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Home Opinion

Considerations to make when joining a SACCO

Faith Ndunda by Faith Ndunda
December 17, 2024
in Opinion
Reading Time: 2 mins read

When joining a Savings and Credit Cooperative Society (SACCO) in Kenya, it is important to evaluate several factors to ensure your savings are secure and your financial goals are achievable.

Ensure the SACCO is licensed by the SACCO Societies Regulatory Authority (SASRA). A SACCO should maintain a core capital of not less than KES 10.0 mn, core capital of not less than 10.0% of total assets, institutional capital of not less than 8.0% of total assets and core capital of not less than 8.0% of total deposits. The SACCO should adhere to the guidelines issued by SASRA to avoid mismanagement of funds.

The reputation of a SACCO is important. One should check its financial health and how long it has been operational. Research and reviews from previous and existing members are key to identify any red flags. Avoid a SACCO with a history of fund mismanagement, delayed loan processing and withholding of deposits upon exit.

The popularity of SACCOs is mainly due to their low-interest loans. Most SACCO loans interest range between 10.0% -18.0% p.a with emergency loans interest rates ranging between 1.0% to 3.0%. On the other hand, commercial banks interest rates on loans range between 12.0% to 28.0% p.a. It is however important to look into the loan policies inclusive of guarantor requirements, interest rates, loan size vs savings, collateral options and loan processing time. Consider a SACCO where you have connections as members since large loans require guarantors. If an individual’s purpose for joining a SACCO is to take a loan, it is recommended to choose one that allows them to take more times the loan relative to your savings.

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SACCOs pay dividends based on share capital and interest on member deposits. The SACCOs have different rates on dividends and share capital thus it is important to compare the rates offered in the market to maximize returns on your savings. Most SACCOs offer higher returns on dividends on share capital than on interest in deposits.

One should also consider SACCO’s additional benefits. Some SACCOs offer burial benevolent funds and insurance coverages to their members. Understanding the exit policies in a SACCO is important. Members must also clear any outstanding loans or guarantor obligations before leaving.

Assessing these factors is key to identify a SACCO that aligns with your financial needs while ensuring the security of your money. Due diligence is important to avoid poorly managed SACCOs.

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Faith Ndunda

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