What

is A Sacco?

The word SACCO means Savings and Credit Cooperative Organization. A Sacco is owned, managed and run by its members who have a common bond, in this case Kenyans living in the USA. Membership is open to all Kenyans regardless of race, tribe, gender, political affiliation, religion or job status. A member of the Sacco is a person admitted to membership after registration in accordance with the Sacco’s by-laws.

Objectives of a Sacco include but are not limited to:

  1. Organize, promote the welfare and economic interests of its members
  2. Provide a source of fair loans and reasonable rates of interest
  3. Promote personal growth through the introduction of new products and services that will promote the economic base of its members
  4. Ensures progress of its members and society through continuous education programs, on proper use of credit, reduction of poverty, human dignity and co-operation
  5. Affiliation to the relevant National Co-operative Credit Union and the Apex Society

A Sacco is Not

  1. Individually owned by a group of people, but by all members who join the Sacco
  2. A "Pyramid Scheme" or some form of a merry go round
  3. A bank that will turn away people as bad credit risks
  4. A subsidiary, franchise or branch of a company or financial services loan scheme
  5. A "loan shark" with intentions of exploiting people
  6. A profit making organization. Profit is not the motivating factor. Service to membership is the drive and motive of this Sacco.

The difference between a Commercial Bank and a Sacco

At first glance the difference between a bank and a credit union/Sacco may seem insignificant, but there are some distinct differences between them in terms of business purpose, ownership, regulation, operations and governance.

  1. Banks emphasis is on business and consumer accounts while Sacco’s/Credit unions emphasis is on member deposit and loan services
  2. Banks are for-profit making financial institutions owned by people or private investors and governed by a board of directors chosen by the shareholders.
  3. Saccos are non-profit financial cooperatives owned by their members and governed by a board of directors elected by, and from among, those members.
  4. Usually there is a common bond among the members of a Sacco, such as belonging to the same organization or living in the same geographical area. It is not the case with bank owners.
  5. In a Sacco ownership every member is an equal owner while banks ownership depends on the number of shares a shareholder owns.
  6. Sacco Boards of Directors are elected by members. They are volunteers, and are not paid salaries but given a minimal sitting allowance, if and when the Sacco can afford to do so. Banks Boards of Directors are elected by the shareholders. They are paid and legally bound to make decisions that benefit the shareholders.
  7. Sacco/Credit union elections are held annually with each member getting a single vote regardless of their amount of savings. Bank owner’s number of votes depends on the shares holdings.
  8. In Sacco’s, no single member is allowed to own more than 25% of the totals shares while in a Bank there is no such restrictions, one may own as many shares as they wish.
  9. Sacco’s always offer competitive fees and lower interest rates on loans to their members than banks do to their customers, because Saccos are not driven to make profits.
  10. In a Sacco, net profits that are earned are shared between all members inform of dividends, based on a member’s shareholding percentage, while in a bank, only the shareholders receive a share of the profits.
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