SACCO exit process: What members need to know

Savings and Credit Cooperative Societies (SACCOs) are built on voluntary membership. While many people join SACCOs to save money, access affordable credit, and build long-term financial stability, circumstances can change. A member may choose to shift financial priorities, relocate, retire, or simply feel that their goals are no longer aligned with the SACCO. In such cases, the law recognizes the right of any member to exit — provided the proper procedures are followed.

The SACCO exit process is more than just walking away from the institution. It involves financial reconciliation, loan clearance, and formal notification to ensure the SACCO remains stable while safeguarding the rights and obligations of the departing member. This article explains the steps, rules, and important considerations in the SACCO exit process.

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- Important Considerations Before Exiting
  - Author: Andrew Walyaula
Understanding the Right to Exit

SACCO membership is voluntary. Under the Cooperative Societies Act and SACCO by-laws, members are allowed to withdraw, provided they:

Give written notice
Have cleared all outstanding loans and obligations
Are not acting as guarantors for active loans

The exit process is designed to maintain the financial stability of the SACCO while ensuring that the member is treated fairly.

Giving Formal Notice to the SACCO

The first step in withdrawing from a SACCO is submitting a written notice expressing the intention to exit. This may be in the form of:

A letter addressed to the SACCO manager or board
A withdrawal form (where applicable)

The notice allows the SACCO to begin the reconciliation process and verify the member’s status.

Clearing Outstanding Loans

If the member has any active loan:

The loan must be cleared before exit.
If the member wishes to exit before completing repayment, they may settle the balance in a lump sum.

A SACCO cannot release a member who has unpaid loans because this would put other members’ savings at risk.

Handling Guarantor Responsibilities

If the member has guaranteed loans for others, the exit may be delayed until alternative guarantors are found. This is because:

Guarantors share responsibility for loan repayment.
Releasing a guarantor without replacement exposes the SACCO to credit risk.

Members considering exit should review any active guarantees and negotiate replacements early.

Reconciliation of Accounts

After confirming that the member has no outstanding obligations, the SACCO conducts a final financial reconciliation. This includes verifying:

Member deposits
Share capital contributions
Any welfare or special fund contributions
Dividends or interest due but not yet paid

This step ensures transparency and accuracy for both parties.

Refund of Member Deposits and Share Capital

Once reconciliation is complete, the member becomes eligible for refund. Refunds may include:

Member deposits, which are usually withdrawable
Share capital, which may only be refunded if the SACCO bylaws allow and replacement capital is available

The SACCO may refund deposits in installments to avoid destabilizing liquidity. The time frame — often between 30 to 180 days — depends on SACCO policy.

Receiving Clearance and Exit Confirmation

After refunds are processed, the SACCO issues:

A clearance letter
A withdrawal confirmation or membership termination certificate (where applicable)

This marks the formal end of the member’s relationship with the SACCO.

Impact on Future Benefits and Relationships

Upon exit, the member:

Loses voting rights in the SACCO
Stops earning dividends going forward
Cannot access SACCO loans or services
May reapply in the future, subject to board approval and rejoining conditions

Some SACCOs allow former members to return if they meet the joining criteria again.

Important Considerations Before Exiting

Before making a final decision, members should:

Assess whether the SACCO is still meeting their financial needs
Consider transferring savings to another SACCO instead of withdrawing completely
Evaluate the long-term benefits of cooperative financial support

Many members exit SACCOs during financial hardship only to realize later that SACCOs offer lower loan interest rates and better credit support than many banks or digital lenders.