Understanding the difference between SACCOs and banks

When it comes to managing money and accessing financial services, SACCOs and banks are two key options. Though they both offer financial services, they operate differently and have distinct advantages.
- Ownership and Governance
- SACCOs: These are member-owned cooperatives where individuals pool their savings to provide loans and financial services to each other. The focus is on mutual support and community benefits.
- Banks: Typically owned by shareholders, banks aim to generate profits for their investors. Decision-making is centralized with a board of directors and management.
- Customer Focus and Accessibility
- SACCOs: They prioritize serving their members and often have a strong local presence, making them accessible and community-focused.
- Banks: As profit-driven entities, banks prioritize returns for shareholders. They offer convenience through widespread branches and ATMs.
- Interest Rates and Fees
- SACCOs: Generally offer lower interest rates on loans and higher rates on savings. They are known for transparent fee structures.
- Banks: Interest rates can fluctuate, and banks may have various hidden fees, such as insurance, processing, and late payment charges.
- Financial Services and Social Impact
- SACCOs: Provide basic financial services like savings accounts and loans, with a focus on community development and financial inclusion.
- Banks: Offer a broad range of financial services, including complex investments, with a primary focus on profit.
- Security and Regulation
- Both SACCOs and banks are regulated to ensure the safety of customers’ funds. In Kenya, SACCOs are overseen by the Sacco Societies Regulatory Authority (SASRA), while banks are regulated by the Central Bank of Kenya.
SACCOs are especially popular in African countries like Kenya, Uganda, South Africa, and Malawi. In Kenya alone, around 14 million people are members of SACCOs, which hold over KSh 732 billion in deposits and KSh 1 trillion in assets. A 2016 FinAccess survey showed that 66.4% of Kenyan adults use savings or deposit instruments, with SACCOs being a trusted option for many.