Kenya is one of the leading countries in Africa with a strong and vibrant Cooperative movement. Saccos in Kenya have mobilized over 622billion shillings in savings with almost 1.2 trillion shillings in loans.
Sacco members have a greater preference for Sacco loans over bank loans for the following reasons:
1. Flexibility In Loan Acquisition
Most Sacco loans are flexible and the conditions to access loans are not as stringent as those found in the banks. The loan can be secured by guarantors or even household items that have no title such as televisions, bicycles, sewing machines, etc which are not acceptable to most banks.
2. Easy Repayment Loan Terms
The loan repayment modes are also more flexible than what the banks in Kenya demand. Some Saccos have a policy or collecting loan repayment upon the occurrence of an event e.g payment of farm produce while others have officers collecting daily repayments from members starting with as low as twenty shillings.
3. No Security Needed
Most SACCOs are formed by members who share a mutual bond. This mutual bond enables members to guarantee each other loans as they are known to each other.
This enables people who do not have chargeable securities to access credit as well as people who have securities. Most banks will only give out loans against chargeable securities such as title deeds or logbooks.
4. Dividend Earnings
At the end of the year, the interest earned by the Sacco is paid back to the members in form of dividends after deducting operational expenses. In a way, Sacco is paying you back part of the expense you have incurred to repay the loan. On the other hand, the interest earned by the bank belongs to the bank owners and an ordinary borrower will not share the proceeds.
5. Diverse Loan Products
Most SACCOs will have more than one loan product to suit their members’ needs. The SACCOs will have normal loans, development loans, emergency loans, school fees loans, etc. These loan products are tailored to meet the specific needs of the members of the Sacco. It makes the loans serve a better purpose, unlike bank loans that are aimed at the general public and therefore do not meet the special needs of an individual.
6. Self Guaranteed Loans
Most SACCOs in Kenya will allow you to borrow up to a particular percent of your savings as a loan. In this case, what you have saved is used as a security to the loan you will be borrowing. This has made it possible for most members to access the loan facilities instantly with no need to look for guarantors or security.
A bank will never allow you to borrow a loan against the deposits or savings in your bank account.
7. Loan Processing Is Easy
It takes a shorter time to process a Sacco loan than a bank loan. The formalities and the appraisals needed for a Sacco loan are less cumbersome unlike the bank’s loan appraisal and approval process. Whereas a bank loan may take anywhere from 7days to 3 months for the loan to be processed and funds released, some SACCOs will take as little as 30minutes to process a loan application.
8. No Hidden Charges
Most Sacco loans have no hidden charges and the charges levied are disclosed to the loan applicant. Bank loans have other charges other than the loan interest that will make the loan very expensive. Most banks will not disclose to the applicant these charges and tend to hide them deep in the bulky terms and conditions which many people never read, or never understand after signing them.
9. Less Likelihood Of Auction In Case Of Default
Since most Sacco loans are guaranteed using other members’ deposits, one is unlikely to suffer the humiliation of being auctioned to recover the loan. Most banks will not hesitate to auction your property in case of a default. Many people have suffered mental anguish ending up in suicides as a result of people being auctioned by the banks.
10. Access To Additional Loans While Still Having Another Loan
Most SACCOs do allow their members to have more than one type of loan product while you have the ability to repay the loan. Most banks will not allow you to access more loans until you clear the first loan. This flexibility of the Sacco loan policy has made it possible for members to access funds in case of emergency needs.
11. Lower Interest Rates
Saccos are known for their lower interest rates. Most SACCOs will charge 1% per month on a reducing balance basis on their loans while some loan types may attract even lower interest rates.
12. Loan Pricing Discrimination
Loan pricing will incorporate the total cost of borrowing a loan. Most banks will not issue the same loan to two different people at the same cost. Banks will load a risk factor to the loan. The creditworthiness of the customer is determined by the bank using methods that are never disclosed to the customer.
Saccos on the other hand, have constant pricing irrespective of the credit worth perception of an individual.
Conclusion
Saccos in Kenya play a vital role in the livelihood of millions of Kenya’s and they offer flexible credit terms that are attractive and affordable to their members. Bank loans are generally expensive and are out of reach for most people. Mobile loans in Kenya also also prohibitively expensive with some charging interest as high as 500% per annum.
Join a Sacco today and start saving for a better borrowing power. Savings in this Saccos may be as little as 10 bob daily.
