BySimon Mburu
Reporter
Nation Media Group
What you need to know:
- Apart from evaluating who gives the highest dividends, there are several points to consider
- Saccos will bridge your financial gap, but with so many Saccos around, it can be difficult for you to spot the Sacco that will grow your money
By saving through a Sacco, Michelle Langat can access loans that she guarantees using her savings. Besides, she is allowed to access loans that are up to four times the amount of money she has saved.
"I have saved Sh800,000 in Sacco shares so far. This means that I can access a loan of up to Sh600,000 and guarantee it against my savings. This is a loan that doesn't need approvals," she says. Michelle says that she earns dividends at a rate of 13 per cent per year.
Saccos will bridge your financial gap, but with so many Saccos around, it can be difficult for you to spot the Sacco that will grow your money. To guide you, here are some of the top Saccos in Kenya by dividends and return on share capital.
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Police Sacco
This Sacco was founded in 1972 and has branches in Nairobi, Eldoret, Kakamega, Nyeri, Kisii, Nakuru, Meru, and Mombasa. It has a membership of about 60,000 and pays dividends at a rate of 10.5 per cent on savings and 17 per cent on share capital. The Sacco has a fixed deposit account option where the interest paid varies according to the amount of money saved. For example, if you save between Sh10,000 and Sh49,999 for one year, your savings will earn 7 per cent interest or between Sh700 and Sh3,499. If you save Sh200,000 to Sh1 million in this fixed account, you will earn interest at a rate of 8.5 per cent or between Sh17,000 and Sh85,000. Their highest fixed account interest is 12 per cent on Sh10 million and above.
Stima Sacco
This Sacco society with headquarters in Nairobi has a membership of 140,000. The Sacco has branches in Nairobi, Mombasa, Kisumu, Nakuru, Ol Karia, Eldoret, Kawi, and Embu. In the dividend payments for the full year 2019, the Sacco paid dividends at a rate of 14 per cent on share capital and 10.5 per cent on savings. Its savings package is known as Alpha deposits. It targets individuals, groups, and corporates. This package allows members to save continuously. However, savings under this account can only be accessed upon membership withdrawal.
Tower Sacco
Headquartered in Ol Kalou Town, Nyandarua County, the Sacco started as a Nyandarua County teachers' cooperative society before opening up to the general public. It has branches in Nairobi, Nakuru, Nyahururu, and Laikipia, and investors can invest and get a return of 20 per cent on share capital for five years. This share sale has been selling at Sh100 per share, with a one per cent bonus for every share purchase worth Sh150,000 and above. For the full 2020 financial year that was paid out in February 2021, the Sacco gave dividends at a rate of 13 per cent. The Sacco allows share investors to take instant loans against their locked savings.
Mhasibu Sacco
This Sacco has branches in Nairobi, Kisumu, and Mombasa and pays interest on deposits at 8.15 per cent. It pays a dividend on share capital at a rate of 15 per cent. The minimum share capital you can invest with is Sh10,000. With a share deposit, you can contribute Sh1,600 per month. Mhasibu accepts securities against loans using deposits, guarantors, and unit trusts. However, if you apply for a loan at this Sacco and offer to secure it with your logbook, the Sacco will only give you 50 per cent of the total amount.
Hazina Sacco
For the full year 2020 dividends that were paid out this month, Hazina members earned interest on deposits at a rate of 10.3 per cent. The Sacco paid dividends on share capital at a rate of 20 per cent. This Sacco will allow you to capitalise or plow back your dividends. If you plow back 100 per cent of your dividends, you earn 10 per cent of the amount as a bonus. If you plow back 50 per cent of your dividends, you earn a 5 per cent bonus.
Nation Sacco
The Nation Sacco is based in Nairobi and has savings packages that will allow you to save monthly, save exclusively for school fees or holidays and invest in share capital. In its 2020 dividend payment, Nation Sacco gave 15 per cent returns on share capital and 8 per cent returns on member deposits. Loans that exceed a repayment period of one year at this Sacco are fully guaranteed by non-withdrawable deposits. The monthly minimum contribution is Sh2,000. The deposits will allow you to secure loans at three times the total amount saved and guarantee other members' loans.
Safaricom Sacco
The Nairobi-based Sacco pays a 7.5 per cent interest on deposits and 12 per cent on share capital. On top of this, the Sacco charges a 5 per cent withholding tax on interest earned. To qualify to earn dividends for the share capital, you will be required to have met the minimum deposit of Sh40,000. Dividends for those who have not met this minimum are plowed back to their shares.
Pay attention to these pointers, say experts
According to two financial video logs by Rina Hicks, a certified professional coach and investment banker, and Peter Gichinga, the board chair at Safaricom Investment Cooperative, this is what you should look out for when scouting for a Sacco:
- Bylaws: Read the bylaws and understand how the Sacco you are interested in operates. Bylaws should answer questions such as how to exit, how to sell your shares, costs involved if you want to exit or swap shares. They should also tell you what will happen if you fail to pay the minimum monthly contribution. In most Saccos, the share capital is not withdraw-able but can be sold or transferred to an existing member upon your withdrawal from a Sacco.
- The return on investment: Know what returns on average you should expect to get. If your money is locked for a year, how much interest will it earn? What value will you get if you invest in the Sacco's share capital?
- Membership diversity: If a Sacco was started by teachers or farmers, how far has it gone in creating diversity? The best Saccos have a diversity of membership. Don't go for a Sacco that is exclusively run by one category of people.
- Long-term value: Get in a Sacco where you know people who can guarantee you loans if need be. You should also look at whether a Sacco offers secured loans.
- Management: Look at the board members and how past decisions and policies have been executed. Also, look at the Sacco's liquidity ratio to see the amount of savings versus disbursed loans. See where and how deposited funds are invested. Find out if the Sacco offers full disclosures on accounts and loans or not.
- Automation: Don't go for a Sacco that will require you to travel to its headquarters to sign withdrawals or make a share swap or apply for a loan. Go for a Sacco that has automated its operations and accepts automation items such as standing orders.
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