Wednesday, March 22, 2023

Investing Ksh 1 Million in a SACCO Vs Starting a Business: Which is more profitable?

Would you invest 1 million in a SACCO or start a business? By Benson Bundi

Bizna Kikao is an open platform where Bizna Club members can exchange ideas on how to improve their personal finance and business well-being.

According to James Njung’e, a financial consultant, investing Ksh 1M in a good SACCO can fetch you dividends of up to Ksh 100,000 plus per year, which can be difficult to actualize in most startups.

That said, every entrepreneur has their luck, and your business might pick up in record time, giving you better profits than you would get if you invested in a SACCO.

Rather than putting all your eggs in one basket, Njung’e advises splitting the cash and investing in both options. Better still, you can save the whole amount in a SACCO and take self-guaranteed short-term loans to start a business.

Below is a full evaluation of investing in a SACCO vs starting a business:


Firstly, a SACCO forces you to save; most SACCOs require members to contribute a certain monthly amount. Sacco savings attract better interest rates than most banks. For instance, most SACCOs offer dividends of between 8-15% p.a.

The next benefit of a SACCO is that you can access credit easily. For instance, if you have medical emergencies, need to pay school fees, etc., you can borrow up to three times your savings. Also, applying for and getting a loan in a SACCO is less arduous and demands less paperwork than most banks.

Full List of the Best Saccos in Kenya

It’s also important to note that interest rates of SACCO loans do not change as frequently as those of banks, which base their loan interest rates on the Central Bank reference rate and fluctuate depending on circumstances.

Finally, because the main aim of SACCOs is to empower members financially, the SACCO will have assets such as land, houses, and other investment opportunities available for its members.

However, most SACCOs have limited financial muscles. They are not able to lend plenty of cash to members, hence placing a limit on the amount members can borrow.

Consequently, one cannot depend on SACCO borrowings to carry out major projects. You might need a backup institution, for instance, a bank, for more cash.


The beauty of investing in a business is that you have firsthand insight into where your money is going. Typically, your hard work determines your profits and losses.

Starting a business is risky, given that only 5% of new businesses are said to survive past their first year.

There are so many factors that are beyond an individual’s control when starting and operating a business. For instance, think of the entrepreneurs who opened businesses just before the pandemic and what impact the pandemic had on them.

10 things nobody will tell you when you’re starting a business

Business is very capital intensive, as you’ll need to pay for the stock, rent, marketing, and other expenses. Lewellyn Ouya, a financial consultant, says that you can do everything right in business, and the business will still fail.

Therefore, before committing all your savings to start a business, you should evaluate the expected risks vis-à-vis the rewards. It would help if you also had a clear business plan, and an alternative plan, in case things don’t go as planned.

You can also seek the advice of a financial advisor, who can help you assess your business idea and develop an investment strategy that aligns with your goals and financial position.

Alternative investments

Rather than investing your Ksh 1M in a SACCO or starting a business, consider investing in government securities, especially infrastructure bonds. These have good returns, are risk-free, and tax-free, and have bi-annual coupons that can be a source of cash flow.

Do you have a burning question on entrepreneurship opr personal finances?

Email your questions to [email protected] or WhatsApp +254738198620 or +254722529685 and get advise from Bizna Club members and the wider Bizna audience.

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