How To Invest In SACCOs In Kenya
In Kenya, SACCO (Savings and Credit Cooperative Organization) is a type of financial institution that is owned and operated by its members. SACCOs are formed by individuals or groups who come together with the aim of pooling their savings and providing affordable credit facilities to their members. In this article, you will learn how SACCOs work and how to invest in SACCOs in Kenya.
There are things that you need to know before investing in SACCOs in Kenya. You may want to learn how they function, where they get their funds, or even the best SACCOs to invest in. It is good to research and educate yourself about something before you involve yourself.
How Do SACCOs in Kenya Work
SACCOs in Kenya are regulated by the SACCO Societies Regulatory Authority (SASRA) and are governed by the Cooperative Societies Act. They serve as an alternative to traditional banks and are primarily focused on providing financial services to their members, including savings accounts, loans, and other financial products.
Members of a SACCO contribute regular savings, which accumulate over time and earn interest. These savings are then used to provide loans to members at competitive interest rates. SACCOs often target specific groups of people, such as employees of a particular organization, professionals in a specific industry, or residents of a particular locality.
SACCOs have gained popularity in Kenya due to their member-centric approach, lower interest rates on loans compared to commercial banks, and the opportunity for members to earn dividends on their savings. They also promote a culture of savings and financial discipline among their members.
Overall, SACCOs play an important role in promoting financial inclusion and empowering individuals and communities by providing access to affordable financial services.
How do SACCOs make profits In Kenya
SACCOs in Kenya generate profits through various means. Here are some key ways in which SACCOs make profits:
1. Interest on Loans
SACCOs charge interest on the loans they provide to their members. The interest rates are typically lower compared to those offered by commercial banks. The difference between the interest earned on loans and the interest paid on members’ savings contributes to SACCO’s profitability.
2. Investments
SACCOs invest their funds in various financial instruments such as government securities, fixed deposits, and other approved investment channels. These investments generate income in the form of interest, dividends, or capital appreciation.
3. Fees and Charges
SACCOs may impose fees and charges on specific services, such as loan processing fees, membership fees, or charges for non-financial services. These fees and charges contribute to SACCO’s revenue stream.
4. Non-Financial Services
SACCOs may offer additional non-financial services to their members, such as insurance products, training programs, or consultancy services. These services can generate additional income for SACCO.
5. Other Income Sources
SACCOs may explore other income-generating activities, such as renting out property owned by the SACCO or providing fee-based consultancy services to external entities.
It’s important to note that SACCOs are primarily focused on serving their members and promoting their financial well-being. While they aim to generate profits, their main objective is not profit maximization but rather providing affordable financial services and benefits to their members. Any profits generated are typically reinvested to strengthen the SACCO’s financial position, expand services, or provide better dividends and interest rates to members.
Different Ways To Invest In SACCOs In Kenya
There are several ways to invest in SACCOs in Kenya. Here are some popular investment options:
1. Membership Shares
One of the primary ways to invest in a SACCO is by purchasing membership shares. These shares represent ownership in the SACCO and entitle you to certain rights and privileges as a member. The value of membership shares can appreciate over time, and you may receive dividends based on your shareholding.
2. Savings Accounts
SACCOs offer savings accounts where members can deposit their savings. By keeping your savings in a SACCO, you contribute to the pool of funds that the SACCO can use for lending and investments. Savings accounts may also earn interest, providing you with a return on your investment.
3. Fixed Deposit Accounts
Some SACCOs offer fixed deposit accounts where members can deposit a lump sum for a fixed period at a predetermined interest rate. Fixed deposit accounts generally offer higher interest rates compared to regular savings accounts, making them a viable investment option for those seeking higher returns.
4. Special Investment Products
SACCOs may offer specialized investment products to their members. These can include investment schemes such as education funds, housing schemes, or retirement schemes. These products provide opportunities for members to invest their funds in specific areas and potentially earn higher returns.
5. Money Market Funds
Some SACCOs may have money market funds that invest members’ funds in low-risk, liquid financial instruments such as Treasury bills and commercial papers. These funds aim to generate stable returns while ensuring liquidity for members who may need to access their funds quickly.
6. Loans to the SACCO
In some cases, SACCOs allow members to invest in the SACCO by providing loans to the organization. Members can lend their funds to the SACCO, typically at a specified interest rate. This investment option provides the SACCO with additional capital, and members earn interest on their loans to the SACCO.
It’s important to note that investment options and terms can vary between different SACCOs. Before making any investments, it is advisable to carefully review the investment terms, risks, and potential returns, and consult with SACCO representatives to make informed investment decisions.
How To Invest In SACCOs In Kenya
To invest in SACCOs in Kenya, you typically need to follow these steps:
1. Research and Select a SACCO
It’s advisable to always research and educate yourself about something before involving yourself with it. To Invest in SACCOs you need to conduct thorough research to identify SACCOs that align with your investment goals, financial needs, and eligibility criteria. Consider factors such as the SACCO’s reputation, financial performance, investment options, membership requirements, and regulatory compliance.
2. Meet Eligibility Requirements
Ensure that you meet the eligibility criteria set by the SACCO you intend to invest in. SACCOs may have specific requirements such as employment status, profession, membership in certain organizations, or residency in a particular locality. These requirements mostly vary with the SACCO and its laws and regulations.
3. Membership Application
Contact the chosen SACCO and inquire about their membership application process. Obtain the necessary application forms and provide the required documentation, which may include identification documents, proof of address, and any other supporting documents as requested.
4. Purchase Membership Shares
SACCOs typically require new members to purchase a specified number of membership shares. Pay the required amount to acquire the shares. The value of the shares can vary depending on the SACCO and its policies.
5. Deposit Savings
Once you become a member, open a savings account with the SACCO. Deposit your savings into the account based on the agreed-upon intervals (e.g., weekly, monthly). Ensure that you comply with the SACCO’s minimum deposit requirements and follow their savings guidelines.
6. Explore Investment Options
Familiarize yourself with the investment options available within the SACCO. Understand the risks, returns, and terms associated with each investment product. Consult with SACCO representatives or financial advisors if necessary to make informed investment decisions.
7. Complete Investment Processes
Based on the investment option you choose, follow the specific processes outlined by the SACCO. This may involve filling out additional forms, providing additional documentation, or meeting specific requirements for the chosen investment product.
8. Monitor and Manage Your Investment
Regularly monitor the performance of your investments and stay informed about any updates or changes from the SACCO. Review your statements, track returns, and ensure that your investment aligns with your financial goals.
Remember, investing in SACCOs, like any investment, carries certain risks. It is important to conduct due diligence, understand the investment terms and conditions, and assess your risk tolerance before committing your funds. If needed, seek professional advice from financial advisors or consultants to make informed investment decisions.
NOTE: To make money through SACCOs is not necessarily by buying shares or investing in them. You can invest with them, by investing with them you can get loans from the SACCOs that you’re already a member and buy properties or make other investments like investing in Uber in Kenya with the loaned funds. Getting loans with SACCOs is much cheaper than other financial institutions.
How To Buy Shares In a SACCO In Kenya
If you want to buy shares in a SACCO in Kenya, these are the steps that you need to follow:
1. Research and Select a SACCO
Conduct research to identify SACCOs that you are interested in investing in. Consider factors such as the SACCO’s reputation, financial performance, investment opportunities, and eligibility criteria.
2. Membership Eligibility
Ensure that you meet the membership eligibility requirements set by the SACCO you wish to invest in. These requirements can include factors such as employment status, profession, membership in specific organizations, or residency in a particular locality.
3. Membership Application
Contact the chosen SACCO and inquire about their membership application process. Obtain the necessary application forms and provide the required documentation, which may include identification documents, proof of address, and any other supporting documents as requested.
4. Membership Share Purchase
SACCOs require new members to purchase a specified number of membership shares. The value of these shares can vary depending on the SACCO and its policies. To buy shares, you will typically need to:
- (a) Determine the Number of Shares
Please determine the number of shares you wish to buy. This may depend on factors such as your investment budget and the SACCO’s minimum shareholding requirements. - (b) Calculate the Cost
Multiply the number of shares by the price per share to determine the total cost. The price per share is usually predetermined by the SACCO. - (c) Payment
Make the payment for the shares either by cash, bank transfer, or any other payment method specified by the SACCO. Obtain a receipt or acknowledgment as proof of your share purchase.
5. Membership Approval
After submitting your application and purchasing the shares, the SACCO will review your application. If approved, you will receive confirmation of your membership and the number of shares allocated to you.
6. Enjoy Membership Benefits
As a member and shareholder of the SACCO, you will be entitled to various benefits such as participating in the SACCO’s decision-making process, receiving dividends, accessing financial services, and potentially attending annual general meetings.
It’s important to note that the specific procedures and requirements for buying shares in a SACCO can vary between different SACCOs. It is advisable to contact the SACCO directly or visit their website to obtain detailed information about their membership application and share the purchase process.
NOTE: Before investing or saving your money in any SACCO you first need to know if its a well-recognized Savings and Credit Cooperative Organization. This is to make sure that you don’t find yourself losing money to fraudsters.
Here are some of the best SACCOs in Kenya:
1. Stima Sacco
2. Safaricom Sacco
Here are the 10 best SACCOs to invest in Kenya in 2023.
Frequently Asked Questions
1. Can you withdraw SACCO shares?
In general, SACCO shares in Kenya are not freely withdrawable like savings deposits. The shares represent ownership in the SACCO and are intended to foster a sense of member ownership and long-term commitment to the organization. However, there are certain circumstances under which you may be able to withdraw SACCO shares, depending on the SACCO’s policies and regulations. Here are some common scenarios:
1. Termination of Membership
If you decide to terminate your membership with the SACCO, you may be able to withdraw your shares. However, the SACCO’s rules and bylaws will determine the conditions and procedures for share withdrawal upon membership termination.
2. Exiting the SACCO
Some SACCOs have specific provisions for members to exit the SACCO by withdrawing their shares. This may involve fulfilling certain requirements or providing notice within a specified period. The withdrawal process and any associated fees or penalties will be governed by the SACCO’s policies.
3. Maturing of Shares
SACCOs may have provisions where shares mature after a specific period, usually several years. Once shares mature, you may have the option to withdraw the maturity value or reinvest them in the SACCO. The maturity period and withdrawal conditions will be outlined in the SACCO’s policies.
It’s important to note that SACCOs have their own rules and bylaws that govern share withdrawals. Therefore, it’s recommended to review the specific SACCO’s policies or consult with the SACCO’s management or customer service representatives to understand the share withdrawal process, any associated fees or penalties, and the conditions under which shares can be withdrawn.
