Saccos have become the top choice financial institution for millions of Kenyans due to the numerous benefits they offer. Currently, there are over 350 saccos registered in the country both deposit and non-deposit taking. Hence, let’s look at the Top 10 factors to consider before joining a sacco in Kenya.
What is a sacco?
Also known as a Savings and Credit Cooperative (SACCO), these are financial institutions formed by members to mobilize deposits and offer credit services. A Sacco exists to serve its members by offering them financial solutions that suit their needs.
Hence, saccos in Kenya originate from members with the same interests such as teachers sacco, doctors sacco, business people sacco and accountants sacco.
How to join a sacco in Kenya
Almost every Kenyan is qualified to join a sacco as long as you meet the set requirements. Below are the steps of joining a sacco in Kenya.
Step 1: Fill in the membership application form. You can get the form at sacco offices or through online channels such as the website.
Step 2: Submit the personal documents. These include documents such as a national identity card and KRA Pin.
Step 3: Pay the registration fees. Most saccos require members to pay a registration fee upon joining. The amount of fees depends on the sacco and ranges between 500 to 2000 shillings.
Step 4: Start monthly savings contributions. As mentioned earlier, saccos are savings enablers. As a member, you are required to make savings on a regular depending on the set minimum amount. Most saccos have it as 1000 shillings. However, there is no limit to the upside. It all depends on your ability.
Top 10 factors to consider before joining a sacco in Kenya
Deciding to join a sacco requires you to make various considerations. This is the only way you ensure you get a sacco that adequately suits your needs and objectives. Some of these factors include;
1. Regulation
You should only join a sacco that is regulated and licensed by the Sacco Societies Regulatory Authority (SASRA). This is the government body mandated to license and regulate saccos in the country.
Joining a licensed sacco ensures your investments are safe and help minimizes the chances of loss or exploitation. In recent days, there have been cases of members losing their savings after joining unlicensed saccos. Such is hard to occur in a licensed sacco due to the measures and policies in place by the government.
Joining a regulated sacco also helps you to seek legal remedies in case of losses. This is made possible due to some measures that are in place such as insurance.
2. Dividend Payments
One of the key benefits you get as a sacco member is dividend payments. This comes in form of dividends for the share capital and rebates for member deposits.
Dividends are calculated in form of your savings and come as a percentage. On average, most saccos in the country pay at a rate of 10%. However, this can go lower or higher depending on the sacco performance.
Hence, you should do a market analysis to ensure you join a sacco that pays high dividends in the market. One of the ways to do this is by analyzing past performance as this can give an idea of the saccos dividend status.
Joining a sacco that pays a higher dividend helps to boost your income. A key measure if you want to grow your passive income. Learn more about the different ways how to make passive income in Kenya.
3. Location
Most saccos have a specific geographic location they operate in. Hence, when considering joining one, you need to settle on a sacco operating in your area or near you. This makes it easier to access services such as transactions, account opening, and loan applications.
Factors to Consider When Choosing a Business Location in Kenya
Saccos also tend to offer products and services that are customized to their location. As an example, a sacco operating in a tea farming location will have products that best suit tea farmers. Hence, a sacco in your location will have a higher chance of offering products that suit you.
4. Leadership
Leadership defines the top management that is in charge of running the sacco. This include positions such as board members and the Chief Executive Officer (CEO)
A good sacco has leaders with good reputations, high academic qualifications, and great work experience. These are key traits for leaders who are in charge of ensuring the sacco is running successfully and meeting members’ expectations fully.
The advantage of the sacco operation model is that leaders are chosen by the members and hence you can always vote them out in case of poor performance.
5. Membership
Saccos are normally founded by members with the same interest. These could either be business interests or career interests.
Hence, you should consider joining a sacco that has members with the same interest as yourself. If you are a business person, the best approach is to join business-oriented saccos. If you are a teacher, then joining a teacher’s sacco is the best option.
The reason for this is a sacco develops products and services that best suit its membership. As an example, there are those products that a business person requires while for a teacher are not necessary. To get clearer, a business person may need an overdraft facility while a teacher is best suited for a salary advance.
Hence, joining a sacco with a common interest member increases your chances of getting more benefits.
6. Products
The key reason for joining a sacco is to benefit from the products and services it offers. Most of these include savings and credit products.
You must ensure to join a sacco that suits your needs. This aspect is achieved through getting the right products. As an example, a farmer may require different products from those of a doctor.
Some of the products that could suit a farmer include loans to buy farm inputs or machinery. Due to the nature of farming, products such as loans must be suitable and aligned with the farming seasons. A key example of this is giving a farmer a loan payable within the harvesting season.
On the other hand, a doctor may require products that facilitate their trade such as the purchase of medical equipment and medicine stock.
7. Technology
Technology has become a key factor in facilitating access to financial services. It has made it convenient and affordable to access these across the country.
In this era, a good sacco should give your various technological platforms to access its services. This helps you to minimize the time and cost of visiting the physical branches. It also enables you to become a sacco member irrespective of the sacco location.
Some of the technological solutions that saccos offer include mobile banking (USSD or the App), internet banking, and ATM cards.
Without these channels, you will be condemned to inconveniences and challenges of accessing sacco services inefficiently.
8. Access to loans
Giving loans to members is one of the core functions of saccos. This makes it a critical element in the top 10 factors to consider before joining a sacco in Kenya. You should only join a sacco offering loans in a timely, affordable, and adequate repayment duration.
The amount of loan you can access from a sacco is determined by your savings. As such, the loan is calculated as a multiplier of the savings. Mostly, this ranges from a multiplier of 3 to 5. it means that if your savings is 1000 shillings, you access loans up to 3000 shillings.
You should join a sacco that offers a higher multiplier to ensure your needs are adequately met. The best sacco should also offer a higher loan duration to ensure you have adequate time to pay it fully. Finally, the loan interest rate should be affordable and on a reducing balance basis. This helps in reducing the costs of borrowing.
The sacco model also ensures loan collateral is through members’ guarantee making it possible for members without tangible security such as land to access loans.
9. Savings Contributions
The sacco model calls for members to make a regular contribution of savings. As such, some saccos have set limits that you should meet regularly. This is mainly through setting minimum monthly contributions.
Hence, you should consider joining a sacco that meets your contributions ability. The sacco should also offer services such as check-offs if you are salaried to make it easier when contributing. Other key necessities are the provision of technology that enables contributions through various channels such as M-Pesa.
Having efficient contribution platforms makes it easier for you to become an active member ensuring you enjoy maximum benefits in the long term.
10. Ease of Exit
Always consider this factor when joining a sacco in the case at some point you will need to exit. The exit process should also be as seamless as the joining process. Some of the reasons that could lead to exit include when the products and services no longer serve you or have achieved your objectives.
When exiting, there are various requirements you need to understand. These are related to the shares you are holding in the sacco. For the share capital, you are not allowed to withdraw. However, you can either sell or transfer them to another person.
On the member deposit shares, you should give the notice to cash them out. The notice depends on the sacco. However, in most cases, the notice period is 60days.
Ensure to enquire about all these factors to ensure you understand them beforehand. Failure to do so may lead to frustrations during the exit process.
