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Blog » Strengthening the Ethiopian SACCO sector: working together to make a difference

Strengthening the Ethiopian SACCO sector: working together to make a difference

Created Jul 27 2022, 7:16 AM by Rubiga Sivakumaran
  • Collaboration and Knowledge Exchange
  • Digital Technology & Innovation
  • Category-Financial Cooperatives Sectors
  • Private Sector Development

By Rubiga Sivakumaran and Juliette Hensgens 

Last May, a team of Rabo Partnerships visited Ethiopia in the context of the global partnership that they have with the World Bank. The partnership aims to strengthen the Cooperative Financial Institution (or in Ethiopia: SACCO) sector as well as its enabling environment in order to improve financial services for smallholder farmers, agricultural SMEs, and rural financial services at large. 

The large network of Savings and Credit Cooperatives (SACCOs) in Ethiopia - over 21,000 in total - can play an important role in financial inclusion, especially in the underserved rural areas where they are physically present and close to their members. Nevertheless, SACCOs face serious challenges as they have limited ability to grow their market share, and are losing business to MFIs and commercial players that are increasingly reaching their (rural) clientele through digital services and products. 

Overall, SACCOs lack skills, products and efficiencies to be truly competitive financial institutions. This is mainly due to their scateredness and small sizes, and can be enhanced by an increased level of cooperation. The remainder of this article describes how we aim to contribute to this. 

Bringing together national stakeholders 

"If we work together, we can really make a difference", confirmed one of the participants of the stakeholder workshop that we as Rabo Partnerships organized with our local partner - the Agricultural Transformation Institute - in Adama, Oromia region. The workshop brought together managers of SACCO Unions and representatives of their regulating and promoting bodies such as the Ethiopian Cooperative Commission and Regional Cooperative Promotion Agency. During two days, they jointly worked on a set of priorities and action plans going forward, resulting in 1) the positioning of SACCOs in the financial system; 2) digitization of processes; and 3) product development. 

Bundling forces to strengthen the sector 

Various initiatives of both national and international organizations exist that aim to strengthen the Ethiopian SACCO sector. During the visit, we spent time with these organizations to exchange experiences and objectives, finally reaching the conclusion that it will be most effective to leverage on each other's initiatives. Each organization can bring different expertise to the table and solve a different piece of the puzzle, e.g., with regards to product offering, branding, and capacity building of SACCOs. Thus, going forward, our team aims to increasingly engage with existing activities and initiatives, while designing currently-missing ones. 

Assessing opportunities for digitization 

Last but not least, we looked into the opportunities of digitization. Two members of the Rabobank IT Young Professional Program joined the visit to conduct research for the onboarding app that they developed remotely. By showing a demo of the app and interviewing the end users (Unions, SACCOs, and their members), they collected the required information to design an implementation plan. Additionally, the team explored digital product and service providers with which we can potentially partner up in the future. 

What's next? 

As a project team, we will go forward working on cooperation among Unions, bundling forces with the wider stakeholder network, and bringing digitization opportunities towards the SACCO sector. The next visit is scheduled for September, during which we will organize another stakeholder workshop that builds on the outcomes of the last, and pursue our engagements with existing initiatives. Meanwhile, we are continously aligning with the World Bank team which is conducting an assessment on the regulatory and supervisory framework. By creating the right dynamics, we aim to strengthen the SACCO sector and therewith its role in rural financial inclusion.