Money Talks: Checklist for a good Sacco

I am a member of two Saccos and my second Sacco just paid us our annual dividends. I know, you must be rolling your eyes because you were paid in the early weeks of January, perhaps by late February.

I have a lot of reverence and affection for Saccos because mine have come through for me when I’ve needed them the most.

Away from those emotions, there is also the income-earning reality of the money we make from our Saccos year after year after year in the form of interest and dividends.

(By the way, the terms ‘contributions’, ‘deposits’, ‘savings’, ‘interest’ and ‘dividends’ are used interchangeably but I know you know what each means, don’t you?)

You’ll earn an interest on your contributions: Your contributions are the money you deposit frequently, perhaps monthly or quarterly, or as it lands in your hands.

Your contributions grow with each deposit, so will your interest. Your ‘old’ contributions earn you more interest than your ‘new’ contributions.

You’ll also earn dividends on your share capital: Your capital is what makes you a member of that Sacco. Think of it as your foundation – it’s the rock on which the bricks of your contributions lay.

Your share capital doesn’t change; neither does the dividend you earn on them.

You are guaranteed to make money from your Sacco for as long as you don’t exit the Sacco.

Remember also, just because you didn’t make deposits to your contributions this year doesn’t mean that you won’t earn interest next year. No. There are still old contributions from the years before that will earn you interest.

As I mentioned, January to March is often the period that most Saccos in Kenya pay dividends. They hold their AGMs then a few days later, members get paid. It’s nice. Very nice.

There is always a lot of buzz about how much Saccos are paying their members. In fact, just a few weeks ago, there was an image going around on social media that had a table showing which Saccos were paying how much to their members, at what rate.

‘X Sacco: Interest on deposits, 13 per cent. Dividends on share capital, 20 per cent.’ ‘Y Sacco: Interest on deposits, 11.30 per cent. Dividends on share capital, 21 per cent.’

On and on it went. Glancing at that table, you’d be forgiven for believing that the Sacco with better rates is the better Sacco, that you’re much smarter putting your money there.

But there is much more to a Sacco than these rates. Much more. First, there are their membership numbers. The more Kenyans join a Sacco as members, the more it affirms that it’s meeting the needs of these Kenyans.

Saccos are also loved for their friendly loans. A sound Sacco will lend you what you’ve borrowed in whole and they’ll take only a few days to process it. (Well… as long as you’ve met the criteria for borrowing and aren’t listed on CRB.)

A sound Sacco also has a variety of loan products to meet your needs as a Kenyan investor. Aside from the normal and emergency loans, they should extend home loans, school fees loans, mobile loans and special loans.

Also consider their assets. The asset portfolio of a sound Sacco should be growing by a steady rate year after year, this tells you that they’re smartly reinvesting the money you’re investing with them.

A sound Sacco should also give its members the opportunity to invest in land, property etc. at discounted rates.

In this day and age, a sound Sacco must have a self-service portal for its members. It’s a portal where you can check your statements and loan balances, guarantors etc.

What’s more, this portal should be accessible 24/7 from any device connected to the Internet.

The only way to know about this important nitty-gritty is from listening to the first-hand experience of other Kenyans who are long-term members of these Saccos.

Forget what you see publicised on social media.

Florence Bett-Kinyatti is a certified accountant and former financial auditor.  @_craftit. [email protected]