Saccos are a great way of saving and earning dividends, and access financing from their three times multiplier effect. For instance, if you have saved Sh. 40,000 in a Sacco, you can easily access funding of up to Sh. 120,000. But before you go ahead and join a Sacco, there are certain things you must know.
Rhina Namsia, the founder of The Acemt Consulting, a training and consultation company that provides financial planning and investment advisory, shares the nine things you must know before you join a Saccoo:
Saccos offer you services similar to your bank but just with a cherry on top, low interest rates
1). When choosing a Sacco ensure it is registered with SASRA check this from their website
2). To be a shareholder at a Sacco you are required to buy a minimum stipulated amount of shares paid once or in installments depending on the Sacco. No individual is however allowed to own more than 1/5th or 20% of the total Sacco shareholding.
3). There is a difference between, SHAREs, DEPOSITs & SAVINGs when it comes to a Sacco. I find people confusing these 3 a lot. Shares are those that you must buy to become a member of a Sacco. They are non refundable and can only be sold to another member of the Sacco if you want to exit the Sacco. Now, many have always complained that it is hard to sell of your shares, is it that you heard it or you tried. Most of these big long serving Saccos is not hard to sell off your shares. Once you decide you want to exit, a letter is done to the sacco and the stipulated shares will be announced up for grabs. You will get an interested party always. Underline the words “Big Saccos”
Deposits is the money you make every month to your Sacco. Depending on the sacco again, you will be given a minimum. It’s from your deposits that a loan is given 3 or even 4 times of them depending again on the sacco. So build on them. For long term loans you may be asked to wait 6 months of consistent regular depositing dont default, for short term it can be 3 months. Inquire more from the Sacco you choose.
Savings are those contributions made to your FOSA account offered by your Sacco. It can be a child’s savings account, your own savings account etc. This is what can be withdrawn anytime you want to exit. People confuse this with Deposits. Dont get confused from now own.
4). There is FOSA and BOSA with Saccos. Most Saccos regulated by SASRA you will realize have both. BOSA is the back office activities of the Sacco as the name suggest.
So anyone who is a member of a Sacco gets access to all products and services offered at BOSA. These products/Services include; development loans, long-term loans, monthly depositing, dividend and rebates earnings, buying shares etc.
FOSA is the front office services offered by the Sacco as the name suggests. These are services similar to your usual commercial bank. Anyone can access these services whether a member of a Sacco or not. We have seen over the years Saccos such as Mwalimu sacco, Police Sacco, Stima Sacco etc opening their doors to non-bond members (i.e teachers, police etc).
So you may not be a teacher but go to that sacco and you can even open a current account where you channel you salary through and make monthly savings. This has enabled many outsiders to get short term loans through FOSA such as Salary advances, emergency loans etc. These Savings don’t earn you returns.
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All sacco members can get both FOSA & BOSA services but not all who can access FOSA services can access BOSA services and not all Saccos offer FOSA services. Please find out more with the Sacco of your choice.
5). Your share capital earns you dividends annually. Your deposits earn you rebates annually too. Its almost guaranteed a s a shareholder that you can count on dividends from your sacco. Did you know that your ‘old’ money in the Sacco earns more dividends than ‘new’ money? Most people try to get smart by depositing lump sum figures closer to the end of the year; they deposit in the wild hope that they will make a quick buck off the Sacco. You can’t beat the system. A Sacco is one investment that thrives on time. We will go into the math of this under the comments sections.
6). It can take about six to nine months for your exit from a sacco to be processed. So don’t go there on a Monday saying you need your money by Friday. It doesn’t work that way.
7). Being a member of more than one Sacco is a smart move to consider. You can be a member of more than one Sacco yes but….just make sure to read the fine print of your Sacco before you sign up to others, though. Especially when it comes to taking loans. There are some Saccos whose bylaws state that you cannot borrow from theirs if you are an active member of another Sacco. They say that you will have to exit that other Sacco first.
8). Your Shares cant be used as a loan collateral. Your Fosa savings can be used to clear a pending loan
9). Most saccos now allow security such as title deed or logbook as a collateral but…as a last resort since the bylaws of a sacco stipulate that deposits ate what are the main collateral for a sacco loan.
So how these securities works is that when one defaults, the guarantors now become liable and the assets are seized given to guarantors to sell and clear the loan then is when their deposits can also be unfrozen. So it’s not that direct, it’s not their mandate in the bylaws
Above all Saccos provide a really good platform for Saving with subsidiaries of investments directly to members such as land owning, property etc or indirect by obtaining a low interest credit facility that can be used for investments
