Why Saccos are better than banks

SACCOs, or Savings and Credit Cooperative Organizations, have emerged as a preferred financial alternative over traditional banks for several compelling reasons, offering a range of advantages that cater to the diverse needs of their members. Explore the following reasons why Saccos are better than banks.
Why Saccos are better than banks
- Favorable Loan Terms
In the realm of loan offerings, Saccos stand out by providing more favorable terms compared to banks. This advantage is primarily rooted in lower interest rates and flexible repayment options. SACCOs, being member-driven entities, can pass on the benefits of lower fees and interest rates, translating into cost savings for their members.
- Accessibility of Loans
Securing a loan through a Sacco is notably more accessible than obtaining one from a bank. While banks often demand an array of documents for loan approval, Saccos streamline the process, requiring only a contribution record or pay-slip. The simplicity of this approach ensures that even individuals without formal employment can access loans from Saccos.
- Low Interest Rates
The perennial issue of high bank interest rates finds a contrasting solution in Saccos. Unlike banks, which may have varying and often high loan interest rates, Saccos consistently offer lower rates. In critical situations, especially during emergencies, individuals often turn to Saccos for cost-effective financial solutions.
- Flexible Payment Terms
The relationship-focused approach of Saccos allows for more lenient payment terms compared to banks. Sacco management, having a strong connection with their members, tends to be understanding and accommodating in structuring repayment plans. Banks, driven by profit motives, often prioritize strict timelines for repayment.
- Dividends for Members
While banks primarily focus on maximizing profits, Saccos prioritize the well-being of their members. SACCO members enjoy annual dividends, a unique benefit that banks typically do not extend to their customers. These dividends can even be utilized as additional leverage when applying for loans within the SACCO.
- Savings and Loans Integration:
SACCOs operate on the principle that once funds are deposited, access is primarily through loans or complete withdrawal from the Sacco. This integrated approach aligns with the cooperative nature of Saccos, ensuring that financial resources circulate within the cooperative system.
- Share Capital Concept
Share capital, a distinctive feature of Saccos, represents the amount members contribute to buy shares within the cooperative. It serves as a non-redeemable investment in the Sacco, akin to a membership ticket. In the event of exiting the Sacco, contributions are returned, but the share capital is retained. Share capital amounts may vary between different Saccos, contributing to the unique structure of each cooperative.
- Additional Benefits
SACCOs go beyond conventional banking services by actively engaging in acquiring real assets for their members. This includes purchasing land, subdividing it, and selling it to members at more affordable prices. Such additional benefits set Saccos apart from banks, fostering a sense of community and shared prosperity.
Also Read: How to calculate dividends and interests on deposits in Saccos