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Banka over saccos article

The term “Sacco” is an abbreviation meaning “savings and credit co-operative society.” It can be defined as a member-based financial institution that operates on cooperative values, identity, and principles, which include socio-economic responsibility, openness, and honesty. The membership of saccos consists mainly of entrepreneurs in the informal sector and farmers. Saccos enable farmers together with small and medium-sized enterprises to create economies of scale in bargaining with urban banks and other financial institutions; they provide access to sustainable financial services; and they provide low-income families with a safe place to save their income in their area or village and reasonably priced loans. Unlike co-operatives, which are an open-ended concept, a Sacco is close-ended, limited to holding savings and providing credit to members. Saving in a Sacco allows your money to earn interest on deposits whose rate is ratified by members at the annual general meeting, depending on the Sacco’s financial performance. Thus, rather than cashing in on your interest, you reinvest it into your savings, which causes it to grow over time.

Solidarity, community, and collaboration are what society needs when a country’s economy is strongly affected by a global pandemic. Lockdown restrictions and the resulting economic shock have impacted many people who are facing unstable financial situations. Under such circumstances, being a member of a Sacco can prove to be highly beneficial than joining a commercial bank. Saccos offer similar financial services as traditional banks. Even the experience of using those services is nearly identical. However, there are a few key differences between the two. Here are some of those differences.


One of the main differences between traditional banks and SACCOs is ownership. Banks are generally owned by investors, who may or may not be account holders. However, in a SACCO, you become a partial owner of the organization the moment you open an account there.


Unlike traditional banks, saccos are not-for-profit organizations. They work in the best interest of their members. They are free from the stress of corporate investors and stock price fluctuations.

However, one must not think of saccos as a charity organization. saccos must collect revenue, take financial decisions, pay salaries, and compete with other financial institutions.

Joining a sacco and becoming a member also has its perks. Here are some of the reasons why saccos are preferable than banks.

1. Easy to get loans

Sacco loans are easily accessible to its members as compared to bank loans. The saccos model is all about savings and credit. Saccos offer members loans at affordable and stable rates. The process of acquiring loans has also been simplified and digitized in many saccos through mobile banking. Banks will require a host of documents that not all might provide before your loan is approved. Saccos will only require your contribution record or pay slip to get your loan approved. The great thing about saccos is that you can get a loan even if you’re not employed.

2. Compound Interest

Saving in saccos allows your money to earn interest on deposits, whose rate is ratified by members at the annual general meeting depending on the Sacco’s financial performance. Thus, rather than cashing in on your interest, you reinvest it into your savings, which causes it to grow over time. The interest added on top of that interest is known as compound interest. This means that the longer you save, the more you benefit. As a wise man once said, “Money makes money, and the money that money makes, makes more money.”

3. Low-interest rates

Banks rates are ever high compared to saccos. Banks have loan interest rates and again they’re never the same, this is where most people won’t imagine how costly it can be to find a bank with low loan interest to get a loan from. At any given time, interest rates for saccos are lower than those of banks. The most interesting thing is that they don’t change more often.

4. Flexible payment terms

Saccos are sometimes lenient on payment terms because the management has a strong attachment to and knowledge of the loanees. Banks are only interested in getting their money back within a limited timeframe.

5. Dividends

In reality, banks don’t appreciate their members; their main aim is to maximize profits and grow their business. On the other hand, sacco members benefit from annual dividends, which can even be used when applying for a loan.

6. Savings and Loans

Keep in mind that once your cash goes into the Sacco, the only way to get access to it is either through a loan or if you exit the Sacco altogether.

 7. Share Capital

One thing you need to be aware of in a sacco is something called share capital. Share capital, in the simplest terms, means the amount you put in to buy shares in a sacco. Most Sacco’s have a standard amount of share capital for all members, no member has more shares than the next. 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. Remember share capital amounts vary from Sacco to Sacco. For instance, the share capital for sacco A is Shs 10,000. The one for sacco B is Shs 20,000.

You must understand that the value of the share capital doesn’t directly translate to the financial health of the sacco. Sacco A may have a stronger balance sheet and more members than Sacco B. Sacco A may lend four times your contributions whilst Sacco B lends three times your contributions.

 8. Investment projects

The sacco business, like other financial institutions, thrives on the trust and confidence of the depositors. A sacco is owned by its members, who buy shares in the entity. This offers solidarity, community, and collaboration among members to solve their socioeconomic problems.

saccos pull together their members’ savings and invest them in joint projects such as land or houses that members can purchase at reduced rates. Dividends are also paid to members at the end of every financial year, depending on sacco’s financial performance


It is estimated that saccos contribute 46 percent of the total gross domestic product (GDP), 35 percent of gross national savings, and employs directly about 500,000 people. More people should be encouraged to join Saccos. Members have an opportunity to benefit from simple loan terms and conditions. Compared to traditional banks, saccos offer members better interest rates if they need a loan during such challenging times. Saccos not only provide employment opportunities to many people but also their impact is visible in terms of their contributions to poverty reduction and the strengthening of economic resilience, both achieved by supporting income-generating activities.

K-unity is a first-tier SACCO that has an asset base of over KES 5.7 billion. We have 17 branches in 5 counties and a membership of over 70,000. K-unity is one of the best and oldest SACCOs in Kenya, having been in operation for over 50 years. You can open an account by clicking the following link: https://bit.ly/3WfIQ2F  Kindly call, text, or WhatsApp us at +254 707 424 774 for more information. 

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