Features & Sacco Leadership

Do co-operatives offer member capital?

Do co-operatives offer member capital? When Are SACCO Dividends Paid? Disadvantages of the 52-Week Money Challenge: Where is the Safest Place to Invest Money? Savings challenges: Saving by going zero-waste: How sustainable living can transform your finances

Co-operatives, like all businesses, need capital to start, grow, and remain sustainable. While many enterprises rely on initial funding from owners or investors and later seek loans or reinvest profits, co-operatives have a unique approach to raising capital.

Member Capital in Co-operatives

In a co-operative, the capital primarily comes from its members. These members invest their money in the form of shares, which provide the financial foundation for the co-operative. This member capital helps the co-operative manage the challenges of starting and expanding its operations. The shares represent a stake that members are willing to risk to help grow the co-operative.

The role of these shares is similar to risk capital in other businesses. They help the co-operative endure financial ups and downs and support its long-term sustainability. Unlike traditional businesses, co-operatives may issue different classes of shares, each with specific rights, to ensure they function effectively as risk capital.

Challenges and Opportunities

One major challenge for co-operatives is the restriction that they can only issue shares to their members. This can limit their ability to raise capital compared to private enterprises. To overcome this, co-operatives need to attract members who are prepared to invest. The key is to focus on acquiring members who bring in capital and are committed to the co-operative’s purpose.

Planning is essential for co-operatives to determine the amount and frequency of funding needed. By attracting a large number of members, each contributing a smaller amount, the co-operative can gather the necessary capital without putting a heavy burden on any single member. This approach can also make the co-operative more appealing to potential members, who may be motivated by the service provided rather than financial returns.

The Co-operative Model in Kenya

In Kenya, co-operatives operate under a legal framework that emphasizes the active involvement of members. Co-operatives in Kenya are required to have a genuine connection with their members to qualify as bona fide co-operative societies. This means that co-operatives must meet the common needs of their members, such as providing goods, services, or employment opportunities.

Co-operatives in Kenya may not have specific rules about active membership requirements, but they must demonstrate a purposeful relationship with their members. This is similar to requirements in other countries and supports the idea that successful co-operative models can be adapted to different regulatory environments.

 

Andrew Walyaula
Author: Andrew Walyaula

Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com

Andrew Walyaula

About Author

Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com

Leave a Reply

You may also like

Factors to consider before taking a loan in Kenya: The risks of being a guarantor: what you need to know: SACCO Loan Requirements
Features & Sacco Leadership

Factors to consider before taking a loan in Kenya

The surge in borrowing activities across Kenya highlights a growing inclination towards loans among its populace. With an array of
What is the importance of credit policy in Saccos: Benefits of Sacco membership for small business owners: How to increase Sacco membership: Why Sacco loans are cheaper: Factors contributing to member exits from SACCOs: How to exit from a SACCO
Features & Sacco Leadership

Why Sacco loans are cheaper and more accessible

Kenyan individuals and households are increasingly turning to Saving and Credit Cooperative Organisations (Saccos) and microfinance banks for loans, rather
error: Content is protected !!
×