NEW BOARD INDUCTION

Prepared and Facilitated by Sirengo Maurice for KUSCCO

New Board Induction
Topics to be Covered

An overview of the prudential standards.

Code of ethics for the Board

Values and expectations of the Board

Leadership and team dynamics

 An overview of the
prudential standards.
19:36

Prudential:
•Sensible, Practical
•Involving or showing care and
forethought, especially in
business
•Requires financial firms to
control risks
•Hold adequate capital as
defined by capital requirements.
• Safety & Soundness Principles
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Prudent Lending Practices means:

• Generally accepted underwriting and lending

practices for Sacco loan programmes, based
on sound judgment to protect members and
lender interests.
• Prudent Lending Practices Provide For
Compliance With Laws
Prudential legislation

Prudential legislation establishes

financial standards to which a Sacco
must adhere to protect the health of
the institution and safeguard member
deposits
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Prudent Lending Practices means:

Prudent Lending Practices include:

Loan
Documentation, Loan Approval, Collections,
Processing,

Administrative Collateral Recovery

Servicing,
Procedures, Protection, Actions.
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Prudential And Operational Regulations

The Sacco Safety and Soundness

Principles identify prudential
standards intended to safeguard
members’ savings from losses and
to ensure Sacco function in a
sound manner.
19:36

Prudential And Operational Regulations

While each Sacco must comply

with local regulatory requirements
and prudential standards, we need
to apply the best practices guide
based on extensive experience in
the development of Sacco
worldwide.
Prudential Standards
Sacco Safety & Soundness Principles
Delinquency
• Loans that are not paid as agreed are
deemed delinquent the day after the first
missed payment.
• The entire outstanding loan balance is
then considered past due.
Prudential Standards
Sacco Safety & Soundness Principles
Loan Loss Provisioning
• Provisions for loan losses are the first line of defence to protect member savings
against identified risk.
• Many countries and Sacco systems apply a tiered system of provisioning for
delinquency, and standards may vary depending on the level of the Saccos’
technology.
• The following loan classification schedule should be utilized where provisioning
is tiered:
• Special mention (one to less than three months) 10% of the outstanding loan
balance
• Substandard (three to less than six months) 35% of the outstanding loan
balance
• Doubtful (six to less than 12 months) 65% of the outstanding loan balance
• Loss (more than 12 months) 100% of the outstanding loan balance
Prudential Standards
Sacco Safety & Soundness Principles
• Loan Charge-offs
• Loans more than 12 months past due should be
written off the Sacco’s books as a loss on a
quarterly basis.
• Although a loan may be written off the books, the
Sacco should still seek to collect payment for the
outstanding balance.
Prudential Standards
Sacco Safety & Soundness Principles
Institutional Capital
• Institutional capital is the second line of defence to protect member
savings.
• Each year, a portion of the Sacco’s earnings should be set aside in
reserves to cover losses from unforeseen or catastrophic problems.
Non-earning Assets
• Assuming they meet capital targets, Saccos should limit non-earning
assets, such as land, buildings, vehicles, furniture and cash, to a
maximum of 5% of total assets.
Pricing: Entrepreneurial Rate
• Saccos should offer competitive, entrepreneurial pricing that covers all
costs.
Prudential Standards
Sacco Safety & Soundness Principles
Efficiency: Operating Costs
• Saccos should maintain efficiency by limiting operating
costs to 5% of average assets.
Liquidity:
• To meet the demands of loan disbursements and savings
withdrawals, WOCCU recommends Saccos maintain 15%
of withdrawable savings in easily accessible instruments
and accounts.
Prudential Standards
Sacco Safety & Soundness Principles
Diversification:
• Saccos should limit the risk of concentrating the loan portfolio
in one or a few related loans.
Non-financial Operations
• Saccos specialize in financial intermediation and should not
focus resources on non-financial operations, such as retail
store operations.
External Credit:
• Depending on Capital Level Borrowing by the Sacco is limited
to a percentage of total assets, depending on the level of
capital reserves.
Code of ethics for the Board
Ethics

• Ethics are the guiding principles that:

• Provide board's moral compass,
• They guide behaviour,
• Inform decisions and
• Provide standards of right and wrong.
• In essence, "ethics" is basically concerned with what it
means to be a "good" person, and by extension a good
board and a good members.
19:36

Ensuring your Sacco is identified as one

with high ethical standards can lead to:
• A more supportive political and
regulatory environment,
• An increased level of public confidence
and trust among members and
stakeholders.
What is a code of ethics and why should we have one?

• A code of ethics is a formal statement setting out the

standards of behaviour expected of you Board members
and your members.
• Ethics, like justice, must not only be done but must be
seen to be done.
• A formal code will also help to enhance your board's
decision-making and ensure that it remains consistent to
the core values and core mission of your Sacco.
19:36

The board should lead in establishing

the 'tone at the top' and in setting
professional and ethical standards and
corporate values that promote
integrity for itself, senior management
and other employees
19:36

The organizational values

should be communicated
through a code of conduct that
articulates acceptable and
unacceptable behaviors
Code of conduct that articulates acceptable and unacceptable behaviors

•To conduct the business of the

Sacco in full compliance with both
the letter and the spirit of the law.
•Not to misuse Sacco confidential
information for personal gain.
Code of conduct that articulates acceptable and unacceptable behaviors

•To recognize and avoid conflicts of interest

and to deal at arm’s-length in any
transaction that relates to the Sacco.
• A Board member who identifies an area of conflict shall be required to disclose any actual
or potential conflict of interest to the Board.
• A record of all such declarations shall be maintained by the Secretary to the Board.

• To protect Sacco property, including

information, products, services, and assets.
Code of conduct that articulates acceptable and unacceptable behaviors

• To properly manage one’s personal finances and avoid

pecuniary embarrassment.
• To treat fairly and with respect all Sacco employees, members,
and stakeholders
• To act honestly and in good faith and not to seek personal gain
from their involvement in the Sacco
• To ensure that the Sacco does not engage in any improper or
illegal activity, such as money laundering, fraud, bribery or
corruption.
• To ensure that the Sacco does not engage in excessive risk
taking activities.
19:36

The board should ensure that appropriate steps

are taken to communicate throughout the Sacco
the organizational values, professional standards
or codes of conduct it sets, together with
supporting policies and procedures with the aim
of having the “tone at the top” become the “tone
in the middle” and the “tone at the bottom”. The
communication should be made repeatedly and
through as many avenues as possible.
19:36

Every director should sign a copy of

the Code and bond of confidentiality
to confirm their commitment to
adhere to its provisions and their
readiness to be sanctioned for
violating its provisions
Standards of Leadership for Board and Staff:
• To observe the highest standards of personal conduct at all times.
• To strictly uphold the laws, bylaws, rules, policies, and regulations
relating to the operation of a credit union.
• To guard against the use of the Sacco position for personal or
financial advantage or special privilege and avoid conflicts of
interest with its policies and operations.
• To carry out the duties and responsibilities of the Sacco position to
the best of one's abilities and to seek out and participate in
opportunities to increase that knowledge and skill.
• To adhere to open, democratic procedures in the election of
officials and in their formulation of Sacco policy
Values and expectations
of the Board
19:36

Since the board is full of different people,

all wanting different things, setting up
and communicating clear expectations is a
good idea for all involved. Your board
members should be aware of their roles
and responsibilities towards each other as
well as to the organization.
Board Expectations
What Sacco Need from Board Members
•Commitment to Mission
•Capacity to Serve
•Skills, Knowledge, Abilities
•Connections
•Independence
Board Expectations
Commitment to Mission
• Mission
• Do you know the organization’s mission? What is its
goal, reason for being? Can you embrace it?
• Vision
• Do you know where the organization is headed? How it
intends to get there? Are you willing to help it get
there?
• Values
• What are the organization’s values? Do you share them?
Board Expectations
Commitment to Mission
Where does commitment to mission come from?
• Shared values
• Increasing knowledge about mission & activities of
organization
• Depth learning about organization & its place in the
market:
• What it does
• Who it serves
Board Expectations

• Believe in and be an active advocate and ambassador for the

values, mission and vision of the Sacco.
• Work with fellow board members to fulfil the obligations of
board membership.
• Regularly attend board and committee meetings.
• Prepare for these meetings by reviewing materials and
bringing the materials to meetings.
• Keep informed about the Sacco, its issues, and its connection
to the members.
• As appropriate, use personal and professional contacts and
expertise to benefit the organization.
Board Expectations

• Be available to serve as a committee chair or member.

• Work in partnership with and respect the authority of the
organization’s leadership staff.
• Agree to step down from board position if unable to fulfil
these expectations
• Exhibit leadership and professional engagement
• Support the Society’s bylaws, policies and position
statements.
• Hold information and data confidential until the Board
provides consent.
Board Expectations
When and how to set expectations
• Communicate the expectations to all current and aspiring
board members as they start their term.
• Roles are defined and responsibilities are assumed.
• Develop a one or two-page “Board Expectations”
document that helps new board members to understand
more clearly how they are to contribute meaningfully.
19:36

•Specific governance
expectations
Board •Time commitment expectations
Expectations •Knowledge expectations
19:36

You want to Know What a

Sacco Really Values are?
Look at Its Board of
Directors!
Board Values

• Board values are the guiding principles of a governing

body.
• Identified the values you most seek in building high
performing boards.
• Each elected leader brings individual interests and values.
• It is the composition of the board that results in a set of
guiding principles to advance the organization and serve
its membership.
19:36

•Organizations develop guiding principles

from inception.
•Founding leaders instil their values.
•Through time, culture and environmental
changes, the ideals evolve.
•Values apply to organizational priorities
and decisions; as well as the selection of
leaders.
19:36

Discuss organizational and individual

values in the nomination and
selection process. They should frame
discussions and decisions of the
board throughout the year.
Board Values
Examples
Community
Authentic Candid Committed
Minded

Diversity of
Considerate Engaged Innovative
Thought

Integrity
Board Values
Examples

Optimistic Passion Proactive Relentless

Resource
Respected Selfless Supportive
Abundance

Time Thought
Transparent
Management Leaders
19:36

Purpose-Driven Sacco
Culture Starts With The
Board rooted with values
 19:36

Thank You

?
19:36

Sirengo Maurice,

Dynamic Management Consultant, Strategy and Business

Excellence Coach, Business Partners,
Visionary Professional Management Consultants

P.O.Box 56551-00200 Nairobi.

Email: sirengo@outlook.com,sirengoma@gmail.com

Tel: 0722631770/0772631770
Leadership and Team dynamics
19:36

" Leadership is not about titles,

positions, or flowcharts. It is
about one life influencing
another." --John C. Maxwell
19:36

"Leaders think and talk about

the solutions. Followers think
and talk about the problems." --
Brian Tracy
19:36

"Earn your leadership

every day." --Michael
Jordan
Team Dynamics
19:36

Boards are social groups. How the board as a

group behaves has enormous consequence on
how the Sacco is governed and performs.

The quality of board members’ interactions are

crucial to board success
Team Dynamics
What Causes Poor Group Dynamics?

Excessive
Weak leadership respect/deference Blocking
to authority

Evaluation
Groupthink Free riding
apprehension
Team Dynamic
How to Strengthen Team Dynamics
•Know your team.
•Tackle problems quickly with good
feedback.
•Define roles and responsibilities.
•Break down barriers.
•Focus on communication.
•Pay attention.
19:36

Team Dynamic

Keep in mind that observing how your

group interacts is an important part of
your role as a leader. Many of the
behaviors that lead to poor dynamics
can be overcome if you catch them
early.
 19:36

Thank You

?
19:36

Sirengo Maurice,

Dynamic Management Consultant, Strategy and Business

Excellence Coach, Business Partners,
Visionary Professional Management Consultants

P.O.Box 56551-00200 Nairobi.

Email: sirengo@outlook.com,sirengoma@gmail.com

Tel: 0722631770/0772631770