2012 The International Year of Cooperatives and Brief History of the Kenyan Cooperatives Movement

By Muko Ochanda

2012, the International Year of Cooperatives

The UN declared that the 2012 will be the International Year of the Cooperatives (IYC). In launching the year, the UN secretary general Ban Ki Moon said “Cooperatives are a reminder to the international community that it is possible to pursue both economic viability and social responsibility.” It is also a fact that the cooperative movement has been an important vehicle of empowerment and liberation from economic misery to many poor people across the world.  The world cooperative movement has approximately one billion people making it one of the largest constituencies in the world. On the other hand, 3 billion people do benefit from the cooperative movement.

The IYC has important significance for Kenya and Africa as a whole. According to the International Cooperatives alliance 2012 statistics, in Kenya, 1 out of 5 is a member of a co-operative or 5.9 million and and 20 million Kenyans directly or indirectly derive their lives from the Co-operative Movement. Secondly co-operatives are responsible for 45% of the GDP and 31% of national savings and deposits. They have 70% of the coffee market, 76% dairy, 90% pyrethrum, and 95% of cotton. The cooperative movement in Kenya also employs more than 250,000 people. On the other hand yhe increased HIV prevalence has affected membership in many cooperatives.

The statistics above are very important and speak loudly to policy makers. In Kenya the cooperative sector is considered one of the most regulated. The government has always been keen on this sector because of its influence on both the formal and informal and micro and macro sectors of the economy. This underscores the fact that  the contribution of the cooperative sector  in building the Kenyan economy’s  and in stimulating the spirit of enterprise and personal development cannot be overemphasized. The movement has played and continues to empower communities and individuals both socially and economically. Hence the government needs to recognize their role in a special way and continue to strengthen them. Cooperatives are important agents of the  third sector (economic agents with a humane- face)  and a bigger diffusion of the third sector helps address in a bigger way the dis-empowering dimensions paving way for eventual grassroots driven economic development.

In Kenya the cooperatives have always played an important role in the lives of the people since time immemorial. During the colonial era, cooperatives played a political mobilization role against  colonialism. Today cooperatives continue with their empowerment agenda. Quite a sizable population of Kenya is involved in the cooperative movement and have either been enriched, educated and helped to do so many things for themselves.

The cooperative nature of the Kenyan people can be traced to the the traditional society where people cooperated in many ways such as hunting, farming, caring for livestock, building houses and in performing many other  important chores etc. The cooperation in the traditional societies was devoid of financial expectations but was done solely for mutual assistance. These traditional cooperation endervors were embodied in the conventions and customs and were accorded different names  and meanings by various communities across Kenya. The traditional cooperation gave way into the spirit of Harambee  that has been considered one of the pillars of Kenya’s social economic and political progress today. It is important to note that this traditional cooperation contributed strongly to the  later embracing of the cooperative movement.

The beginnings of the formal efforts to establish cooperatives in Kenya could be traced to  1908, when the European settlers formed the Lumbwa Cooperative society. This society was restricted to the settler population in Kenya.  Africans on the other hand were only allowed to establish cooperatives after 1930’s.

The first legislation to look at the cooperatives on Kenyan soil included the cooperatives societies ordinance Act of 1931 which was replaced in 1932 and 1945. In 1946 the colonial government started supporting the idea of cooperatives by natives and established the Department of cooperatives and the office of the registrar of cooperatives. The first Cooperatives Societies Act, Cap 490 of Kenya was formulated in 1966 based on the recommendations of ILO. The Cooperatives Societies Act 490 was eventually repealed and replaced by the cooperative societies Act, No 12 of 1997.

In the following section I have summarized the important landmarks in the history of the Kenyan cooperative movement.

Landmark Processes/ Papers in the Growth of Kenyan Cooperatives

1904: The wheat grain growers started their cooperative activities through incorporating the Unga Ltd.

1908: Lumbwa Cooperative established by colonial settlers around the present Kipkellion area as a strategy for marketing, dealing with individual technological constraints and for helping provide farm inputs at subsidy rates.

1919: The first maize growers association under the name British East Africa Maize growers association (BEAMGA) was established.

1923: A second maize growers association named as Plateau Maize Growers Association (PMGA) formed.

1923: BEAMGA renamed Kenya Farmers Association (KFA)

1925: Second diary cooperative formed around Naivasha; Kenya Cooperative Creameries

1927: The wheat farmers established the Wheat Grain Growers Association (WGGA) and incorporated Kenya Grains Mills in 1928

1927: PMGA is dissolved and joins KFA

1928: Unga Mills acquires the controlling shares of the Kenya Grains Mills Ltd leading to the weakening of WGGA. WGGA disolves and merges with KFA. Hence in 1928 all the grain growers were operating under the KFA.

1928: The third diary cooperative formed in Nanyuki known as Nanyuki Cooperative Creameries

1930: Enactment of the Kenya Cooperative Ordinance of 1930 leading to the registration of KCC and KFA in 1931.

1931: All the cooperative creameries were united under the Kenya Cooperative Creameries

1937: The Kenya Planters Cooperative Union (KPCU) was formed by coffee growers at Ruiru as a stockist and processing organization. With time KPCU found that it was limited by the cooperative registration, it hence sought a second registration as an incorporated company. It was eventually incorporated in 1945 as a limited company. Hence it effectively has double registration.

1944: Door opened for Africans to form and Join the Cooperatives. The post of a registrar of Cooperatives suggested

1945: Cooperative Societies Ordinance enacted allowing African participation in the cooperative movement.

1946: Department of cooperatives established and  the registrar appointed

1950-1952 Great support of the cooperative idea by the colonial civil servants. 160 cooperatives formed during this time.

1952: Mau Mau rebellion: Cooperative members withdrew to join pro independence forces

1954-Swynnerton Plan of 1954 on developing African Agriculture and improving land tenure

1958- Over 400 registered cooperatives

1963-1000 Cooperatives formed

1964-The reorganization of the coop sector into a tier structure by the new post independence government. The four tiers were at the bottom the grassroots/primary coops, cooperative unions, national cooperative organizations (NACOs) and the National apex body. Hence an apex body was created under the name Kenya National Federation of Cooperatives (KNFC).

1965 The government saw the cooperatives as vehicles to introduce African Socialism and strengthen ties between the people from different regions of Kenya and accelerate the development process in its Sessional Paper 10 of 1965 on African Socialism and its application to planning in Kenya.

1965: The Cooperative Bank of Kenya is established, another important structure in the development of the coop movement in Kenya. It was formarlly registered as a bank in 1968

1966-Enactment of CAP 490 the cooperatives societies Act.

1966: Office of commissioner of cooperatives established replacing the formal colonial structure of the registrar of cooperatives

1967- Kenya Nordic Cooperative Development Programme (KNCDP) and assistance from the World Bank, US and Germany: Purpose Building Human Capital and Capitalization Boost. The KNCDP assistance helped in the building of the cooperative college in Karen. Gvt on its part provided subsidies and free access to government credit and free extension services to the movement.

1970-Sessional Paper 8  on cooperative development. The paper urged primary coops to view government parastatals as collaborators instead of competitors.

1973: An association formed to respond to the needs of SACCOs known as Kenya Unions of Savings and Credits; to promote SACCOs, forster trainings, consultancy and research, representation and risk management.

1974-Full ministry formed on cooperatives development. Producer cooperatives directly linked to parastatals and statutory boards which were run by the state (state corporations). Government protected the cooperatives from competition by any other market agents

1978 An important step taken to initiate an insurace agency to address the insurance needs of the cooperative movement by initiating the Cooperative Insurance Services (CIS Insurance) as a company owned by the movement.  In 1999 the company changed its name to Cooperative Insurance Company of Kenya (CIC Insurance) motivated by the need to adopt agility and dynamism as dictated by the liberalization wave.

1979: The National Cooperative Housing Union (NACHU) was registered in response to the rapid urbanization and proliferation of slums. NACHU had the vision to improve the housing conditions through the cooperative model and was formed by trade unions, faith communities, civil societies and the cooperative movement.

1980- SAPs introduction accelerating reform through liberalization and structural reforms. The SAPs introduces transformation in wide ranging trade and macro economic policies impacting  on production costs, incentive structures and sector competitiveness. They also allowed market entrants into the areas that were previously protected. Coops were forced to become competitive in order to enhance their survival.

1982-An attempted coup . The performance of the government began to be questioned on a number of spheres such as human rights, economic performance and increasing corruption. The cold war  after WWII ensured great support for Kenya as a pro western capitalist democracy.  Some pressure began mounting on political reform  and particularly introduction to multi party politics. There were dwindling donor flows. This too weakened the movement.

1986- Sessional paper on renewed growth and economic management of the economy. It removed all government monopolistic tendencies, divested government investment in commercial activities and encouraged private sector to run and invest in the government owned organizations and parastatals.

1987- Sessional Paper No. 4 on renewed growth through cooperative movement

1990- Promotion of regionalization and globalization policies; key being removal of tariff and non tariff trade barriers, withdrawal of direct and indirect protection to domestic competition. Adverse economic conditions, collapse of many financial institutions and coops.

1997-Sessional paper no. 6 of 1997 which came up with a policy to provide for a member based, autonomous and member controlled movement. A new legislation developed. Liberalization during the 1990s saw many mergers , disputes and splits in various cooperative societies into small and uneconomic units on one hand and on high level of mismanagement.
Cooperatives Society Act 490 repealed and replaced by Cooperatives Society Act No 12 of 1997.
1998: Kenya Rural Savings and Credit Cooperatives Societies Unions (KERUSSU)  was registered to respond to the needs of rural SACCOS.
1999-Ministry of Cooperatives reduced to a department in the ministry of agriculture and rural development. This led to staff and budget cuts within the movement. 7000 cooperatives formed. This was the era of liberalization, structural adjustments and privatization
1999-National poverty eradication plan: A charter for social integration setting out rights and responsibilities for the citizens, communities, businesses, civil societies and policy makers. Improving access of the poor to basic services such as health, education, water and sanitation. Broad based economic growth, especially in the rural areas where a majority of the poor people live.
2002: New goverment under NARC comes to power replacing an incumbent 38 years old KANU government.
2003: Ministry of cooperatives revived as Ministry of Cooperative Development and Marketing (MoCDM). Registered cooperative societies totalled to 10,297 with a membership of 5.9m and an income of about 7.4 billion contributing to 30% of national saving
2004:  Draft Sessional Paper on Cooperative Development in Kenya indicating that the country had 10700 registered coops with a total membership of 5.9m and total turnover of Kshs 7.9 billion contributing 30% of the GDP.
2004: Cooperative Amendment Act enacted that paved the way for various changes within the movement
2007: Vision 2030 published  recognizing the contributions of the coop sector in reducing social exclusion and in strengthening of the agriculture sector.
2008: SACCO Societies Act enacted providing for the formation of SACCO Societies Regulatory Authority (SASRA) and other procedural issues.  Cooperatives development policy also developed to expand the space for sustainable growth of cooperatives and in reinforcing their contribution in economic development. In the same year MoCDM developed a strategic plan for the period 2008-2012 using four pillars of customer orientation, financial viability, business effectiveness and skills building.
2009: MoCDM developed a cooperative marketing strategy to as a sub-strategy to the 2008-2012 strategic plan focusing on coops revitalization through professionalization, competitiveness and strenghtening value addition activities.

2 Comments (+add yours?)

  1. dave mwangi
    Jul 06, 2012 @ 20:54:28

    good write up.very informative.



  2. Atomsa shifera
    Dec 30, 2013 @ 14:54:03

    Exellent explanation



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