7 Disadvantages of Joining a SACCO in Kenya [2022]

Disadvantages of Joining a SACCO in Kenya

Savings and Credit Co-operative Organizations, SACCOs, have become popular in the Kenyan financial market over the decades. They are putting up a stiff competition with other financial institutions like banks. The primary financial advice you will get when you start earning some money is “save”. For whatever reasons, saving is a vital financial discipline and many will recommend one to join a SACCO for the practice.

No doubt, licensed SACCOs have several benefits such as encouraging a culture of saving, lower interest rates, and easy access to loans in case of an emergency. But, the demerits associated with the practice cannot go unnoticed. The following are some of the disadvantages of joining SACCOs that are not painting a good picture of the sector.

Disadvantages of joining a sacco in Kenya

1. Poor Management

Dealing with finances is such a sensitive exercise that requires experts to handle—something which SACCOs either don’t have or are limited in. Many people come up with such saving arrangements but most the saving institutions never celebrate their third birthday, due to poor management. This is due to a lack of professionalism in handling money and sensitive affairs of the institutions.

2. Lack of Transparency

There is limited trust in SACCOs due to the lack of proper rules and regulations governing the sector—until resent when the factor was captured by the Central Bank of Kenya. There have been many cases of money getting lost in the hands of the management without a trace. Some members also borrow money three times their savings only to disappear for good.

3. Internal Conflicts

You never want to get caught up in the quarrels of a SACCO. It is always messy and chaotic when members find out that there is no transparency among their leaders or fellow members. Don’t even imagine a situation where a member borrows money and disappears. Apart from blame games and broken trusts, it sometimes leads to a physical confrontation.

4. Lack of guarantorship

Getting loans sometimes tends to be tedious in SACCOs since you have to get at least two or three members to assent to your borrowing. The people assenting your borrowing are called guarantors. Not many people normally want to be guarantors because, if you fail to pay back the money the burden will be on their heads. Several people, in the name of guarantors, have paid huge amounts of money they never borrowed themselves.

5. The Pain of Collateral

Collateral here refers to the assets you pledge against the loan you intend to borrow. In case you fail to honor your payments; the assets are taken for compensation. The recovery process is a painful one as there is no mercy—even your iron roof can be blown off to pay for your loans. Many Kenyans have sunk deeper into poverty after failing to pay back their loans. Better take a loan when you are sure of the means of paying it back.

6. You Can’t Withdraw Your Money

Here is where the reality pinches harder—you can’t access your savings in SACCO unless you intend to end your membership. Sometimes your life has hit rock bottom and the savings could be the only hope you have. Unfortunately, no access to your cash if you still have hopes of continuing with SACCO membership and enjoying privileges. The situation may push you to look for loans elsewhere, which might be unhealthy financial practice.

7. Limited Money for Borrowing

Unlike banks, which have huge financial assets which them the ability to lend out fat amounts of money, the majority of SACCOs in Kenya have limited financial muscles. They are not able to lend out a lot of cash, in case a member needs it. In this scenario, you are limited in the amount you can borrow. You cannot, therefore, carry out major projects with borrowings from a SACCO. Thus, a need for a backup, like a bank, for more cash.



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