Introduction

Savings and Credit Cooperative Societies (SACCOs) are financial organizations whose ownership and control are by their members. These societies operate as non-profit organizations to provide access to financial services to their members. They offer various services, including savings accounts, loans, and other financial products. This article will discuss the different types of SACCOs, how they operate, and their benefits.

The Savings and Credit Cooperative Organizations in Kenya have a long history, dating back to the early 20th century. The SACCO sector has grown significantly since its first establishment in the country in 1965. They serve to supplement the low-income communities not served by traditional banks, by providing affordable and accessible financial services. Ownership and control are solely on members. These members pool their savings and provide loans to each other and over the years, they have become an essential part of the financial landscape in Kenya. They play a crucial role in promoting financial inclusion and economic development. The sector has grown to include thousands of SACCOs with millions of members and has become a significant source of credit for small businesses and households.

How do SACCOs operate?

Operation is based on the principle of mutual assistance, where members pool their resources to provide financial services to each other. The members are required to make regular contributions to society. The contributions then provide other members loans and other financial services. A board of directors elected by the members governs SACCOs, and a management team oversees their operations.

Types of SACCOs

Community-Based SACCOs

Community-Based SACCOS are established to serve a specific community, such as a religious group, ethnic group, or geographic area where the members are usually drawn from the same community and have a common interest. The SACCOs are generally small and limit their services to community members. They operate on the principles of a cooperative society, where members pool their resources together to provide each other with access to credit and other financial services. Members of a community-based Sacco also benefit from higher interest rates on their savings compared to commercial banks. The Kenyan government promotes the formation of these to promote financial inclusion and empower communities.

They play a significant role in providing access to financial services to those underserved by the traditional banking sector, particularly in rural areas. In recent years, there has been a growing trend towards digitalization in community-based SACCOs, with many adopting mobile money and other digital financial services to increase efficiency and reach more members. Despite facing challenges such as limited resources and a lack of regulatory oversight, they remain a crucial part of the financial sector in Kenya and continue to play a vital role in promoting economic development at the local level.

Occupational-Based SACCOs

In this instance, the occupational-Based SACCOs are established to serve a specific occupational group, such as teachers, farmers, or government employees. Usually, the members are in the same occupation, and their shared interest is to improve their financial well-being. Occupational-based SACCOs often provide benefits specific to their members’ needs, such as loans for agricultural activities or educational expenses.

Microfinance SACCOs

Microfinance SACCOs are established to serve low-income individuals who may not have access to traditional banking services. They offer various financial services, including savings accounts, loans, and insurance products, to help their members improve their economic well-being. These SACCOs often work with microfinance institutions and other financial organizations to provide their services.

National SACCOs

National SACCOs are established at a national level and service members from different parts of the country. Usually, they are larger and provide a broader range of services. In addition to that, they often work with other financial institutions, such as banks, to offer their services to members. They are also open to members from all over the country and offer a more comprehensive range of services.

Benefits of SACCOs

The benefits of SACCOs are numerous. For starters, they provide access to financial services to individuals who may not have access to traditional banking services. Similarly, they offer a range of financial products, such as loans and insurance. This serves to help members improve their economic well-being. They also provide a safe place for members to save their money, and offer competitive interest rates on savings accounts.

Conclusion

In conclusion, SACCOs play an essential role in providing access to financial services to individuals who may not have access to traditional banking services. There are various types of SACCOs, including community-based, occupational-based, microfinance, and national ones. They operate on the principle of mutual assistance, where members pool their resources to provide financial services to each other. The benefits brought about include access to financial services, a range of financial products, and a safe place to save money.

Today, there are hundreds of SACCO societies in Kenya with a total membership of over 2 million. They offer various services, including savings, loans, insurance, and money transfer services. Despite facing challenges such as mismanagement and lack of regulation, these societies remain a vital part of the financial sector in Kenya and continue to play a crucial role in promoting financial inclusion.

Categorised in: General

This post was written by Cynthia Njoki

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