Deposit-Taking vs. Non-Deposit Taking SACCOs

Savings and Credit Co-operatives (SACCOs) have become increasingly scrutinized in recent times due to concerns about the loss of member funds. To comprehend SACCOs fully, it’s essential to delve into the cooperative movement.
Cooperatives are defined as independent associations of individuals united to meet common economic, social, and cultural needs through jointly owned and controlled enterprises. SACCOs, in particular, focus on providing financial services such as credit facilities and fund mobilization to their members, who are both users and owners of the cooperative.
In Kenya, SACCOs are divided into two segments: deposit-taking and non-deposit-taking. Both segments mobilize savings deposits from members, which are used as collateral for issuing loans.
Deposit-taking SACCOs (DT-SACCOs) are those that accept deposits and offer withdrawable savings account services similar to banks. They provide front office services where members can deposit or withdraw money.
Non-deposit-taking SACCOs, on the other hand, mobilize savings from members strictly for use as collateral for credit facilities. These deposits are not withdrawable but may be refunded when a member leaves the SACCO. They do not offer front office services for deposit or withdrawal transactions.
Deposit-taking SACCOs are licensed and regulated by the SACCO Societies Regulatory Authority (SASRA) and provide banking services in addition to savings and credit products. They pay relatively high interest on savings compared to commercial banks and are allowed to offer easy-to-withdraw savings accounts through front-office activities.
When selecting a SACCO, individuals have the option to choose between deposit-taking and non-deposit-taking SACCOs. However, caution is advised before joining a deposit-taking SACCO. It’s crucial to ensure that the institution is credible and duly licensed by SASRA to avoid falling victim to unlicensed entities or Ponzi/pyramid schemes promising high returns.
Deposit-taking SACCOs have witnessed significant growth in membership, assets, revenue, and dividends to shareholders, contributing positively to the national economy.