If you want to join a SACCO, then there are many things to consider when joining a SACCO. Cooperative financial institutions include SACCOs.
They are organizations that are owned and run by members and are guided by the idea of people helping people. Members pool their funds, which are then utilized to lend money to one another and provide other financial services.
Many people, however, are unfamiliar with SACCO procedures and regulations and are sometimes frustrated when they are unable to obtain loans, particularly when they are unable to persuade other members to serve as guarantors or because direct withdrawal from deposits is not permitted.
Here are the things to consider when joining a SACCO.
Things To Consider When Joining A SACCO
1. Regular Savings And Contributions Are Required
A SACCO saving system is not elective and is absolutely regular, in contrast to saving schemes given by commercial banks where the customer can contribute something if he chooses.
This implies that consistent monthly payments must be made throughout the duration of membership without interruption.
2. Before Saving, You Must First Become A Member
Similar to how you must first create an account with a commercial bank and purchase shares in order to join a SACCO. There is a minimum share capital for each SACCO. This might not be due entirely at once but rather in installments.
As soon as your membership registration is complete, you can begin paying your monthly donation. You can only transfer these shares if you desire to leave the SACCO. If you intend to leave, it is a good idea to find a member to whom you can transfer your shares.
3. Saving Is Depositing, While Taking Money Out Of A Deposit Is Borrowing
The member’s deposits from which the loans are granted will be made up of their monthly contribution. But to get access to this money, you must take out a loan.
The simple expression “to save is deposit and to access a deposit is to borrow” sums up this idea. Before moving your lump sum deposits from your bank to a SACCO, you must determine your liquidity needs.
You can only get access to your money after you deposit it in a SACCO deposit by taking out a loan or leaving the organization.
4. There Is A Minimum Cap For Savings And Contributions
Despite the fact that members can choose the amount of their monthly contributions, there is a required minimum payment. With different SACCOs, this varies.
Except in the event of membership termination, this amount cannot be withdrawn. However, you are free to choose any amount over the bare minimum that you can provide each month. In addition, the evaluation of contribution and savings restrictions is flexible.
SACCOs, as opposed to banks, only have access to the savings and stock of its members as a source of capital for lending. However, one of their main advantages is the requirement that the amount you qualify for must not exceed the amount of your savings.
This means that in order to be eligible for credit, a member must save over a minimum of six months. The member is generally only qualified for up to three times his savings in many local SACCOs.
5. Your Normal Savings Plan Is Separate From How You Repay Loans
Some participants think they can stop making monthly contributions in order to focus on payback. This is a false impression. Even as your loan is being repaid, you must continue to make your regular contributions to the SACCO. Finding an additional source of income is advised while you continue to save for debt payback.
6. No Borrowing Without A Ship Of Guarantee
Here there are some differences between banks and SACCOs. Commercial banks require collateral, but SACCOs just require member guarantees for loans. The total deposit made by the guarantors must equal the loan’s principal.
In the event of default, the guarantor is responsible for paying the obligation because the SACCO will keep his deposits seized until the amount is settled.
7. Serving As A Guarantor
Please be aware that if you guarantee a loan for another SACCO member and that member defaults, you are accountable for both your portion of the loan as well as the entire debt. The members who have guaranteed a member are accountable for seeing to it that the member repays the debt.
Guarantors and the borrower must tell the SACCO of the situation if a borrower falls behind and provide a plan for how payment will be made moving forward. If a member defaults, the SACCO will take the loan amount from the deposits of the guarantors.
8. Intend To Leave A SACCO
You can leave a SACCO that you have joined as a member. You must address it in writing to the committee or the office administrator or accountant. The office will next confirm whether the member owes the SACCO any money or if there are any monies owed to them.
If a member owes the SACCO because the loan amount is greater than the deposit, they must work out a plan of payment with the office. If the deposit is greater than the loan and the SACCO owes the member, it arranges the refund.
Before a resigned member can be cleared, the remaining member must find a successor if the resigned member guaranteed the remaining member.