Savings and credit cooperative societies, commonly known as SACCOS, are becoming increasingly popular in Kenya.They provide an alternative to banks for low-income earners who need financing.
Taxi driver George Mokua said being a member of a SACCO helped him start his taxi business. For a long time, he said, he didn't have the confidence to approach a bank because he had not saved a substantial amount of money and had few assets. “The terms and conditions for getting a loan through a SACCO are not hard," he said. "A bank will require a title deed among other requirements which one may not have.”
Their ability of SACCOs to provide loans at relatively low interest rates has attracted members and contributed to their growth across Kenya.
George Mokua bought his first car through a Sacco loan. He is saving and on his way to buying a second.
“There is not so much pressure when making payments to the Sacco," he noted. “Whatever they give you, as long as you pay back, there is no problem. With a bank, when the time for repayment comes they want their money really fast."
In a SACCO, which are known as credit unions in other countries, net profits are shared between all members in the form of dividends, based on a member’s shareholding percentage, while in a bank, only the shareholders receive a share of the profits.
There is also usually a common bond among the members of a SACCO, such as belonging to the same profession or living in the same area.
Michael Maruga Mangeri is a manager at Metropolitan National SACCO, which has been in operation since 1977 and has 90,000 members. “We have juakali artisans [metal workers], we have dairy farmers, we have coffee farmers, we have tour people, we also have people who own small enterprises, I mean hardware and shops, even Kiosks. Those are the blue-collar jobs we have currently,” he explained. “And we are developing them by giving them loans at very competitive rates."
Kenyatta University entrepreneurship and finance expert Ambrose Jagongo feels SACCOS are the future of young entrepreneurs in Kenya who are just starting out.
“The one inside there of collateral, [do] hamper the people who are not endowed with some finances to get. If I do not have collateral, I may not go to the bank. If I want to start a business, the bank will not give me money. The bank will give me money when i already have a business that they see," he said.
Research by the International Labor Organization indicates about seven percent of the African population is affiliated to some of type of financing cooperative.
In Kenya, those cooperatives are giving a big boost to the country's economy, through people who in all likelihood, could not get financing any other way.