In Summary
  • Some people try to cheat the system by being dormant most of the year then making a lump-sum towards December.
  • Saccos think ahead of you – the contributions you make earlier in the year, say in January, earn more in dividends than those made towards the end of the year.
  • Most Saccos have a standard amount of share capital for all members – no member has more shares than the next.
  • Do you have feedback on this article? E-mail: [email protected]

A reader emailed with a question. I thought to email him back with my two cents, but then later, after having a cup of tea and banana, I figured to turn his question into a story for this column. (A writer has to do what a writer has to.)

Also, if you folks have any more questions, I’m more than thrilled to answer them. I don’t want to turn this into a pulpit where I weld my Bible every week and spit scripture – think of it like a coffee house, instead, and you and I sit to chat about our money.

Anyway, Mark emailed saying:

Dearest Bett,

Like you, I am an ACCA accountant and having read your latest article, I declare myself impressed. I am not a rich man but from time to time I have a spare Sh10, 000 here and there, which I currently know I just put to waste.

Your article mentioned investing in Saccos so my two questions are: Is this a safe investment or is there a chance that the SACCO will shut with my money in it? Tell me a bit more if you possibly can, just so I know how much risk I am taking and if the reward measures up. I work and live in London but hope to return home soon and would like to do that with a financial safety net if possible.

And I would have said…

Thank you so much for writing in, Mark. No, really, thanks. I’ve not had the immense pleasure of turning a reader’s email into a column idea. So this is pretty special.

Saccos are great for three things: you save, you invest and you borrow cheap.

Saving and investing

Your Sacco savings grow as you make contributions. You can make contributions at a frequency that works for you – I suggest putting in a little consistently every month.

Your savings, rather contributions, earns you dividends at the end of the year. And it’s not peanut dividends like those for the stock market, it’s relatively solid cash.

I may as well be open with you, now that we’re here: One of the Saccos I save with – let’s call it Sacco A – gives me about Sh56,000 for savings of Sh750,000. The other Sacco – Sacco B – gives me dividends of Sh8,000. I only started saving with them, I have in there about Sh100,000 and a short-term loan I’m servicing.

Loans have no impact on the dividends you’ll receive, or how your dividends are computed. Some people try to cheat the system by being dormant most of the year then making a lump-sum towards December. Saccos think ahead of you – the contributions you make earlier in the year, say in January, earn more in dividends than those made towards the end of the year.

There’s a computation the sacco uses. Here’s a sample from Kenya Police Sacco >> https://policesacco.com/dividend-calculator/

Being in the Sacco also means I, as a member, get first priority when the Sacco has property they’d like its members to invest in. Sacco A has a housing arm.

We’re usually invited to buy land on discounted member rate. Last year they did plenty of site visits to Nanyuki and Nyeri. I believe that the house me and my hubby, GB, will someday purchase, will be through this housing scheme.

Share capital

One thing you need to be aware of in Saccos is something called share capital. Share capital, in the simplest terms, means the amount you put in to buy shares in the Sacco. It’s like a non-redeemable ticket into a club.

Most Saccos have a standard amount of share capital for all members – no member has more shares than the next. It’s deducted from your contributions. (Ideally, it should.)

Share capital also means that, should you decide to exit the Sacco, they’ll give you back your contributions but they’ll retain your share capital.

The share capital for Sacco A is Sh10,000. The one for Sacco B is Sh35,000.

It’s important you understand that the value of the share capital doesn’t directly translate to the financial health of the Sacco. Sacco A has as stronger balance sheet and more members than Sacco B.

Sacco A lends four times your contributions. Sacco B lends three times your contributions.

Sacco A doesn’t have front office services activities (FOSA), Sacco B does, meaning that it provides basic banking services to the members. I have a Co-operative Bank ATM card from Sacco B.

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