Features & Sacco Leadership

Understanding the role and responsibilities of a SACCO guarantor

Understanding the role and responsibilities of a SACCO guarantor

When it comes to SACCOs (Savings and Credit Cooperative Organizations), a guarantor’s role is significant and highly responsible. A guarantor serves as a co-signer, offering security and assurance to the SACCO by taking on the responsibility of a loan if the borrower defaults. This arrangement fosters a sense of collective financial support within SACCOs while ensuring that credible members back loans. Here’s everything you need to know about being a guarantor in a SACCO, from eligibility to best practices.

Who is a SACCO Guarantor?

A guarantor in a SACCO is a member who co-signs a loan, essentially promising to take on the responsibility for repayment if the borrower (loanee) fails to meet their loan obligations. By doing so, the guarantor provides the SACCO with confidence that the loan will be repaid in a timely manner, even if the borrower encounters financial difficulties.

To qualify as a guarantor, one must be an active member of the SACCO, which includes maintaining a minimum deposit requirement and a good credit record.

Who is Not Eligible to Be a Guarantor?

Not all SACCO members are eligible to serve as guarantors. Here are specific exclusions:

  • Inactive Members: Those who are not actively involved in the SACCO’s activities or who do not regularly contribute to their SACCO accounts.
  • Members Already Overextended as Guarantors: A member who has guaranteed six loans has reached the maximum allowed and is therefore ineligible to guarantee additional loans.
  • Members with Insufficient Deposits: A minimum of Sh5,000 in deposits is generally required to be eligible.
  • Loan Defaulters: Members with a history of defaulting on their own loans cannot be guarantors, as they are considered a higher risk.

Responsibilities of a SACCO Guarantor

As a guarantor, the member’s role goes beyond simply signing on the dotted line. They hold essential responsibilities that ensure both the SACCO’s security and the loanee’s accountability. The main responsibilities include:

  • Assuring Repayment: The guarantor provides the SACCO with assurance that the loan will be repaid in case the loanee defaults. If this occurs, the guarantor will be held liable for the outstanding balance.
  • Maintaining Oversight: A guarantor is encouraged to keep track of the loanee’s progress, ensuring that payments are made on time and in full. This proactive approach not only protects the guarantor from potential financial burden but also supports the SACCO in maintaining a strong credit culture.

When Can a Member Self-Guarantee?

Under certain conditions, a SACCO member may be able to self-guarantee their loan rather than rely on other members as co-signers. A member is eligible to self-guarantee if:

  1. They have not guaranteed any other loans, or
  2. The sum of loans they have guaranteed is lower than their total deposits in the SACCO.

This option allows members with substantial deposits to secure their own loans without requiring additional guarantors. However, the self-guarantee limit is set at a maximum of 90% of the member’s deposits. This limitation ensures that the SACCO remains protected while offering flexibility to financially stable members.

How Many Guarantors Are Needed for Each Type of Loan?

The number of guarantors required depends on the loan type and amount:

  • Six-Month Cash Advance: Requires just one guarantor, reflecting its short-term nature and relatively lower risk.
  • Short-Term Loans: Typically, a minimum of two guarantors is necessary.
  • Long-Term Loans Below Sh400,000: Generally requires at least three guarantors, ensuring a higher level of security for the SACCO.
  • Long-Term Loans Above Sh400,000: For these larger loans, SACCOs may demand guarantors with substantial deposits, often with a minimum of Sh400,000 collectively pledged by all guarantors.

For short-term loans, guarantors are not always required to attach their ID. However, for long-term loans, attaching a copy of their ID is compulsory. In addition, if a guarantor’s signature differs from the SACCO records, the guarantor must countersign to verify their identity.

Tips for Protecting Your Signature as a Guarantor

Being a guarantor requires vigilance, especially regarding the protection of personal details and signatures. Here are some critical tips to prevent unauthorized use or forgery of your signature:

  1. Sign Carefully and Mindfully: Each time you sign as a guarantor, ensure that your signature is consistent with your SACCO records. This can help avoid issues with verification.
  2. Add a Date to ID Copies: When submitting a copy of your ID for a loan, date it to signify that the ID was provided for a specific purpose. This practice minimizes the risk of future misuse.
  3. Avoid Sharing ID Copies Electronically: Rather than sending a copy of your ID via email, which could expose you to forgery risks, print the copy and deliver it to the loanee or the SACCO in person. This approach provides additional security for your personal information.

If a guarantor forgets their signature, they can contact the SACCO and request a copy of their signature specimen, which will be sent to their registered email. This resource helps guarantors verify their signature for consistency.

 

Andrew Walyaula
Author: Andrew Walyaula

Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com

Andrew Walyaula

About Author

Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com

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