What happens when a SACCO collapses?
Recent rumors about the potential collapse of various Savings and Credit Cooperative Organizations (SACCOs) have led to mass withdrawals and heightened concerns among members. Financial analyst Steve Kahome offers advice on how to safeguard your investments in the event of such a crisis.
Precautionary Steps Before Joining a SACCO
- Review Financial Statements: Kahome advises prospective members to examine a SACCO’s financial records from the past decade to assess its stability.
- Understand the By-Laws: Before joining, it’s crucial to understand the SACCO’s by-laws. Some SACCOs require members to submit a formal withdrawal request and may take up to 60 days to process it.
- Secure Loans: Ensure that any loans you take from the SACCO are backed by adequate security to protect your interests.
Regulatory Measures for Protection
To address potential collapses, the Sacco Societies Regulatory Authority (SASRA) has introduced a deposit guarantee fund. Established under the revised Sacco Societies Act of 2021, this fund offers protection for member deposits up to KSh100,000 ($926) in case of a SACCO’s failure due to governance or liquidity issues.
The fund is financed through contributions from SACCOs, investment income, and other sources. It provides a safety net for members’ deposits but does not cover shares.
In addition, SASRA has partnered with the Directorate of Criminal Investigations to form the Sacco Societies Fraud Investigation Unit (SSFIU). This unit focuses on combating fraud and cyber-attacks affecting SACCOs, ensuring greater protection for customer deposits.
While these measures offer some level of security, members are encouraged to remain vigilant and informed about their SACCO’s financial health and regulatory protections.
Author: Andrew Walyaula
Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com
