Responses of Savings and Credit Co-operative Societies (SACCOs) to the challenges of competition in the Kenyan financial sector: the case of Saccos in Eldoret

Abstract

Economic and political reforms are sweeping the whole world affecting all nations. In Kenya these reforms have created fundamental changes in the environment in which firms operate. An obvious manifestation of such changes is the liberalization of trade. Such liberalization has meant that SACCOs in Eldoret have to contend with unbearable competitive pressures from the resilient global companies. The study set out to document the responses adapted by Savings and Credit Cooperatives (SACCOS) to challenges of competition in the Kenyan financial sector. The objectives of the study were: (i) To establish the challenges of competition encountered by SACCOs in Eldoret. (ii) To determine the responses of SACCOs In Eldoret to the challenges of competition. Primary data was collected USIng open and closed-ended questionnaires distributed to senior managers in the selected SACCOs. The data was thereafter, analyzed using descriptive statistics and an appropriate computer package. The analysis revealed that SACCOs have made various changes in their traditional, resource mobilization and lending methods in an attempt to cope with the changed operating environment. The -. SACCOs have also changed the basis products by adding new features such as front office services (FOSA) among others. SACCOs require fresh and initiatives to penetrate new market niches. The SACCOs philosophies should be more specific and directed towards enhancing excellence in customer service. The marketing practice need to be more aggressive to counter competition paused by cheap bank loans and substitute micro finance funds.

The strategic variables have also been adjusted either moderately or significantly. The most adjusted strategies are those of product and promotion. The product range has been improved in delivery, features and variety. In market research the SACCO need to significantly increase information gathering on competitors and customer needs. Efforts should be directed towards satisfying the identified customer needs. In cost structure strategies, the study revealed the need to adapt significant improvement in technology and capital investment in information technology. The other strategies such as pricing and distribution have been moderately adjusted. By undertaking various strategic responses, SACCOs are able to not only defend their market share but also to increase profitability and efficiency. The success of SACCOs in Eldoret is a learning experience for other local SACCOs in the country facing or about to face the effects of changed competitive conditions.