Fraud Mitigation: Saccos to Deploy Data Analytics

Hon. Peter Munya, CS, Trade, Industry & Co-operatives.

Fraud Mitigation: Saccos to Deploy Data Analytics Criminal Investigations (DCI) and

By June Njoroge

The digital wave that has swept across the Cooperative movement to Kenya’s Co-operative sector.

address members’ needs more efficiently and conveniently, has exposed the gaping vulnerability in the sector, as the cases of fraud and money laundering have become ever so rampant.

In light of this, Deposit Taking Savings and Credit Co-operative Societies (SACCOS) have been advised by the State Department of Co-operatives to adopt a strong protect member funds.

The Sacco Societies Fraud Investigation Unit (SSFIU) is already operational, initiated to curb the cases of fraud and corruption in Co-operatives, by the Sacco Societies Regulatory Authority (SASRA), Directorate of the Ethics and Anti-Corruption Commission (EACC).

This was followed by a Presidential directive in July for the unit to be set up. The Co-operatives Cabinet Secretary Peter Munya, has been spearheading the initiative to curb fraudulent dealings in anti-fraud stance in order to

Among the measures adopted by Co-operatives to mitigate fraud is forensic data analytics which aids in fraud detection and prevention.

Its basically a combination of technology and analytical techniques with human interaction; to help in detecting instances of fraud, corruption, abuse and other forms of noncompliance either before or after a transaction. Saccos are encouraged to make data analytics central to their growth plans because the traditional selling points are slowly being eroded by emerging competitors.

Knowledge is power, and data provides that knowledge; hence the need for Co-operatives to leverage data as a competitive advantage.

To compete effectively, Saccos need to use data to understand their customers on a personal level so that they can develop digital products that meet their needs.

If Saccos continue to maintain data in traditional data warehouses, they cannot be able to solve emerging problems, because the structured data model, lacks flexibility to adapt new business challenges. Co-operatives need to make informed decisions to help meet the emerging needs of their membership.

Data analytics can also help identify hidden opportunities, accelerate member engagement, prioritize offers, influence digital adoption and identify at-risk members. In a global survey, 40,000 certified fraud examiners revealed that proactive data monitoring and analysis is an invaluable addition to an organization to limit potential financial and reputational losses from fraud.

Data analysis uncovers hidden patterns and insights which enhances understanding of customers and the products they need. Some Saccos utilize data lakes, which are vast pools of raw unstructured data, which complements a data warehouse.

This allows the Sacco to use their data to identify and solve any business problem, because they are flexible and extendable. Data analytics enhances the ability to identify trends, forecast outcomes

and prescribe solutions.

The fundamental function of data analytics is to aggregate and distribute data so that Saccos can get a clearer perspective of the members they are serving, their needs and expectations; so that they can formulate a roadmap or blueprint on how to meet this needs to elicit customer satisfaction thereby, standing a big chance in retaining them.

Big data analysis and video analytics, allow Co-operatives to investigate threats in a more intelligent manner and generate actionable intelligence from collected data points to achieve their strategic intelligence and business objectives.

Saccos should adopt a sophisticated approach to data analytics and governance, by adopting a data strategy that answers basic business questions by first defining their objective. The data analytics journey comprises of the below steps to be effective:

Steps for Co-operative Data Analytics Journey

1. Statement of Objective and

Strategic Planning

This is the brainstorming stage; what problem/issue does the Sacco want to address? How to reward the most valuable members?

A successful Sacco analytics program is dependent on the right tools; capable hardware and supporting systems and an effective software.

2. Analytics Platform

Implementation

This is where Saccos need to assemble their teams, infrastructure, ascertaining that all the software, hardware and key players are in place.

3. Analytics adoption and penetration.

This stage is about getting actionable data to your business users.

4. Management and Control measures.

This stage is about metrics; can you measure the impact? Calculate ROI? Does your solution work? A successful Sacco analytics program is dependent on the right tools; capable hardware and supporting systems and an effective software. The latter will determine how the Sacco stores data? How to move, transfer, integrate and report that data. This calls for robust tools to maintain data safety, quality, accessibility and motility. Analytics are the missing piece to bridge the divide of security and risk in Saccos.

Data analytics is broken down into four basic types.

1. Descriptive analytics describes what has happened over a given period of time. Has the Sacco increased membership in a given year? Are deposits growing more this month than last month?

2. Diagnostic analytics focuses more on why something happened. This involves more diverse data inputs and a bit of hypothesizing. Did the latest education drive bring new members on board? Has the Covid-19 pandemic affected the asset base?

3. Predictive analytics moves to what is likely going to happen in the near term. For instance, if the Sacco conducts a back to school promotion in January, its likely to be more successful than conducting it in March or April.

4. Prescriptive analytics suggests a course of action. For instance, if a Sacco is to embark on an online education campaign; it should first ensure it has a digital platform, channels and an adequate if not large following.

By mitigating fraud risks, Saccos increase member confidence which is key because members fuel the institutions.