SACCOs (savings and credit co-operative societies) are one of the main ways Kenyans save and borrow. Members save regularly, and can borrow several times their savings at rates usually well below mobile and many bank loans.
How they work
- You join by buying shares (a one-off amount) and paying a registration fee.
- You save every month into deposits. Many SACCOs take contributions through your employer’s payroll.
- You borrow - commonly up to three times your deposits, after a minimum membership period, with other members as guarantors.
- You earn a yearly interest on deposits and a dividend on shares, decided at the annual general meeting.
Types of SACCO
- Employer and profession-based - for teachers, police, civil servants, bank staff, doctors and others. Many large Nairobi SACCOs started this way, and some have opened to the public.
- Community and open SACCOs - anyone can join.
- Deposit-taking SACCOs offer bank-like savings accounts too. They must be licensed by SASRA (the SACCO Societies Regulatory Authority).
Choosing a safe SACCO
- Check SASRA’s list of licensed deposit-taking SACCOs.
- Look at the history of dividends and interest paid.
- Read the annual accounts - SACCOs publish them to members.
- Ask how quickly loans are processed and how easy it is to withdraw if you leave. Deposits often cannot be withdrawn while you remain a member, and leaving can require notice of several weeks.
- Beware of “SACCOs” promising very high returns - pyramid schemes have used the name.
Guaranteeing
Loans need guarantors. If you guarantee a loan and the borrower does not repay, your deposits can be used to recover it. Guarantee only people you trust, for amounts you could afford to lose.
Tax
Dividends from a SACCO have 5% withholding tax deducted, and interest on deposits is also taxed at source.