Factors to consider before joining a Sacco
Savings and Credit Co-operatives SACCOs have helped millions of Kenyans actualize their investment dreams. Under the regulation of SACCO SOCIETIES REGULATORY AUTHORITY (SASRA) they provide financial solutions to investors with small financial muscle. Members pool their savings together and obtain bigger loans at favorable interest rates. Their savings earn interest while shares earn annual dividends.
As is with any other type of investment, due diligence before joining a Sacco is very paramount. Failure to do so may result to loss of funds in case the Sacco collapses, frustrations with the Sacco whenever transacting, low returns on share capital and deposits, difficulty accessing credit and unfavorable loan terms, as well as frustrations in case you need to quit being a member of the Sacco.
Some of the factors to consider before joining a Sacco include:
- Sacco registration status: Ensure that the Sacco is registered with the relevant authority. The Ministry of Co-operatives and Sacco Society Regulatory Authority (SASRA) database is a good avenue to confirm if the Sacco you intend to join is duly registered to operate.
- Minimum share capital and monthly contribution: Saccos have a minimum number of shares required to be purchased by a person wishing to be a member. You will also be required to make monthly contributions with the Sacco, and failure to do so attracts a penalty. Ensure that the minimum shares required for membership, as well as the monthly contribution amounts are within your financial capacity.
- Ease of access to credit: Credit facilities should be easily accessible to Sacco members. Before joining a Sacco, do research on their loan products and also ensure that you have friends, family and acquaintances in the Sacco to act as guarantors when taking a loan.
- Investment opportunities: Try as much as possible to join a Sacco that has attractive investment options for their members. Some have separate investment subsidiaries to bargain for reduced rates on investments such as land and property.
- Sacco reputation: Before joining a Sacco, ensure you research on its general reputation to ensure that you do not join a Sacco that is on the verge of collapse or has liquidity troubles. A Sacco with a bad reputation is shunned upon by people, and this translates to low deposits. Having low deposits limits the Sacco’s investments options and consequently low returns on member funds.
- Technology: A technologically advanced Sacco is important since depositing of funds, withdrawals and access to statements can be done remotely at the comfort of your home.
- Dividends payment: The rate of dividend paid by Saccos varies depending on individual Sacco performance during the period. Ensure you join a Sacco that offers competitive dividends on your shares
- Seamless exit process: Leaving a Sacco should be as stress-free as joining it. Ensure that you do your due diligence on the Sacco’s exit process to avoid getting frustrated when the time for exit comes.
Make sure to have a clear understanding of these factors before making a decision to join that Sacco.
Related: Rights of a taxpayer in Kenya.