Apart from promoting the spirit of saving among people, Saccos have revolutionized the financial sector greatly. It has saved many people from the bureaucratic process associated with the traditional banking systems. With just a few requirements, you are good to with a Sacco.
But how do the Saccos make their money? You know that any organization, institution, or cooperation needs finances to operate successfully. A Sacco is not excepted. Though its core purpose is to deal with savings and giving out loans to individual members, it has to finance its operations.
The following are some of the ways a Sacco can get money to finance its operations such as, paying its staff, processing loans, and paying its utility bills.
1. Members’ Monthly Savings
Monthly savings from members form the basic source of income for a Sacco. Every Sacco has to set out a certain amount of money their members need to remit monthly. While the money is primarily meant for members’ savings, its portion can be employed in running the affairs of a Sacco. It can be calculated in any percentage as agreed by the members and the management.
Together with securing a guarantor, the savings are what determines how much loan a member is qualified for. Saving also attracts interest over time. Members earn dividends out of the interests.
2. Non-Refundable Share capital from Members
Before you join a Sacco, you will be told of a nun-refundable share capita you will be needed to pay. The amount varies depending on an individual Sacco. The amount gives one the right of ownership as a partner in the Sacco. The share capital depending on the Sacco governance can help in running the Sacco.
3. Fines and Penalties
Saccos get money from penalties and fines imposed on members. Maybe a member might have failed to pay back their loans in time or have engaged in any practice worthy of attracting a penalty or fine, depending on the rules of a Sacco.
The money obtained from the fines or penalties is plowed into a Sacco to help run its operations. It may not be a friendly way of obtaining money but it is necessary to bring order in a Sacco. You don’t want to be in an institution where people just break laws and get away with them.
4. Interest Earned from Savings
Both the funds raised in form of savings or non-refundable share capital are put into savings. They can be placed in either a bank or any other preferred institution by members where they can earn interest. The interests can be monthly or annually.
The interest finally accumulates into a reasonable amount that can help in running the Sacco. It is always advisable to choose an institution and a saving plan that has the best interest rates. It will help raise a significant amount of money to help in operations and dividends to members.
5. Investment Projects
Investment plans are the best avenues of great and huge returns for any institution that engages in the same. There are different investment plans a Sacco can engage in, ranging from real estate, government bonds and securities, business, or agriculture. You can choose the one that fits your budget.
For instance, a Sacco decides to take a portion of its members’ savings—upon agreement and decides to buy a piece of land somewhere. At a lower price. Could be, that the land appreciates at the rate of 20% per annum. After five years, suppose the Sacco invested Ksh.500,000, they are likely to double the initial capital.
Additional Kshs500,000 into a Sacco is pretty good money. Right? The members could be smiling to the bank after receiving their dividends as the Sacco operations are taken care of appropriately.