Are you in a dilemma of whether to join a Sacco or a bank? You should probably join both since they have different importance to an extent. However, the benefit of one may supersede the other. The majority of people are familiar with banks, maybe because they are known to have physical locations with huge financial assets.
Saccos are as old as more than five decades ago since their emergence into the Kenyan market. But, ironically, people came to recognize their importance just less than a decade ago. It is a fact that both banks and Saccos are good, but you will agree with the reality that Saccos are better after going through the following points
1. Ease to Get Loans
Unlike banks, which have long procedures for filling out forms, when you want to secure a loan, Saccos has just a few simple steps. With banks, you have to provide security as collateral but it is not a must with Saccos. You just need three Sacco members to act as guarantors and you are halfway done with the process.
In addition, Saccos offer higher loans in comparison to banks. You get three times your savings, but with the banks, the amount you can get depends on many factors which are determined by the banks.
2. Low-Interest Rates
The main difference between banks and Saccos is that Saccos exist to help its members attain financial freedom while the banks exist to make a profit from their customers. Therefore, Saccos tend to charge considerably low interest rates in comparison to banks.
Apart from the interest charges, banks also charge service fees for processing a loan to a borrower. Most Saccos however, do not charge service fees when giving loans to members. They are very few if there are.
3. Flexible Loan Repayment Terms
Besides Sacco’s interest rates being friendly, their loans also attract flexible loan terms which are not possible with banks. In the Saccos for instance, the payment date arrives when you are not yet prepared with money you can explain your case to the management and get some adjustments. Such a case is not possible with banks.
Banks are a bit alienated from the real needs of their customers than Saccos where a member can explain his desire directly to the leadership. Bank services are more system-generated than natural as in the case of Saccos.
Dividends refer to the rewards a Sacco member gets in form of money at the end of a financial period. The rewards are proceeds of profit accrued by the Sacco over a financial period. This is a major motivating factor in Saccos.
The case is different with banks. In banks, instead of being rewarded for being a loyal customer, you are charged interests for providing you with storage for your money. The beneficiaries in banks are the employees who get bonuses annually depending on how much profit the bank made in a given year.
5. Saving Culture
Saccos’ major concern is to see its members prosper financially. So, as you remit your monthly savings, there is a mandatory portion that goes to savings directly. But the banks’ main concern—after noticing your account statement is good is to request you if they can lend you money. Their main aim is to earn interest out of the loan.
Saccos encourage its members to save so that members can access higher loans. The loans are employed in development projects by the borrowers thus transforming their economic lives. It does not mean that loans from banks do not transform life. They do but the main aim of the banks is the interest rates the loans attract.