Implications of a dormant SACCO account
When a member of a Savings and Credit Cooperative Organization (SACCO) fails to actively use their account over a specific period, the account may be declared dormant. While this is a routine administrative measure, dormancy can have far-reaching consequences on the member’s relationship with the SACCO, their access to services, and even the long-term security of their savings. Below we explore the implications of a dormant SACCO account.
Loss of Access to Services
One of the immediate effects of a dormant SACCO account is limited access to the services provided by the cooperative. Members with dormant accounts cannot apply for loans, withdraw savings, or participate in any transactional activity until the account is reactivated. This temporary freeze is aimed at safeguarding the account and preventing unauthorized use, but it also means that members may be unable to access financial support when they need it most.
Suspension of Dividends and Interest
SACCOs often pay annual dividends to active members based on their share capital and savings. However, when an account is declared dormant, the member may forfeit the right to earn dividends during the period of inactivity. Some SACCOs also suspend the accumulation of interest on deposits in dormant accounts, which further reduces the long-term value of a member’s investment.
Forfeiture of Voting and Participation Rights
In many SACCOs, only active members are allowed to vote during annual general meetings (AGMs) or participate in key decision-making processes. A dormant account, therefore, strips the member of their right to influence how the SACCO is run. This disconnection can weaken the democratic nature of the cooperative and isolate the member from developments and policy changes that may affect them.
Possible Deduction of Dormancy Fees
To maintain dormant accounts, SACCOs may impose a maintenance or dormancy fee. These charges are deducted periodically from the account balance and can significantly deplete the savings over time, especially if no deposits are made to offset the deductions. Some SACCOs also charge a reactivation fee when a member requests to resume operations on the account.
Risk of Being Transferred to Unclaimed Financial Assets Authority (UFAA)
If an account remains dormant for an extended period—often five to seven years—the SACCO is legally required to report and transfer the unclaimed funds to the Unclaimed Financial Assets Authority (UFAA) in Kenya. Once this transfer happens, the SACCO no longer manages the funds, and the member must follow a formal process with UFAA to reclaim their money. This process can be lengthy and may require supporting documentation such as national ID, membership details, and proof of claim.
Impact on Creditworthiness
Having a dormant SACCO account can affect a member’s credit reputation within the cooperative. Since loan eligibility is often tied to consistent savings and active membership, dormancy can result in lower borrowing limits or even disqualification from loan programs. This is especially problematic for members who intend to use the SACCO as a future source of affordable credit.
Author: Andrew Walyaula
Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com
