asset Financing

Background

Wanjiku is a retired University of Nairobi (UoN) support staff. Her monthly salary was KShs 6,500. (about USD 72 at current exchange rates). She is a widow with six children. While at UoN, she was a member of Chuna SACCO. She acquired # acre piece of land through a loan from the SACCO.

Upon retiring from employment in 2000, she joined Ndetika SACCO to which she transferred all her savings from Chuna SACCO. With three children who had not competed school, she had to seek source of income for upkeep and education. Using her retirement money, Wanjiku started poultry and dairy project cows on her # acre piece of land. Her target market was the local Wangige open air market and Nairobi. After 3 years, she abandoned the dairy project because of high employee and animal feed costs. The poultry project suffered a major blow in 2008 when she lost 600 birds through a disease outbreak.

Her savings at Ndetika enabled her to qualify to take school fees loans every calendar year for six years and saw her children complete school and college.

In 2006, she took her first Asset Finance loan of KShs 300,000to develop her land. The building was designed by her

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son who is a qualified architect. After 3 years, in 2009, she took her second loan of KShs350,000 to complete building.

The building has 14 flats fully occupied. To ensure a constant supply of water she took , she sunk a 65 ft. bore hole and bought two water storage tanks. She took her 3rd loan of KShs 150,000 to buy two water storage tanks and also fix gutters on the roof to harvest rain water.

Wanjiku’s income has increased and is now predictable. From the rent of KShs 50,000 (USD 556) per month, she is able to pay all her expenses and loan instalments at Ndetika. Her children acknowledge that their social status in the village has changed.

The SACCO has enabled Wanjiku to acquire additional 1 acre within the neighbourhood and 7 acres in Kajiado District on which she grows food crops for sale and domestic use.

In total, she has taken loans amounting to KShs 3 million. All her children have joined the SACCO and she has also opened accounts for her grandchildren.

Ms. Wanjiku has opened a Nyumba Account through which the tenants pay rent. This also assists her to manage her finances and pay the loan.

Future plans. Add 8 more flats on the existing premises

Her best moments as a member of Ndetika: “my architect son was educated using loans from Ndetika he designed the Wangige Branch of the SACCO after he completed his architecture university degree. My other two children have completed school and are independent”

Advice to Ndetika SACCO: “Ensure that members get loans without delay. Such delays disrupt members’ cash flows”

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Case Studies 2 Name: Samuel Njenga. Age 65 Member since 2000. Economic Activity - Proprietor Samnel Academy, Farmer Product: reviewed: Asset Financing

Mr. & Mrs Kanga’ua – Proprietors Samnel Academy

Background

The Kanga’uas are retired teachers of 35 years’ service with the Teachers Service Commission. Mr. Kanga’ua retired in 2000 and together with his wife registered Samnel Academy, a day and boarding primary school. He was among the founding members of Ndetika and the Director of the School. Mrs Kanga’ua apart from being a Director is a full time teacher.

Their experience with Ndetika SACCO.

Upon retirement, they started constructing a primary school on their family land. They managed to build, eight classrooms though incomplete, the walls were not plastered. In 2002 they admitted the first students. As the student population grew it become necessary to invest in a van vehicle that would act as a student transport as well as a utility vehicle for the school. In September 2004, they took the first loan of KShs 210,000 and purchased a van. The branded van brought other benefits; it acted as an advertisement for the school. One year later in November 2005, they sought KShs 655,000 to purchase a minibus to help cope with the students demand for transport. He invested part of the money in completing the boarding facility and construction of two teachers’ residential houses.

Five years later in June 2010, the Kanga’uas sought KShs 975,000 from the SACCO to erect a perimeter wall around the school to enhance security, complete the water treatment facility, and repair the school mini bus. They also used part of the money to purchase a plot of land at Naivasha.

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The water system is used to supply the school, and irrigate the farm where they grow most of the food used at the institution.

The school has grown to become a household name in the Division as well as part of the province. Its first candidates, group of 8 students are in secondary school. The Directors have made a policy of following up the progress of their former students after graduating from the primary level.

In August 2011, Mrs Kanga’ua was taken ill and needed an urgent medical operation. This was an emergency case which they approached the SACCO and were advanced KShs 150,000 to meet the medical bill at Nairobi Hospital.

He has also intensive his agriculture into rabbit, pig and dairy and food crops used at the school. His school has grown from a student population of 10 to 100.

Future Plans

To cut on electricity costs, Mr, Njenga plans to set up a 20, 000 cubic meter bio gas system to supply energy to his home as well as the school.

Expand the boarding facilities and build more teachers houses.

Challenges that the Kanga’uas experience

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1. The number of students unable to complete fee payments is increasing. The local administration has declined to give bursaries to these needy students because they cannot fund private schools.

2. The cost of inputs have increased ( stationery, electricity, wages ,) due to the economic difficulties most parents are going through, the proprietors are unable to increase school fees and are forced to cut costs in other areas.

Their best moments with Ndetika

The Kanga’uas are of the view that Ndetika has succeeded because of the following:

1. It employs very honest officers and has no tolerance of corruption. This has enhanced confidence and image in the eyes of the members.

2. There has to be a clear separation of powers and responsibility to give staff space to work and innovate The Board must give space to the management to work and desist from micro –managing.

3. “Patience with the members, Hardworking staff, and member education.

4. Sacco officials put the interests of the members first.

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“We pay tribute to not only your great support but also your patience as we repaid the borrowed fund. We look forward to your continued support in future. You rare truly a part of us“ Samuel Kanga’ua

Ndetika has been part of their journey. They are approachable, flexible, and very patient when dealing with customers. They always ready to listen to us. “ I feel that Ndetika has grown with us more than anyone else” Mr. Kanga’ua

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Case Studies 3 – Handing over to the new generation Name: Kibe Age 65 Member since 1990. Economic Activity - Land lord & class merchant Product: reviewed: Asset Financing, Education

Mr. Kibe retired in 1997 as an instructor at Kiambu Technical College. Before retiring, he had joined Ndetika SACCO in 1996.

Their experience with Ndetika SACCO

Kibe’s wife was the founder of Kinoo branch. She operated a cash collection centre in her shop from 1996. This was done to recruit more members especially those who considered Nderi as being far off. She maintained Member’s personal accounts and would reconcile the accounts with staff from the office in Nderi.

As pioneers of the SACCO, they have had all their six children open and operate accounts at Ndetika. Their grand daughter is doing an internship as a customer service officer at the Kikuyu Branch.

The Kibes have educated all their children using education loans from Ndetika SACCO. They were not able to remember how much they have borrowed through out the years. Their first born daughter is a landlord and operates an import and export business courtesy of Ndetika SACCO. Their second born son is a computer engineer with an international firm in Nairobi.

As an inheritance to their children, they have sub divided the family land and given title deeds to all their children. Given the demand for residential houses in the area, they have taken out construction loans from the SACCO and ensured that all their children have put up rental units.

What they would like the SACCO to do.

The SACCO should consider lowering the interest rates. This in their view will attract more members. For the success of the SACCO business and economic development of the members the SACCO should ensure that ;

1. All loans properly secured and adequately documented

“We consider Ndetika as part of our family. All that we have achieved is through our association with the SACCO“ Mrs. Kibe

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2. Funds diversion should not be tolerated. The SACCO should follow-up the members to ensure that loans are used for the intended purpose

3. Staff members should be honest, trusted and very transparent when dealing with Members

Lessons from Ndetika Specifically, what we can learn from this experience are:

1. Understand the member’s needs. Each individual member has unique needs which should be addressed in the right context. Though SACCO products are generally available to all members it is important to listen to individual clients. SACCO products should be tailored to suit the needs of the clients. It is important to conduct frequent member surveys to be in line with the dynamism of clients’ demands.

2. Be flexible in addressing specific needs of the members. Flexibility and firmness must be used in equal measure to provide a conducive environment that will enable the borrower repay the facility comfortably.

3. Believe in the vision of your members. a. Have a relationship that is beyond monetary needs. Loan and

marketing officers should at all times be in touch with the members. Participating in social functions, constant communication creates visibility in the market place and a sense of belonging.

b. Where professionals exist within the membership, consider using their skills to improve services.

c. Unlike Banks, member’s advanced age should not be a deterrent to lending. Adequate security, ability and capacity to pay and insurance should be enough to secure the SACCO’s funds.

4. When financing a project consider all the aspects that the borrower needs to put in place for it to succeed. The loan officer should look at the different interrelated parts (Njenga’s school needs include security, water supply, electricity, boarding facilities, food etc.). The interplay of the various links will determine the ability of the project to repay the loan. A phased financing plan would be more beneficial to all parties as it is possible to review mid-stream, before committing SACCO’s financial resources. Also external parameters that are beyond the SACCO are as well as the member’s control may change.

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5. The SACCO must be able to take care of unforeseen circumstances e.g. illness. When faced with a choice to repaying a loan or paying medical or other emergency bills, borrowers would naturally delay loan repayment.

Conclusion Ndetika has broken away from the traditional SACCO (salary based or crop based) set up and introduced products and services suited to its nature and composition of members. The most significant lesson is community SACCO can succeed in a competitive commercial banking environment if the leadership is focussed to addressing members’ needs and have appropriate business strategy.

Product Innovation

Documents

kenya phone

case studies

ndetika rural sacco

kikuyu tel

market segmentation

ondiri house kikuyu

contact person

business relationship