, 40 tweets, 13 min read Read on Twitter
SACCO members, the dividends season is upon us. Has your SACCO announced the AGM date and/or dividend rate? If so name it and the % on dividend and savings respectively
I promised to add to this thread on how to choose and join a SACCO. So let me do a short #52WeekChallenge thread, powered by #SaveWithMshwari
A SACCO (Savings and Credit Cooperative) is a type of cooperative whose objective is to pool savings for the members and in turn provide them with credit facilities. #SaveWithMshwari
The general objective of SACCOs is to promote the economic interests and general welfare of its members. SACCOs are member owned and member-governed via an elected committee #SaveWithMshwari
Originally, cooperatives were formed by farmer groups. First to market their produce then they evolved into savings and credit. With time, other professions formed their own SACCOs like Mwalimu Sacco for teachers, Kenya Police, Wanandege, Mhasibu (accountants) etc
Today, most of these SACCOs have opened up their membership and even rebranded. Any one can join, as long as you have an introducer who is a member..

The essence of the SACCO movement is to grow together. Borrowing, investing, repaying the money and earning a dividend. Like all member-owned organization, trust is key. #SaveWithMshwari
How do you choose a SACCO?

1. If you're joining a SACCO, you're doing so to be able to borrow money (and to save). So you choose one whose conditions for borrowing work for you.

The trickiest thing about borrowing from a SACCO is security. Traditionally, members guarantee each other's borrowing. Because they know each other and are in the same trade or have the same permanent employer

Today, that is not too easy. Our jobs are mobile.
My first hack on guarantees is you join a SACCO together with people you trust. Joining as an investment club for example means you can guarantee each other, with the club's assets as security. #SaveWithMshwari
My second hack is to join the SACCO your nuclear family is part of. E.g I am in my mom's teachers' SACCO cos teachers trust each other (and by trusting mom they trust me by extension). So I guarantee them and they do the same for me

Key thing is. Don't. Mess. Up.

If you have to borrow from elsewhere to repay the SACCO loan, do so. Because without trust, there's no borrowing.

Final hack: Securing your borrowing against your assets. Some SACCOs will allow you to use your car, land etc as security. They however don't book 100% of the asset's value. Make sure you know the T&Cs so you don't save then are unable to borrow

2. When joining, the SACCO will require you to buy a minimum amount of shares. This is what they call share capital. It is not refundable and it earns a dividend annually. Buy the minimum.

3. The periodical contributions you make are called "deposits". To position yourself to borrow, aim for consistent deposits. It's better to do small monthly amounts, than inconsistent lumpsum amounts

3. Most SACCOs will allow you to make a lumpsum saving to boost your deposits so you borrow. But they require you to wait for about 6 months before borrowing against it.

4. Most SACCOs have different types of products but the most common is what we call a "Normal Loan". It is 3 times your deposits and you can repay it in 36-48 months depending on the SACCO.

A normal loan attracts 12% interest reducing balance per annum. Most SACCOs will charge a 1% processing fee. All the other loans (development, school fees, emergency etc) have their own T&Cs.

The second benefit of joining a SACCO is that your money earns something. If you read the responses to the first tweet, you will see the various dividend rates.

I want us to discuss this.

Every year, they pay:
- A dividend - this is a % return against your share capital
- Interest on your deposits.

This is off the money they earn lending to you
As such, it means you are paying interest less than 12% because you are receiving back 5-9% of your deposit back as interest. And another % as dividends.

Why build credit with a SACCO when you could just take an unsecured loan with the bank?

1. It's cheaper to borrow from a SACCO
2. A SACCO forces you to keep saving even as you repay. So you're building an asset base.

3. If you are disciplined to reinvest your earnings, the power of compounding works in your favour.
I recently changed my mind about dividends being party money after using a compounding calculator. I realised that if I reinvested all my dividends and interest, in 10 years, 51% of my total capital will be earned interest

You can use this calculator to work out the compounding factor of your SACCO savings + dividends.

So every time you eat dividends, you are basically eating the fruits of your investment / leaving money on the table.

You do not have to reinvest in a SACCO, you can look at other places to invest the cash, but make it earn something for you.

At this juncture, a reminder to save for the #52WeekChallenge. For the employed, this is pay week, hack the Challenge by depositing a lumpsum to get ahead.

For those who haven't joined the #52WeekChallenge, what is holding you back? Here are the simple steps. Join and deposit kakitu before you head out for Friday party. #SaveWithMShwari
For business people, some SACCOs have customized products that are aligned to small businesses.

If you are in biashara and in a sacco please @ me

Also, most SACCOs will allow SMEs to join as a corporate member which allows employees to borrow and the employer defucts and remits the funds after signing an MOU.

This is an easier path, than forming your own SACCO

Like all financial products, SACCOs aren't for everyone. If the idea of community and trust sound repulsive, then you can go for other things. Bank loans, saving in other instruments etc.

But whenever people ask why upcountry folk and teachers especially are able to do so much with so little pay, their key is SACCO membership

Ok. I'll add the questions to the thread as they come.
Deducts* Bah
For a Savings and Credit Org, do the absolute minimum on shares because you can only recoup them by earning a dividend (at 10% that's 10 years).

Investment SACCOs that facilitate you to sell your shares at a profit may make it easier for you to sell.

Next time, we will talk about investment SACCOs and their risks. I'm sure you've seen kina Gakuyo etc and the drama that has been playing out.
Anyways. Watu wa Solution SACCO (former Mwalimu SACCO Meru) tukutane Kinoru Stadium, with a pledge to NOT eat our dividends.
Remember. Dividends are the fruit. Reinvest them to fully benefit from compound interest.

Enjoy your Friday guys!
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