Considerations while joining a Sacco.

By John Muchiri
mwasj.jm@gmail.com entrepreneurbridge@gmail.com
B.Com(Finance option)
Kenyatta University

SACCO is an acronym for Savings And Credit Co-operative. SACCOs are deposit taking institutions that pool together money inform of savings from members and lends out or invests in authorised financial instruments such as shares, treasury bills and bonds,  e.t.c
In SACCOs just like banks, you have to open an account. An individual first buys shares in a SACCO to become a member: The shares can be bought in lump sum or can be paid in instalments.
After the purchase of required shares, a member starts to contribute monthly towards his/her saving scheme(which is not optional).
Default in remitting monthly contributions can lead to termination of membership. It is advisable for a member to state the amount he will be able to contribute without straining  himself as it reduces chance of default.
Unlike in banks; deposits made on SACCOs are not accessible to the member unless he chooses to take out a loan or withdraw from the SACCO.  This should be a key consideration while determining whether to join a SACCO or not.
In case of an individual with inconsistent income or a business with constrainted working capital apportioning a great percentage of your income towards SACCO contribution can be a bad idea. Why? This will mean reduced liquidity when cash is needed most.

Benefits of SACCOs.
1#. SACCOs have lower interest rates than banks. In Kenya the average interest charged by SACCOs is around 12% as compared to banks' 18-24%.

2#. Members earn interest on there savings.

3#. In most SACCOs in Kenya, the practice is that members can borrow upto 3 times their savings; provided they have guarantos.

4#. SACCOs pay dividends on share capital to their members.

5#. They offer a wide range  of loan facilities such as development loans, education loan, instant loans which are processed within a day.

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