Do Savings in a SACCO earn interest?

Saving while you are still energetic and productive is a smart financial move. If you are earning an income and are thinking about where best to save that money, you need to consider a SACCO.
Savings and Credit Cooperative Organizations have gained popularity in Kenya over the past two decades. However, young people are yet to fully embrace them as a way to save money because most are not familiar with the concept of SACCOs, how they work, and why they are so beneficial. SACCOs are a perfect option for young people who are looking to empower themselves financially.
What Makes a SACCO Different?
- The Manner in Which You Save:
SACCOs accumulate savings and provide loans or invest in financial securities and/or real estate. Saving with a SACCO is different from saving with a bank because:
- There are no charges attached to the savings.
- A member cannot access their savings unless they terminate their membership or obtain credit.
- They pay interest on your accumulated savings.
- The Way They Provide Credit:
A member is allowed to borrow up to three times their savings, as long as they can provide collateral or get another member to guarantee the loan.
- The Investment Projects They Are Involved In:
SACCOs pool together their members’ savings and invest them in joint projects. SACCOs are generally development-oriented as a result of having their roots in the cooperative movement. Typically, they invest in projects such as real estate that members can purchase at reduced rates.
Advantages of SACCOs
- They Encourage You to Save: SACCOs require you to save consistently, enabling you to cultivate the discipline of saving regularly.
- Investment: SACCOs pay out dividends on the savings of their members. Compared to other investments, saving in a SACCO has a more guaranteed return.
- Limited Liability: The liabilities of the society members are limited to the amount of capital they contributed. For this reason, if the society goes bankrupt, the personal property of the members is safe.
- Urgent Loans: Various SACCOs offer developmental and school fees loans that can be processed within a day, depending on the borrower’s urgency.
Do Savings in a SACCO Earn Interest?
Yes, savings in a SACCO do earn interest. One of the most attractive features of SACCOs is that they pay interest on the savings of their members. This interest is typically higher than what you would receive from a traditional bank savings account. The interest paid on SACCO savings can significantly boost your overall returns, especially when combined with the dividends paid on your shares in the SACCO.
SACCOs distribute their profits among their members in the form of dividends. These dividends are calculated based on the number of shares a member holds and the overall performance of the SACCO. This means that not only are you earning interest on your savings, but you are also benefiting from the collective success of the cooperative.
Why Join a SACCO?
You should join a SACCO because it will come in handy when you need to get a line of credit. Most importantly, when you do need this line of credit, you will have access to some of the lowest interest rates in the country. Additionally, the habit of regular saving that SACCOs promote can lead to significant financial growth over time.
Moreover, the investments made by SACCOs in projects such as real estate can provide members with opportunities to purchase property at reduced rates, further enhancing their financial stability and growth. The sense of community and mutual support within a SACCO also means that you are not just saving and borrowing in isolation but are part of a larger movement aimed at collective financial empowerment.