Saving in a Sacco has been touted as one of the best ways of making your money work for you.
It not only guarantees you dividends from time to time, but it also allows you to borrow against your savings at relatively lower rates than banks would charge.
But many Sacco members do not have the full information about the finer workings of the investment vehicles, such as the process of withdrawing membership.
If you reach a point where you want to part ways with your Sacco, it is important to understand a few things before initiating the withdrawal process.
Financial experts advise that you should ask yourself why you joined the Sacco in the first place, and whether you have attained that purpose.
Moses Chebor, a former manager at Boresha Sacco, says you should have a valid reason for leaving.
“It could be reasons such as when you want a loan, they do not issue you with one or delay in processing it,” he says.
Mr Chebor says a delay in disbursement of funds for more than six months should be a red flag that the Sacco could be having cash flow issues, most likely due to mismanagement.
This is reason enough for you to exit the Sacco.
The quality of services offered by Saccos is crucial for retaining members considering the institutions compete with banks, which in many cases, offer more superior services such as mobile banking.
“When you want to join a Sacco, it should have these services, which you can access from the comfort of your home,” says Mr Chebor.
He says Saccos that have incessant leadership wrangles also compromise the quality of services to members and may make some want to leave.
“But members have the power to change the management in the board or within the committee. They have the powers to bring in the right people.”
He also points out that the financial strength of a Sacco is a key consideration in deciding to join or leave. This can be seen in how quickly you can access money when you need it.
“When you want to borrow for emergencies, school fees or development, you should get it in good time,” says Mr Chebor.
Saccos, especially those that operate through the check-off system, have an advantage as they are guaranteed cash at the end of the month.
“There are others that have built reserves from other sources with membership open to anyone, including those who make deposits daily,” says Mr Chebor.
“There is a lot of money floating in Saccos.”
If a member wants to leave a Sacco, they should issue a notice of 60 days (two months) after which they should get their money.
“If you have guaranteed other members, then those members should replace you as a guarantor,” Mr Chebor advises. “Otherwise, a member is not free until the loan they have guaranteed is equal to the savings of that particular member.”
Members are, however, free to lodge complaints with the Sacco management if they feel they are being unduly exploited by their fellow members.
In a supervision report for 2020 released last year, the Sacco Societies Regulatory Authority (Sasra) raised concerns about Saccos that were not adhering to the law on refunds to members upon exit.
According to the Regulations 2010, refunds for deposit-taking Saccos should be done within 60 days after receiving a written notification from the member.
“Impediments that make exit from Saccos tedious only serve to drive away potential members, particularly the younger generation of the citizenry, who will not hesitate to invest their funds in the many other available alternative financial institutions,” said Sasra Chairman John Munuve in the report.
He said the authority would not hesitate to institute stiff regulatory sanctions against Saccos and their officers found to have unreasonably delayed refunding members’ deposits or resolving non-legal disputes with their members, thereby tarnishing the reputation of the entire subsector.?
Eric Maina, an analyst with financial research firm Mwango Capital, says it is also important for members to examine their Sacco’s books from time to time.
“Ask questions such as how is it performing? Is there anything amiss? Is there corruption and are the Sacco’s financial results being submitted on time?”
“While looking at the books, look at where the investments go,” says Mr Maina.
He says the frequency of dividends should also be a key consideration in deciding whether to join or quit a Sacco.
“It’s key, but it is also dependent on what they have been investing in. If it is going down, then that is something to question.”
Mr Maina says if it has been a difficult year to make investments, then it is likely the dividends will go down, which is understandable.
But if the dividend payout moves from 10 per cent to zero, then it is questionable.
“A fall in dividend should not always be a cause for alarm,” he adds.
Since Saccos are regulated, they also ought to invest money in regulated markets to protect members’ deposits.
Mr Maina says people prefer Saccos because of the returns in terms of dividends and the relatively lower interest rates.
As such, these are the variables that members should monitor. For example, are they favourable to you or have they changed over time?
“If you could qualify for a loan three times your deposits but now you are getting two (times), that could make you move,” he says.
You should also keep tabs on people you have guaranteed loans or have guaranteed you.
“If it is to your detriment, then you have a right to move,” says Mr Maina.