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How to choose a Sacco in Kenya

How to choose a Sacco in Kenya: Why Saccos are better than banks: How to register a Sacco in Kenya: to choose the right SACCO: Deposit-Taking vs. Non-Deposit Taking SACCOs: Non-Deposit Taking SACCOs

Co-operative societies in Kenya boast a rich history dating back 115 years to 1908, marked by the establishment of the first co-operative society—a dairy co-operative. It wasn’t until 1946, during colonial Kenya, that Africans were included in the co-operative movement, and by 1969, over 1,800 societies had been formed with significant government involvement. The liberalization of economic policies in the 1990s nearly led to the collapse of the cooperative movement, but the turn of the millennium saw Saccos (Savings and Credit Co-operatives) gain momentum.

Also Read: Top Saccos to consider for investment in 2024

In contemporary Kenya, Saccos have emerged as preferred financial service providers, especially since the enactment of the Co-operative Societies Statute, 1991. Initially limited to specific groups like teachers, police officers, and coffee farmers, Saccos have evolved to become mainstream financial institutions. Leading Saccos include Stima, Mwalimu, Harambee, Kenya Police, and Afya Saccos, offering an alternative to banks with relatively low-interest credit. For the beginners the big question is how to choose a Sacco in Kenya.

What are the basics of a Sacco?

  1. Mandatory Membership Before Savings: Every Sacco requires a minimum share capital, purchased either as a lump sum or in installments. Share capital represents ownership in the Sacco, making members co-owners. It is a prerequisite for borrowing and accessing other Sacco services. Share capital is non-refundable but earns yearly dividends based on Sacco’s annual performance.
  2. Borrowing Against Savings: Saccos rely on member savings and shares for lending capital. The loan amount is limited by the member’s savings, typically up to three times the savings amount. New members may need a minimum savings period (e.g., three to six months) to qualify for loans, in addition to purchasing the minimum share capital.
  3. No Borrowing Without Guarantors: Saccos require guarantors instead of collateral for loans. Guarantors take on the debt burden in case of default, with the guarantors’ deposits seized until the debt is settled. Guarantors’ liability decreases as the borrower repays the loan. Some Saccos now accept collateral, such as title deeds, in lieu of guarantors.
  4. Front-Office Services: Many Saccos offer front-office banking services, including current accounts, retail purchases, standing order payments, and investment options exclusive to members. Emergency loans, approved within 30 minutes to 24 hours, are a notable feature with shorter repayment periods.

How to choose a Sacco in Kenya

  1. Reputation: Research the Sacco’s operating history, member reviews, and regulatory status. Ensure it is licensed by the Sacco Society Regulatory Authority (SASRA) to avoid potential scams.
  2. Guarantors and Security: Understand the Sacco’s policy on guarantors and loan limits. Evaluate whether the Sacco requires guarantors or accepts collateral, depending on your preferences and situation.
  3. Technology: Consider the Sacco’s technological capabilities, such as online transactions, integrated savings plans, and accessibility without visiting a branch. A technologically advanced Sacco can offer convenience and time savings.
  4. Dividends: Compare dividend rates offered by different Saccos, especially if you plan to invest a significant amount. Some Saccos may offer higher interest rates on shares, influencing your decision.
  5. Investment Opportunities: Investigate investment subsidiaries of Saccos, such as land acquisition opportunities. Saccos licensed by SASRA provide added confidence in choosing them as investment partners.
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

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