Saccos are instrumental in implementing feasible business ideas and creating solid financial foundations that allow the employed and unemployed to grow.
In an interview with Kenyans.co.ke Dennis Murerwa, a financial expert elaborated on the factors one should consider before joining a Sacco.
Sacco registration
All Saccos in Kenya are regulated by the Saccos Society's Regulatory Authority(SASRA). The government agency is under the Ministry of Trade. Its primary responsibility is to license and supervise all deposit-taking Saccos societies in Kenya.
“One needs to check if the SACCO they want to join is in the SASRA database which updates the list annually” he clarified.
Additional benefits
Saccos generally offer better services for their members through welfare systems, concessional loans, and community social responsibility programs. Some Saccos will set up production units and market the produce of small-scale farmers on their behalf.
“Saccos will also act as agents for NHIF if the members need the service. Some Saccos may offer benevolence funds that pay family members or spouse of the deceased, ” he elaborated
Ease of accessing loans
Members easily access loans since their savings are used as a qualification for credit. It's important to join Saccos where your friends or families have also joined to improve access to loans. Your acquaintances also act as guarantors.
“Sacco members get loans easily since they use their savings to qualify. For a member to secure a loan one needs guarantors, collateral, or self guaranteed loan. A self guaranteed loan has a limit, the amount has to be less than the shares of the member.” he stated
Interest on loans
Saccos offer lower interests on their loans when compared to banks. Most Saccos will offer interest rates ranging from 10 per cent to 12.5 per cent.
“They have low-interest rates since they use a reducing balance basis of leading instead of amortization systems that are somewhat expensive,” he added.
The flexibility of payment terms.
Saccos will avoid extending the liabilities of its members to other members of society. The Saccos are limited to the capital contributed to them by the members of the Sacco.
“These financial institutions are known to be more flexible to people residing in the rural areas than those in the urban areas. The Saccos consider the fact that the members in the rural areas have inconsistent incomes since most of their members are in the Agricultural sector ” he added
Dividends
Saccos offer dividends based on their savings. This encourages their members to have a saving culture since dividends have a direct correlation to a member's savings. The more you save the higher your dividends.
“Dividends are paid based on share capital while deposits will earn interest.” Mr.Murerwa stated
Ease of exiting a Sacco
Saccos will allow their members to leave as long as they have no pending loans.
“The law requires Sacco's to allow members to exit upon a written notice of 60 days on condition that he or she has no loan or guaranteed any loan within the Sacco," the financial expert explained.
