Considerations before buying SACCO shares

Buying shares in a Savings and Credit Cooperative Organization (SACCO) is one of the most effective ways to build financial stability and participate in cooperative growth. SACCO shares represent ownership in the institution, giving members a stake in its performance and access to benefits such as dividends, voting rights, and loans. However, before investing your hard-earned money, it’s important to carefully evaluate certain factors that determine whether a SACCO is the right fit for you.

Below are key considerations to keep in mind before buying SACCO shares.

1. Table of Contents

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   Understand What SACCO Shares Represent

Before investing, it’s essential to know what you are buying. SACCO shares are ownership units that form part of the cooperative’s capital. They are not savings deposits — meaning they cannot be withdrawn at will. Instead, they represent your ownership and voting rights within the SACCO.

Unlike shares in listed companies, SACCO shares are not traded on the stock market. Their value is set internally and can only be transferred to another member or qualified individual with the SACCO’s approval. Therefore, you should view SACCO shares as a long-term investment rather than a short-term source of liquidity.

2. Review the SACCO’s Financial Health

One of the most important steps before buying SACCO shares is to assess the cooperative’s financial performance and stability. A strong SACCO should have consistent growth in its assets, loans, and membership base.

You can check this information through the SACCO’s annual reports, audited financial statements, or publications from the SASRA (Sacco Societies Regulatory Authority). Key financial indicators to examine include:

• Profitability: Is the SACCO consistently making profits? Profitable SACCOs are more likely to pay attractive dividends.
• Loan Portfolio Quality: A SACCO with many non-performing loans may struggle to pay dividends or meet members’ financial needs.
• Liquidity Ratios: These indicate whether the SACCO can meet short-term obligations, such as member withdrawals and loan demands.

A financially sound SACCO ensures your investment is safe and your returns are sustainable.

3. Check the SACCO’s Registration and Licensing

In Kenya, all deposit-taking SACCOs are regulated by SASRA, which ensures they operate under strict financial and governance standards. Before buying shares, confirm that the SACCO is duly registered under the Cooperative Societies Act and, if it accepts deposits, licensed by SASRA.

You can verify this by visiting SASRA’s official website or contacting the County Cooperative Office. Investing in an unregistered SACCO exposes you to significant risks, including fraud and loss of funds.

4. Understand the Minimum Share Capital Requirement

Every SACCO has a minimum share capital that a member must buy to qualify for membership. This amount varies across cooperatives — for instance, some may require members to hold shares worth Sh10,000, while others may demand Sh50,000 or more.

It’s also important to note that the minimum share capital is non-withdrawable, even if you decide to leave the SACCO. This policy ensures the cooperative maintains a stable capital base. Therefore, before buying shares, ensure you are comfortable with the required investment and understand that the funds are meant for the long term.

5. Evaluate Dividend History and Return on Investment

Dividends are one of the major incentives for buying SACCO shares. They represent a portion of the SACCO’s profits distributed among members based on their shareholding.

Before investing, take time to review the SACCO’s dividend history over the past 3 to 5 years. Consistent dividend payouts indicate good management and profitability, while irregular or declining dividends could signal instability.

Additionally, compare the SACCO’s average dividend rate with others in the same sector. Some of Kenya’s top-performing SACCOs, such as Stima, Mwalimu National, and Harambee SACCO, often pay annual dividends ranging between 10% and 18% on share capital.

6. Analyze the Governance and Leadership Structure

A SACCO’s success depends heavily on its governance and management team. Mismanagement and poor leadership have led to the collapse of several cooperatives in Kenya.

Before buying shares, evaluate the SACCO’s leadership by checking:

• The composition and qualifications of the management committee and board members.
• The level of transparency and accountability in decision-making.
• Whether annual general meetings (AGMs) are conducted regularly and members are informed of key decisions.

Strong, transparent governance helps protect members’ investments and ensures that the SACCO operates ethically and effectively.

7. Consider the Liquidity of Your Investment

SACCO shares are not as liquid as other investment options such as treasury bills or listed stocks. If you ever want to exit or transfer your shares, you may need to find another member willing to buy them, and the SACCO must approve the transfer.

Therefore, only invest money that you can afford to lock away for a long period. If you expect to need quick access to your funds, consider increasing your deposits instead of buying additional shares.

8. Understand the Risks Involved

Like any investment, buying SACCO shares comes with risks. These include:

• Governance Risks: Poor management decisions may reduce profitability or cause losses.
• Liquidity Risks: Difficulty withdrawing your investment when needed.
• Regulatory Risks: Changes in SACCO regulations may affect operations or dividend policies.

Being aware of these risks helps you make an informed decision and plan for long-term growth rather than short-term gain.

9. Compare SACCOs Before Investing

There are hundreds of SACCOs in Kenya, each with unique features and policies. Before committing your money, compare several SACCOs in terms of:

• Dividend rates
• Share capital requirements
• Loan products and interest rates
• Member benefits and accessibility

Joining a SACCO that aligns with your financial goals — whether for saving, borrowing, or investment — ensures that your shares work for your advantage.

Author: Andrew Walyaula

Andrew Walyaula is a seasoned multimedia journalist. satrendmagazine@gmail.com