Understanding the difference between shares and savings in SACCOs

When engaging with a Savings and Credit Cooperative (SACCO), you will encounter the terms “shares” and “savings.” Both are essential for your financial journey, but it’s crucial to understand their distinct roles and functions.
Shares
Shares in a SACCO represent your ownership in the cooperative society. By purchasing shares, you become a part-owner, giving you a say in the decision-making processes of the SACCO. The price of a share is typically fixed, and each member is required to purchase a specific number of shares. While these shares cannot be used as collateral for a loan, they do earn dividends and provide certain rights and privileges within the SACCO, such as voting in the Annual General Meeting or electing representatives.
Savings
Savings in a SACCO are the regular contributions made by members towards their individual accounts. These savings accumulate over time and earn interest periodically. Savings are essential for building your financial security and can be withdrawn or used as collateral for loans within the SACCO. The SACCO offers different savings plans with varying interest rates and terms, allowing you to choose the one that best suits your needs and financial goals.
Differences Between Shares and Savings
The primary difference between shares and savings lies in their purpose and function within a SACCO:
- Shares represent ownership and provide members with rights and privileges within the cooperative. They do not serve as loan collateral but earn dividends and influence decision-making.
- Savings are regular deposits that accumulate interest over time. They can be withdrawn or used as collateral for loans, serving as a crucial component of personal financial security.
How Shares and Savings Work Together
Shares and savings work hand in hand to support the overall functioning of the SACCO. While shares represent your ownership stake, savings contribute to the pool of funds available for lending to members. This combination allows the SACCO to provide affordable loan facilities and other financial services, benefiting all members.
Financial Decisions
Understanding the difference between shares and savings can help you make informed financial decisions. Shares provide you with ownership and decision-making power, while savings allow you to accumulate funds and earn interest over time. By leveraging both shares and savings, you can maximize the benefits of being a member of a SACCO and work towards achieving your short-term and long-term financial goals.