SACCOs combine collective savings with member ownership and access to loans.
Co-op Consultancy CEO Nicholas Kamonye explains how SACCOs combine collective savings with formal ownership, member voting rights and access to credit.
SACCO and chama differences go beyond pooling money, with registered cooperatives offering formal ownership, governance and borrowing structures. Co-op Consultancy chief executive Nicholas Kamonye says these structures help members save, access affordable credit and build wealth together.
Speaking during a Co-op Youth Forums episode, Kamonye described a chama as a useful starting point. However, he distinguished an informal savings group from a registered cooperative with defined rules for contributions, borrowing and decisions.
Kamonye leads Co-op Consultancy, a subsidiary of Co-operative Bank Group. He said SACCO membership gives savers a stake in the institution, alongside access to its financial services.
SACCO and chama differences in legal status
A cooperative must register with the Commissioner for Co-operative Development under the Co-operative Societies Act. Unlike an informal chama, it has a legal identity separate from its members.
That status allows the cooperative to own property, enter contracts and sue or face lawsuits in its registered name. SACCOs undertaking regulated deposit-taking business must also obtain a licence from the Sacco Societies Regulatory Authority, known as SASRA.
Meanwhile, SACCOs undertaking specified non-deposit-taking business require SASRA authorisation. These requirements sit alongside the cooperative’s internal systems for managing members’ money.
Members exercise their authority through the annual general meeting, the cooperative’s highest decision-making body. There, they elect leaders, review financial reports and participate in decisions affecting the institution.
An elected board oversees management, while a supervisory committee provides oversight. Registered cooperatives must also keep proper accounting records and arrange financial statement audits at least once every financial year.
How ownership and pooled savings support borrowing
SACCO members are both customers and owners through their share capital contributions, Kamonye explained. They also have equal voting rights, regardless of how many shares they hold.
To illustrate the value of pooling savings, he used an example of 100 members contributing Ksh1,000 each month. Together, they would accumulate Ksh1.2 million in a year, compared with Ksh12,000 for one saver.
Beyond saving, members can access loans once they meet their SACCO’s savings and membership requirements. Depending on the institution, borrowing limits can reach three or four times accumulated deposits.
However, loan access also depends on income, repayment capacity and guarantees from fellow members. Kamonye said many SACCO products charge about 1 per cent monthly interest, equivalent to a nominal annual rate of 12 per cent.
Actual rates and fees nevertheless vary across institutions. Members can use this credit for property purchases, business investments and other personal needs.
