How to ensure the safety of your savings in a SACCO

The recent occurrences of individuals losing their hard-earned money in fraudulent SACCO schemes have raised concerns about the safety of savings in these financial institutions.
However, despite these isolated incidents, saving in a SACCO remains a viable option for many individuals looking to achieve their financial goals. Here’s what you need to know to ensure the security of your money when saving in a SACCO.
How do SACCOs Operate?
SACCOs have been instrumental in helping individuals save money and access affordable loans for various purposes such as home construction, business expansion, or education. Your savings in a SACCO accumulate over time through regular contributions, earning dividends at the end of each financial year.
Share Capital
Share capital represents the amount you invest to buy shares in the SACCO, akin to a membership fee. It’s essential to comprehend that the value of share capital doesn’t necessarily reflect the financial stability of the SACCO. Different SACCOs have varying share capital requirements, and while exiting the SACCO allows you to retrieve your contributions, the share capital remains with the institution.
Savings and Loans
Once your funds are deposited in the SACCO, accessing them is primarily through loans or complete withdrawal from the SACCO. It’s crucial to evaluate the loan requirements and guarantor obligations before seeking financial assistance from the SACCO.
Guarantor Requirements
Being a guarantor for a loan poses risks, as defaulters may burden you with their debt obligations. Ensure you trust and know the individuals you guarantee, as the SACCO may deduct your savings to cover defaulted loans.
Assessing SACCO Stability
While SACCOs provide financial services, they are not immune to collapse. Conduct thorough research on the SACCO’s financial statements, liquidity levels, management controls, and membership satisfaction to gauge its stability. Additionally, consider factors such as dividend payouts, investment portfolio, and regulatory compliance.
Rules and Regulations
Familiarize yourself with the SACCO’s guidelines, terms, and conditions governing membership, savings, and loan eligibility. Understanding these rules will help you make informed decisions and mitigate potential risks.