Money Talks: What’s the benefit of joining two Saccos?

Dear Bett,

Is it really in order to join two savings and credit co-operative societies (Saccos) having the same activities?

Thanks

Thomas

Thanks a bunch for writing in, Thomas!

As I mentioned in my last article, you can be a member of more than one Sacco. The issue is that there are some Saccos – some, not all – whose bylaws state that you cannot be a member of their Sacco and any other Sacco.

This issue usually comes up when you are applying for a loan and are not credit worthy. The Sacco may reach out to this bylaw as grounds for rejecting your loan application.

So make sure to ask this before you blurt it out.

Thomas, you ask, but why join more than one Sacco, anyway? The answer lies in the credit facilities Saccos extend.

Credit facilities

Investors become members of more than one Sacco so they can take advantage of credit facilities – they want to be able to take as many loans as they can, from each of their Saccos.

I am a member of two Saccos.

Let’s call them Sacco A and Sacco B.

I have studied the financial statements of both Saccos. They are both in good financial standing – they both have a healthy balance sheet, good cash flows, long-term assets and growing membership. Importantly, they have a diversified investment portfolio.

They also pay out dividends and pay them out every year, after their AGM.

I have been a member in Sacco A longer than I have in Sacco B. This means that I have more money saved in Sacco A – I get more dividends here than in Sacco B.

Sacco A extends loans at five times my deposits. Sacco B at three times my deposits.

Sacco B doesn’t have FOSA services. Sacco B does. (FOSA stands for ‘Front Office Service Activities’. When a Sacco has FOSA services, you can deposit and withdraw money over the counter, as you would in a bank).

If I need to borrow money for a big project, I will borrow from Sacco A. If I need some quick money to, say, finance a small project or to finance an emergency, I will borrow from Sacco B.

Sacco A takes much longer than Sacco B to process their loans and release the money to you. (Two weeks for Sacco A versus five days for Sacco B.)

Sacco A’s share capital is Sh10,000. Sacco B’s share capital is Sh35,000.

I am happy with the wholesome services I am enjoying from both Saccos. I don’t intend to exit any of these Saccos or to become a member of another Sacco.

An important point to note is that I cannot transfer my share capital or my deposits from one Sacco to another. Illustration: If I exit Sacco A, I will leave my share capital of Sh10,000 behind. When they give me my deposits, I will bank the money in Sacco B’s account as a boost to my deposits.

Another reason investors become a member of more than one Sacco is because they may have switched employers.

Say, you have been an employee in a certain company for a number of years and you had joined the Sacco affiliated to that company. It was easy for you to access their facilities because of your employment status.

If you applied for a loan, for example, it would be a breeze to get guarantors’ signatures because most of your colleagues would be Sacco members as well.

Supposing the tides changed and you moved to another company, into self-employment or you were laid off. You no longer have easy access to the Sacco or to its members/your former colleagues. You will have a difficult time when applying for a loan and need to find guarantors willing to bear the responsibility of guaranteeing your loan.

Because technically, you are an outsider now. They will question your financial status and your trustworthiness. And should things go south, they know that they cannot walk over to your desk and demand that you settle your loan arrears.

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