Diploma in co-operative Management KNEC notes

Module 1

Module 2

Module 3






Purpose and structures of co-op banking

Co-operative banking system

The co-op banking system consists of:-

  • Co-op bank of Kenya
  • Union banks
  • Co-op rural and urban Saccos
  • Marketing society

It is an organised system whereby the members of the co-op movement are provided with banking services in line with co-op ideas/policies /principles

The co-op bank operates under the co-op society’s act and the banking act

The co-op banks works through the head office in Nairobi and a number of its branches countrywide

It functions as the central bank in the system where a rural Sacco has excess funds it invest in the co-op bank.

However where the rural Saccos experiences liquidity problems it can borrow from the co-op bank of Kenya

The bank also gives some other types of services e.g. management of systems investment analysis and advice to urban or rural Saccos.


The co-op bank system operates from the central bank of Kenya through the co-op of Kenya down to the union banking section, rural Saccos, credit sections, non-affiliated Saccos and finally the individual members of the co-op movement.

The co-op bank system operates aims at the meeting its needs through:-

  • providing efficient payment for produce market through the societies
  • providing savings custody facilities to their members
  • Providing credit facilities to co-operative organizations and to individual members
  • accumulating savings for development activities
  • assisting in education in the use of banking services and financial management
  • it exposes the farmers to banking services


Co-operative bank of Kenya

It was registered as a co-op society on 19th June 1965

On 10th Jan 1968 it registered under the new banking act

It was until 1969 when it started offering banking services

Reasons for these were:-

  1. it needed to be registered under the banking act to operate as a bank
  2. minimum capital requirement for the banking act had not been met
  3. it had operational problems i.e. whether the bank would started operating with branches in every province or it could start with one branch in the head  office and open branches later

The problem of share capital was solved through exemption and the bank would operate from one branch in Nairobi. It: – started operating in 1969.


Membership of the co-op bank

The members of the bank (shareholder) are:-

  • Registered co-operative societies
  • Co-operative unions
  • Countrywide co-operative organisations

To become a member the following requirements have to be fulfilled

  1. Accept the by-laws of the bank
  2. Undertake to purchase not less than the minimum number of shares as it is decided by the bank from time to time.


Objectives of co-op bank

The co-op bank of Kenya was established to achieve the following objectives within the co-operative banking systems

  • Mobilizing the financial resources of the co-op organization and to avail this capital circulation by distributing credit to co-op members according to the need without relying too much in borrowed funds.
  • Organise appropriate saving services to the co-operative organisation
  • To channel outside financial resources from donor agencies into the co-op sectors
  • Assist the co-op sector in the international trade
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