This archive report was first published on 24 July 2021.
July 24, 2021
With the increasing desire for instant gratification among the youth, it's no surprise that many are turning away from traditional savings and credit options, including Savings and Credit Co-operatives (Saccos). However, experts argue that Saccos remain a valuable option for youths looking to save, invest, and access credit.
John Warui, CEO of Network Sacco, notes that the youth have been brought up in a time when obtaining credit from other financial institutions is easier and more attractive than Saccos. However, he emphasizes that Saccos offer a unique opportunity for youths to save, invest, and access credit, with benefits such as dividends, interest on deposits, and democratic leadership opportunities.
"In a Sacco, you make your cake and eat it," Warui says. "By being a member of a Sacco, you are a shareholder. You earn a dividend as an owner and interest on deposits as a shareholder. In a bank, your savings are used to make profits for the bank but you get nothing from that."
George Ototo, Managing Director of Kenya Union of Savings and Credit Cooperatives (Kuscco), agrees that Saccos offer more than just savings and credit. "There is more than just loans in a Sacco. Members also get trained," he says. "Also, if you want to get credit, you will barely come across anyone who will charge you interest rates lower than what Saccos will."
Despite the benefits, Ototo warns that potential members must do due diligence to avoid being defrauded in a Sacco. "Institution-based Saccos are the best as there is a common bond and considerably high dividends. Those just advertised need to be avoided because proving their authenticity is difficult, and some of the people running them might not even understand how Saccos work," he warns.
Warui also cautions that Sacco members should watch out for guarantees who are ill-mannered and likely to exit without paying their loans. "That can have the guarantors' savings wiped out. For a long time, Sacco loans have been secured using guarantors' shares. If the guaranteed members flee, then woe unto the guarantor," he says.
