How SACCOs Work

A Savings And Credit Co-Operative (SACCO) is an association of like minded individuals, registered under the Ministry of Ministry of Cooperative Development & Marketing in Kenya, and authorized to take deposits from and lend to it’s members. SACCOs are governed by the SACCO bylaws which state the objectives, membership, share capital, organization structure, management and lending regulations. The sector is regulated by the SACCO Societies Regulatory Authority (SASRA)

Most SACCOs are managed by a professional management team, which reports to a committee elected by members annually or according to the by laws of the SACCO. Most SACCOs in Kenya  have restricted membership to industry or sector of working. For example Stima SACCO is for Power generation and distribution sector employees, while Magereza SACCO is formed by Prison Services employees.

Investment

SACCOs are deposit taking in nature and are an ideal way to channel your savings. The SACCO aggregates the savings and lends them out or invests in authorised instruments such as shares, treasury bills and bonds, and in some cases property as authorized by the by laws. Returns from SACCO savings for a member are usually high and sometimes better than what banks offer.

Some SACCOs in the country help their members construct or buy homes at lower rates than the average mortgage rates offered by commercial banks.

Nature

  • SACCOs require a minimum monthly contribution from members. This instills a saving discipline.
  • The money isn’t accessible to the member unless they choose to withdraw from the SACCO or take out a loan. This protects the savings and prevents impulsive spending of cash saved.
  • Savings in a SACCO do not attract bank charges at all.
  • Interest paid on these savings is often higher than bank rates.

Borrowing

Once one is a member of a SACCO, they’re allowed to borrow within the limits of their savings. The standard is a member can borrow up to 3 times their savings, provided other members give him/her guarantees or they give a form of security. SACCOs have various products, such as emergency loans which are processed within a day and school fees loans and development loans. While banks may be able to extend a larger unsecured loan to clients, borrowing from a SACCO has several advantages:

  • SACCOs have lower interest rates and these rarely change currently capped at 12% per annum. Banks also constantly revise their lending rates advised by the Central Bank Rate while SACCOs rarely revise their rates..
  • As a member of the SACCO, you earn interest on your savings which are part of what you have borrowed lowering your borrowing costs further.
  • While repaying a SACCO loan, a member is expected to still maintain the same level of monthly savings as they did before. This builds a saving discipline, and helps one accumulate a substantial savings base. [Courtesy Mzimba SACCO]

According to a supervisory report released by the Sacco Societies Regulatory Authority (SASRA) for the period ending December 31, total assets for the 215 Saccos licensed to carry out front office service activities (FOSA) rose to KES 196 billion in December 2011 from KES 171 billion as at the end of December 2010. According to the report deposits rose by 14% to KES140.6 billion up from Sh123.13 billion in 2010. Loans and advances went up by 20% to KES 147.7 billion up from KES 123.4 billion as at Dec 2010.

SASRA says the growth in SACCO sector has been driven by membership growth with deposit taking SACCOs reporting a membership growth to 2.09 million in 2011 from 1.64 million in 2010.

According to a supervisory report released by the Sacco Societies Regulatory Authority (SASRA) for the period ending December 31, total assets for the 215 Saccos licensed to carry out front office service activities (FOSA) rose to KES 196 billion from KES 171 billionas at the end of December 2010.

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