The reforms aimed at the eradication of poverty and unemployment challenges through substantial recovery and improvement or productivity of investment economizing the private sector as the main engine of growth. In discussing the issues of the liberalizing of cooperative policies practices and legislation its clear that the societies have both successes and failures.
Successes of the liberalizing of cooperatives up to date To the cooperative movement, liberalizing measures were put in place with a view to create commercially autonomous member-based cooperatives that would be democratically and professionally managed; self-controlled; and self-reliant. To this effect in 1997 government published Session Paper No. 6 of 1997 on “Co-operatives n a Liberalized Economic Environment” to provide the new policy framework for the necessary reforms.
To date the role of the government was redefined from control to regulatory and facilitative in nature. The Ministry of Co-operative Development duties were confined to registration and liquidation of co-operative societies; enforcement of the Co-operative Societies Act; formulation of co-operative policy; advisory and creation of conducive environment for co-operative growth and development; registration of co-operative audits; and carrying out of inquiries, investigations and inspections which is still applicable today.
Successfully also was the enforcement of co-operative principles of voluntary and open Membership; democratic member control; member-economic participation; autonomy and independence; education, training and information; co-operation among cooperatives; and concern for community. The reforms have given autonomy to individuals will to Join or leave the cooperatives, which is still effectively being practiced, up to date. The 1966 Co- operative Societies Act was repealed and replaced by the Co-operative Societies Act, No. 2 of 1997 the new Co-operative Societies Act served to reduced government involvement in the day-to-day management of co-operatives. Cooperatives were granted authority to rule over themselves from the previous state controls by transferring the management duties in co-operatives from the Commissioner for Co- operative Development to the members through their duly elected management committees. This trend is still applicable up to date where by members have the discretion to make policies through Coco’s that benefit them. Co-operatives were no longer required to seek the permission of the Commissioner to invest, spend or borrow.
They were now free to borrow against part or the whole of their properties if heir by-laws allowed, provided the annual general meeting approved such borrowing which is still applicable today. The reforms have also given cooperatives the power to hire and fire grade staff without the commissioners consent. The cooperative movement as a result of liberalizing has seen a growth in the cooperative movement with a growth in 2004 of 10,642 cooperatives in Kenya and currently the number is increasing rapidly with the inception of other better laws such as the new constitution.
Despite the reducing trend of membership surprisingly there’s an increase in member registration in Coco’s over the years up to date new CACAOS are being formed even among the self-employed persons in the informal AU Kali) and agricultural sectors, which is a complete departure from the past where these co-operatives were only formed among the employed persons in the urban areas.
To this extent, it can be said that liberation has transformed the cooperative movement and that many citizens are appreciative of it. Liberalizing of the cooperative movement has transformed the structural organization of cooperatives. The inefficient cooperative unions are increasingly loosing their members, for cooperative societies now have the freedom to seek better service provision from there organizations or make provision for such services on their own.
Another advantage is that Agricultural co-operative unions have particularly been affected through monopoly. For instance, in the dairy sub-sector, co-operative societies were
With this, vertical integration f cooperatives in the dairy sector has virtually collapsed as cooperative societies now have the freedom to sell their produce to any willing buyer rather than KC and some of the societies have put up their own milk processing plants to offer the services previously provided by KC. Despite all that, non-agricultural co-operative unions have remained vibrant, particularly those in the financial sector, and have subsequently maintained the vertical structure of the cooperative movement.
For example, to date Kenya Union of Savings and Credit Cooperative (COUSCOUS) brings gather over 2,600 active COCO societies with a membership of over two million while the Kenya Rural Savings and Credit Cooperative Societies Union KEIRETSU has 45 active rural COCO societies with a membership of 1. 5 million. These unions serve as the mouthpieces of the respective CACAOS in the country; a feat that has helped the unions continue to attract rather than loose membership.
COUSCOUS also provides common shared services like education and training; business development, consultancy and research; risk management; and the inter-lending program for CACAOS called Central Finance Program. These services have attracted CACAOS to main loyal members of COUSCOUS, and helping it attain the status of the largest COCO movement in Sub-Sahara Africa. Successfully with the current liberalizing of cooperatives most of the cooperative organizations are functioning without reference to the apex organization.
The role of spokesperson and representative of the cooperative movement is increasingly being played by national cooperative organizations and cooperative unions. As an example, COUSCOUS being the mother of all Coco’s now stands out as the mouth-piece and advocate of CACAOS in all matters that affect the development and growth of these cooperatives. COUSCOUS has been vibrant in the recent past by being vocal, in opposing the retrenchment of employee’s as that would affect the membership of Cacaos.
Even more significantly, COUSCOUS was recently involved in the formulation of the yet to be debated and enacted COCO Act that sets out to make special provisions for the registration and licensing of Cacaos, prudential requirements, standard forms of accounts, co-operate governance, amalgamations, divisions and liquidations; establishment of a COCO Regulatory Authority, savings protection insurance, and setting up a Central Liquidity Fund, among others. In the circumstances, the collapse of the vertical organization of the cooperative movement in the country is increasingly becoming evident.
Another success of the liberalizing is that with liberalizing of the economy, banks such as The Cooperative Bank of Kenya have opened shareholding to individual members of co-operative societies as was duly recommended by their societies in 1996. The bank has however, retained its association with the co-operative movement by restricting 70% of the shares to co-operatives while individual members of societies hold only 30% of the shares and are not entitled to attend the annual general meeting of the ann.. This has helped to keep out private shareholders who might have bought out the bank as has been the case in other African countries.
The coming of this policy framework also saw the International Cooperative Alliance’s (CA) cooperative principles of voluntary and open membership, democratic member control; member- economic participation, autonomy and independence, education, training, cooperation among cooperatives; and concern for community became formally incorporated in the cooperative policy. The 1997 policy failed to provide for the separation of the responsibilities of elected management committees from managerial staff responsibilities.
Consequently, management decisions were still made by elected leaders that may not be qualified managers. In such response to the inadequacies of the 1997 policy, the Ministry formulated a revised policy framework titled “Kenya Cooperative Development Policy 2008”. The 2008 policy themed at ‘expanding the economic space for sustainable cooperative growth in Kenya’, focused on restructuring, strengthening and transforming cooperatives into vibrant economic entities that can confront the challenges of wealth creation, employment creation and poverty reduction as private business ventures.
To date the policy is still up and running. After the fall of Kenya National Federation of Cooperatives KNIFE, the interim Board started developing the strategy in 2007 by holding provincial consultative meetings that focused on how to revive the organization. This culminated in the National Cooperative Leaders Conference in November in 2007, which endorsed a new governance structure, revised By-Laws (2008) and a new funding strategy.
The revised By-Laws (Kenya National Federation of Cooperatives, Bibb) proposed a governance structure consisting of a secretariat composed of the Executive Director ND four heads of sections; a technical committee comprising of the Chief Executive Officers of Nachos; the General Assembly as the supreme authority consisting of 75 elected delegates; and the National Governing Council as the executive authority comprising of eight Chairmen of Nachos, seven elected regional representatives, the Commissioner for Cooperative Development and the Executive Director.
The By-Laws also address the need for strengthening of the financial capacity of KNIFE, as they propose a graduated scale of annual contribution by members based on the type of cooperative organization and annual turnover. This amends have helped to shape the federation up to date with increased number of people. The revitalization program has charted a new direction for the organization, as it restricted its activities to the core objective for which it was formed. That is, to be the mouth-piece of the cooperative movement in Kenya by engaging in advocacy, lobbying, collaboration and networking activities.
At the end of the revitalization process, the investment in institutional capacity building of KNIFE should has enabled it to address wealth creation and poverty alleviation of the cooperative movement. Liberalizing has rough about growth of banks such as the Cooperative Bank of Kenya. The Bank has not only been instrumental in providing banking services to cooperatives, but has also been the source of affordable credit for the cooperative movement. For instance, today it lends approximately EKES 3. 5 billion (USED $46. Million) annually to Cacaos, in order to increase their liquidity levels so that they can meet member demands for loans associated with school fees. Moreover, the Cooperative Bank still serves as a mechanism through which most donors to the agricultural sector, particularly those that produce coffee, can channel their support. This has allowed the Cooperative Bank to network with many donors, such as Food Aid Organization (FAA), and the European Union, among others. In the financial sector, CACAOS are also increasingly becoming innovative by developing new products to enhance their income.
For instance there’s some diversification of traditional products of savings and credit of Coco’s by introducing Front Surviving liberalizing: the cooperative movement in Kenya Front Office Service Activity (FOSS). FOSS offers services that members can use to process their monthly salary, while having access to instant cash advances (based n their salary) and maintaining withdrawal savings deposits. Currently, slightly over 250 CACAOS operate with this activity in Kenya.
In addition, the COCO movement is quickly spreading from its traditional urban and wage employment strongholds into the agricultural sector in rural areas and informal economy. As a success liberalizing has enabled the setup of free market cooperative entities that have led many people to derive their Jobs from marketing products produced by cooperatives. For instance, dairy cooperatives produce various products such as fresh ilk, ghee, butter and yoghurt; while other agricultural cooperatives market coffee, fish, pyrometer and eggs. These products are then passed on to other entities to market to retailers, wholesalers and consumers.
To date this trend continues and has helped reduce poverty and provide employment as it was the expectation of the 1996 framework policy paper. Liberalizing has made Cooperatives to be sources of income by generating opportunities for many people, particularly members of cooperatives. In 2007, primary cooperatives in the agricultural sector had a membership of 1 approximately 50% of whom were estimated to be active. The CACAOS had 6,286,894 members, 98% whom were active in the lending activities of their cooperatives. The other non-agricultural primary cooperatives had a total membership of 334,000, with approximately 50 per cent active.
These figures are clear pointers to the significant contribution of cooperatives to poverty reduction and poverty prevention in Kenya to date. This is particularly true as most of the income generated from cooperatives is mainly used to address long-term poverty prevention measures. Liberalizing has brought focus on cooperatives to the core activities of operatives, including agribusiness, entrepreneurship, savings and credit advancement regulations, leadership and governance of cooperatives, and the economic benefits of membership in cooperatives, among others.
It is apparent that any cooperative that doesn’t provide Economic gains in Kenya tends to be deserted by the members. This is evidenced by dormancy that cooperatives are currently experiencing. A few activities of such successful cooperative ventures could be viewed as attempts at offering social protection to the members and this has brought the growth in some cooperatives in the country. As an advantage the framework policy has seen transformation of the cooperative movement where benevolent funds have been introduced in most CACAOS to which members contribute regularly and only draw from them when they are bereaved.
The schemes define the relatives in whose death the member would get assistance to meet the burial expenses, as well as the respective amount of money to which he/ she would be entitled. Gracefully the institutionalizing of the framework paper policy and liberalizing has seen the transformation of the Cooperative Insurance Company(ClC). This company has the ore business of giving protection against risks associated with operation of cooperative enterprise, as well as cooperators themselves.
Significant ICC has also developed a micro-finance insurance scheme specifically for covering savings of micro-finance institutions (Miff) in case a person with a loan passes away before completing repayment. Negative aspects of the liberalizing of cooperatives Consequently, the immediate impact on most co-operatives was mainly negative. The elected leaders abused the freedom bestowed on them and to the detriment of many cooperative societies.
Corruption cases; gross mismanagement by officials; theft of operative resources; split of viable co-operatives into small uneconomic units; failure by employers to surrender members’ deposits to co-operatives (particularly Cacaos); failure to hold elections in co-operatives; favoritism in hiring and dismissal of staff; refusal by co-operative officials to vacate office after being duly voted out; conflict of interest among co-operative officials; endless litigation; unauthorized co- operative investments; and illegal payments to the management committees were increasingly reported in many co-operatives and up to date the trend is till continuing though at a reduced scale.
Though there’s a surge of cooperative societies the indication is that up to date there’s recorded numbers of dormant cooperative societies. In 2004, the Kenya Union of Savings and credit cooperatives actually estimated that 42% of the cooperative societies were dormant. The number is still increasing and this isn’t beneficial to the eradication of poverty through employment and innovation. The relative poor performance of agricultural cooperatives could also be attributed to the liberalizing of the co-operative sector without adequately preparing the co-operatives. There’s also the element of over dependence of the agriculture sector, which leads to failure unexpectedly. Liberalizing has brought about immense changes in the cooperative movement.
The Kenya National Federation of Cooperatives was the national apex of cooperative movements in Kenya. Its dominance declined drastically due to corruption and mismanagement reason being that poor management over the years saw KNIFE deviate from its core business into other activities, such as auditing, education and training as well as research and consultancy. Such activities were already being performed by some of its members, and subsequently KNIFE ended up competing with some of its members hat were offering the same services to the cooperative movement. In the circumstances some cooperatives found no reason for being members of a federation that they saw as a competitor.
However its quick revival was established in 2005 after the then minister of cooperatives dissolved Knife’s Board of Directors and replaced it with an interim board (Kenya National Federation of Cooperatives, AAA). Interim Board of Directors that was appointed by the Minister in May 2005 immediately embarked upon developing strategies for reform and restructuring to revivalist the organization (Kenya National Federation of Cooperatives, 2007). As a active impact KNIFE has largely been ineffective in representing the cooperative movement during policy and legal processes. As an example, it failed to effectively participate and influence changes to the 1997 Cooperative Societies Act that produced the Cooperative Societies (Amendment) Act, 2004.
KNIFE started monopolizing donor support after the ACT had been enacted to hold consultations on the implications of the Act, which was too late to achieve any impact. Perhaps this also explains the absence of cooperatives in national development debates. KNIFE has lacked even up to date the urge to influence policy and legislative debates in Kenya, aging it difficult to improve the visibility of the cooperative movement. This is surely a liberalizing downfall a thing that the paper framework couldn’t expect to happen. As a negative effect liberalizing has reduced government support since autonomy was given to the private sector this free market approach has unfortunately brought to the decline of, the number of trainees from Cooperative college of Kenya.
Cooperatives attending the college have been reducing since the liberalizing due to the tremendous reduction in government sponsorship to the cooperative movement for training purposes. Left on their own, most cooperatives, especially in the agricultural sector, have been unable to raise the required fees for their staff to train at the college. CONCLUSION In conclusion, the impact of liberalizing has seen cooperatives survive the market forces and open up more enterprising innovations that secure the welfare of employees. Successfully much legislation has been put in place that is still working up to date and this has helped to attract more members to cooperatives. On the downside corruption is still rampant as the societies grow new schemes are being hatched to hamper the progress of the cooperatives.