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SACCO, or Savings and Credit Cooperative Society, is a member-based organization that provides members with a range of financial services, including loans and savings. They are a particular kind of self-help group that combines the resources of people who have similar objectives, ambitions, and values. 

SACCOs are cooperatives run by their members. Their members are in charge of, own, and govern them. A common connection among members is that they work for the same company, are members of the same social fraternity or church, or reside in the same community. However, regardless of their backgrounds, different groups of people are welcome to join.

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A diary cooperative that was founded in Kenya in 1908 was the country’s first SACCO. Since then, the sector has developed, and today there are 175 registered deposit-taking SACCOs in Kenya. THE Sacco Societies Regulatory Authority is in charge of licensing, supervising, and controlling them.

SACCOs, or Savings and Credit Co-Operative Societies, are member-based organizations that provide members with a range of financial services, including loans and savings. They are a particular kind of self-help group that combines the resources of people who have similar objectives, ambitions, and values. 

SACCOs are cooperatives run by their members. Their members are in charge of, own, and govern them. A common connection among members is that they work for the same company, are members of the same social fraternity or church, or reside in the same community. However, regardless of their backgrounds, different groups of people are welcome to join.

A dairy cooperative founded in Kenya in 1908 was the country’s first SACCO. Since then, the sector has developed, and today there are 175 registered deposit-taking SACCOs in Kenya. THE Sacco Societies Regulatory Authority is in charge of licensing, supervising, and controlling them.

PROS

Increased returns and ownership

When you purchase shares in a SACCO, you take a stake in the cooperative. As SACCO expands, the value of the shares may increase, and if you save money with them, you may also receive dividends and interest. In contrast to a bank, where you would just receive interest.

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Access to affordable and quick loans

SACCOs let you borrow against your savings, which can speed up the loan application process and let you skip all the hoops that other credit institutions may make you jump through. In comparison to other creditors, the loans also have more accommodating terms.

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Investment alternatives

By collaborating with other cooperatives, SACCOs can provide a variety of investment alternatives. For instance, SACCOs will work with housing Co-operatives to provide access to inexpensive mortgages and construction loans so that its members can purchase homes.

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Savings discipline

By joining a SACCO, you agree to contribute at least a certain amount each month. This will compel you to stick with it and help you establish a saving culture.

Front-office Services

The majority of SACCOs have taken the risk of venturing into providing a variety of financial services that were previously solely offered by banks. These services include bankers’ checks, automated financial processes, investment guidance, current accounts, mobile/internet banking, etc.

CONS

Borrowing requires collateral and guarantors

Your eligibility for credit is limited because you can only borrow against your shares and savings. If you need larger loans, guarantors will have to co-sign your loan. The co-signer needs to be a SACCO member who is willing to risk their shares and savings for you. Your ability to obtain credit could be restricted if you can’t find one.

The liquidity issue

It can be difficult to get access to your money in an emergency. You will be required to give the SACCO written notice of your intent to cancel, find a member to whom you may transfer your shares, and pay a penalty. The entire procedure may take months.

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You have no control over how the money is invested

Trustees and the board of the SACCO are in charge of doing that. All members will split the loss if this doesn’t work out, even though they are supposed to behave in your best interest and not risk your money.

Lack of Deposit Insurance

In contrast to savings in other financial institutions like banks, SACCO savings are not insured. Bank deposits are protected by KDIC.

Best For

SACCOs are ideal for those investing in long-term goals due to their strong yields and capital growth. Since you have to make a minimum monthly contribution, they can aid you in staying on track with your savings objectives. You can also reinvest your interest and dividend income to increase your earnings.

Saving for retirement, paying for your child’s college expenses, and saving for a down payment on a home are a few long-term financial objectives you can pursue utilizing SACCOs.

What to Think About When Investing In Saccos

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Time horizon

Saving in a SACCO may be more appealing if you intend to purchase land in the following five years.

Justification for Saving

SACCOs can assist you in becoming eligible for larger loans.

Risk Tolerance 

How much danger are you prepared to accept to reach your financial objectives? Consider their investment portfolio and determine how much risk they are taking. Your investments could be subject to significant danger if your SACCO invests in high-risk products.

Investment Capital

What level of initial investment are you willing to make? You may be required to pay joining fees, purchase a specified number of shares, and make a minimum monthly contribution, depending on the SACCO you are joining.

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Your anticipated ROI

How much profit are you hoping to make?  SACCOs allow you to get dividends on the shares you own in addition to interest on your savings.

What To Think About Before Joining A Sacco

Mismanagement and theft in SACCOs have cost many savers their hard-earned money. While there is no assurance that the SACCO you join will be secure, there are a few things to take into account. It might lessen the likelihood that you’ll enter a SACCO where your money will be mismanaged or stolen.

  • Check the SACCO’s registration with the SACCO Societies Regulatory Authority (SASRA) before you join. The company is tasked with registering and managing all SACCOs in the nation and is under the Industrialization and Enterprise Development Ministry. 
  • How long has SACCO been in existence?
  • The asset base of the SACCO
  • The minimum share capital 
  • Membership growth 
  • Minimum monthly contributions 
  • Available product mix: loans, savings, and investments
  • Guarantors requirements 
  • Borrowing terms and limits 
  • Interest rates on loans
  • Dividend/Rebate payments 
  • Composition on the board (Central management committee)

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