3 Types of Accounts to Know When Saving in a Sacco

Savings and Credit Cooperatives (SACCOS) are some of the most popular savings and investment vehicles for Kenyans. They help create a savings culture, are a great source of passive income, and they also allow many Kenyans to access affordable credit for their personal development and investment needs. 

However, some Kenyans have had bad experiences after saving with a Sacco and realising that their money is unable to serve their needs. For example, one may save with the hope of getting a loan, only to realise that the Sacco account they had been using does not allow them to get credit. 

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Here are three accounts you should know about when saving in a Sacco.

The Shareholder Account

A share account represents a member's ownership in the Sacco. It is essential for becoming a member and accessing the full range of Sacco services, including voting rights and eligibility for loans.

Money saved in the shareholder account does not qualify you for a loan. Saccos have a minimum number of shares that each member needs to own. These shares also, cannot be withdrawn, you can only liquidate them when leaving the Sacco, by finding another member who is willing to buy the shares. The advantage of these shares apart from giving you voting rights is that they earn more dividends compared to interest on deposits.

Features

• Ownership Stake: Saccos are member-owned. The shareholder account is where members deposit their money to increase their shareholding in a sacco. Once a member has a shareholder account, they have voting rights.
• Dividends: Having a shareholder account gives you ownership in the sacco, meaning that you are eligible to earn dividends. Most Saccos pay dividends annually.

Advantages

• Lower Loan Interest Rates: A shareholder account means that you are part owner of the Sacco. This then qualifies you to access lower loan interest rates compared to those offered by banks.
• Member Control: This account gives you a voice in crafting the Sacco policy and direction. During the Annual General Meeting, Sacco members get to vote on key policies in the Sacco.
• Capital Growth: Owning a shareholder account allows you to participate in the upside of the Sacco, either through dividends or interest payments. This amount can be re-invested to increase your shareholding.

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The Savings Account

A savings account in a Sacco is a basic account designed for regular deposits and withdrawals. Its primary purpose is to provide collateral that can be used to get an affordable Sacco loan. It is a secure place for members to save money while earning interest on their deposits.

This account is also known as the non-withdrawable deposits account.

When saving in a sacco for purposes of your money earning interest or accessing credit facilities, you need to save in this account. If you mistakenly save in the shareholders account the money becomes non-withdrawable. But with the savings account, you can withdraw your money with a 60 day notice. 

Features

• Interest Earnings: Savings accounts in Saccos typically earn interest, which can be higher than those offered by traditional banks.
• Low Fees: Saccos savings accounts often have lower fees for account maintenance and transactions, making them member-friendly.
• Loan Facilities: Savings accounts in Saccos are usually linked to loan products, where savings can be used as collateral for borrowing. For most Saccos in Kenya, you can get a loan of up to three to five times your Sacco deposits. 

Advantages

• Higher Interest Rates: Compared to traditional banks, Saccos often offer higher interest rates on savings.
• Personalised Service: Saccos tend to offer more personalised and attentive customer service since they serve smaller, close-knit communities.

The Current Account

A current or transaction account is designed for managing day-to-day finances and providing easy access to funds for regular transactions. The primary purpose is to facilitate frequent deposits, withdrawals, and payments.

The money in this account does not earn you any interest and it cannot be used to qualify you for a loan. It is purely for transactional purposes.

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Features

• Cheque Book Facility: Many Saccos offer cheque book services, allowing members to write cheques for their transactions.
• Mobile and Internet Banking: Saccos offer mobile and online banking services, providing members with convenient access to their accounts.

Advantages

• Flexibility: Saccos can often provide more flexible terms and conditions compared to traditional banks, catering to the specific needs of their members.
• Efficiency: One advantage of a current account is its ease of use for routine transactions. It is simple for account holders to move money as needed, withdraw cash, and make payments.

Wrapping Up

Saccos are a great investment tool in Kenya. However, before putting your money in any Sacco, ensure you have done your due diligence to find a Sacco that suits your financial needs.