How SACCO shares earn dividends
Savings and Credit Cooperative Organizations (SACCOs) are one of the most popular ways Kenyans save and grow their money. One of the biggest attractions of SACCO membership is earning dividends on shares. However, many members do not fully understand how SACCO shares generate these returns.
Understanding how dividends are earned helps members make better decisions, increase their earnings, and benefit fully from SACCO membership.
What Are SACCO Shares?
SACCO shares, also known as share capital, represent a member’s ownership in the SACCO.
- Every member must buy a minimum number of shares to join
- Shares show long-term commitment to the SACCO
- They are different from regular savings or deposits
- In most SACCOs, shares are not withdrawable unless a member exits
The more shares a member owns, the bigger their stake in the SACCO — and the higher their potential dividend payout.
How SACCOs Generate Money
Before dividends are paid, a SACCO must first make a surplus. This surplus mainly comes from:
- Interest charged on member loans
- Income from investments
- Service and administrative fees
- Other approved SACCO activities
After paying operating costs and setting aside statutory reserves, the remaining surplus becomes available for distribution to members.
How Dividends Are Calculated
Dividends on SACCO shares are usually calculated as a percentage of share capital.
For example:
- If a SACCO declares a 12% dividend
- And a member owns shares worth KSh 100,000
- The member earns KSh 12,000 in dividends
Members with higher share capital receive higher dividends.
Who Decides the Dividend Rate?
Dividend rates are not fixed. They are:
- Proposed by the SACCO’s board of directors
- Approved by members during the Annual General Meeting (AGM)
- Guided by audited financial results and regulatory requirements
This means dividends depend on the SACCO’s financial performance in that year.
Factors That Affect SACCO Dividends
Several factors influence how much dividend a SACCO pays on shares:
- Loan Performance
Loans are the main income source for most SACCOs. High loan uptake and good repayment increase surplus, leading to higher dividends.
- Operating Costs
SACCOs with low administrative and operational expenses retain more surplus for distribution.
- Member Discipline
Low default rates and timely loan repayments improve financial health and dividend payouts.
- Investments
SACCOs that invest wisely in real estate, government securities, or other ventures generate additional income that boosts dividends.
- Regulatory Requirements
A portion of surplus must be retained as reserves before dividends are paid, as required by SACCO regulations.
Difference Between Shares and Deposits
Many members confuse shares with deposits:
- Shares earn dividends and represent ownership
- Deposits/savings may earn interest and determine borrowing power
- Dividends are usually higher than savings interest but less flexible
Understanding this difference helps members plan better.
When Are Dividends Paid?
Dividends are normally paid:
- Once a year after audited accounts are approved
- Often credited to a member’s account
- Sometimes reinvested into shares if the member chooses
Reinvesting dividends allows members to grow share capital faster and earn higher future dividends.
Can Dividends Be Guaranteed?
Dividends are not guaranteed. They depend on:
- SACCO profitability
- Economic conditions
- Loan repayment trends
However, well-managed SACCOs with strong member discipline tend to pay consistent dividends over time.
How Members Can Increase Dividend Earnings
Members can increase earnings by:
- Gradually increasing share capital
- Reinvesting dividends
- Supporting the SACCO through borrowing and saving
- Participating in governance and oversight
Author: Andrew Walyaula
Andrew Walyaula is a seasoned multimedia journalist. Email: waliaulaandrew0@gmail.com
