Abstract
Sharia cooperatives (SACCO) are essential low-cost financing that helps underserved communities in Kenya through giving loans, savings, school fees, and considerable group lending. This research used both the structured questionnaires and Focus Group Discussion methods to investigate Sharia cooperatives providers and clients as the best means of financial inclusion to support the disadvantaged people in North-East Kenya (NEK) counties. Four dimensions of financing outreach including scope, cost, worth, and depth sharia cooperatives outreach have been studied. The results have shown Kenyans sharia cooperatives have not achieved a reasonable scope of outreach. This might be due to what is found in the study the lack of qualified sharia cooperatives staff and both financial and digital financial illiteracies of the clients. The clients were found to have low knowledge of their products and services, lack of using the internet and digital devices, and more than 80% of them undertaking transactions at the premises and preferred direct contact. Moreover, the results showed the investigated SACCO did not reach the optimal worth outreach Due to the increase in the number of underserved people and the high rate of poverty in the remote rural areas. The results also show SACCO in Kenya have achieved reasonable depth outreach since they are covered the underserved community members such as women, youth but need to exert still more efforts to reach the remote rural areas. Although the customers have seen the cost of sharia cooperative services is reasonable, the results showed the high cost of attracting new clients. That might be due to the unused of the targeted communities the new means of connections such as webmail, internet, and smart devices. Based on these results the study might recommend that these SACCO might need to implement effective training strategies to enhance clients and staff knowledge to improve financial and digital illiteracy to improve the scope, worth, and cost outreach dimensions. The results also show low depth outreach due to the poor basic infrastructures, lack of capital to adopt wireless finance to expand to remote areas. For this study might recommend more capital injection for SACCO to adopt digital financial technology. These results give good policy implication for the Islamic Development Institution (IsDB), Islamic financial institutions, investors, and other alike to help these sharia cooperatives through capital injection, financial awareness seminars, telecommunication companies, and building capacity programs to promote this low-cost financing for the most disadvantaged Muslim minority in Kenya.
Highlights
The history of cooperatives in Kenya dates back to 1908 when the Lumbwa Co-operative Society was established
In 1931 the first Co-operative Ordinance which did not allow Africans to participate in cooperatives was enacted primarily to regulate the operations of co-operatives by the government
A second Cooperative society ordinance was enacted in 1946 when the colonial government acknowledged that Africans needed to participate in the economy through co-operatives
Summary
The history of cooperatives in Kenya dates back to 1908 when the Lumbwa Co-operative Society was established. The SACCO Societies Act introduced prudential regulation of all deposit taking SACCO‟s was enacted in 2008 This act has paved the way for the establishment in 2009 of the SACCO Societies Regulatory Authority (SASRA) and the Cooperative Alliance of Kenya Limited (CAK) as the national apex organization for the cooperative movement in Kenya, following the collapse of the Kenya Federation of Cooperatives Union. The cooperatives movement in Kenya boasts of an annual turnover of Ksh 436 billion (USD 4.4 billion) equivalent to 45 percent of the national GDP In their operations, the cooperatives have mobilized savings of over Kshs[230] billion and provided affordable credit of over Kshs[184] billion to members. In 2014 USAID injected Ksh.[8] million (USD 80,000) grants in form of a revolving fund to this program
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