What is SACCOs, why should it be digitised?

IF you’re an adult living in an urban region of any corner of the world, then you’ll be well aware of the banks. Most probably you’ll have one or multiple bank accounts.

Also, you might think that who doesn’t have a bank account in today’s day and age. However, that’s not the reality in many remote and rural areas of the world.

According to the World Bank, there are around 1.7 billion unbanked adults in the world. The major reason for this astounding number is lack of awareness, access, convenience, steady income, and trust. Trust is a huge factor as it keeps people unbanked even if they have access to banking facilities.


All the major factors mentioned above along with the lack of trust in mainstream banking have given birth to some innovative and novel alternatives to banking.

SACCOs is one such alternative which is doing wonders when it comes to the boosting financial inclusion in urban and rural areas of developing nations.

As per the 2014 Global Census on Co-operatives, there are around 2.6 Million SACCOs in 145 countries which have over 1 Billion clients and members.

This number gives us a rough idea about the significance and the impact of SACCOs on the world. SACCOs which are sometimes also referred to as cooperatives or credit union came into existence the first time in Germany in 1846. Since then they have continued gaining popularity in Canada, the US, Europe, and mainly in the African continent.

What is SACCOs?

SACCOs is an abbreviation for Savings and Credit Co-Operative Society. It’s a member-based financial institution which operates on co-operative values, identity, and principles which includes social responsibility, openness, honesty, and caring for each other.

In simple words, it’s a self-help organization in which a group of people stock their savings and offer loans to their own members. The main objective behind setting up SACCOs was to combat poverty by enabling the poor to train how to utilize limited resources.

A SACCOs is a self-help, unique member-driven, and democratic co-operative. It’s governed, owned, and managed by its members who share a common bond like a labour union, working for the same employer, belonging to the same church, social fraternity or living in the same community.

The membership for SACCOs is open to whoever belongs to the groups irrespective of the race, colour, religion, creed, job status, and gender. These members join the SACCOs to put their savings together and provide loans to their own members at reasonable rates.

The interest which is charged on the loans is used to cover the cost of the administration and the interest cost on savings. There’s no profit or payment outside the internal owners. Also, members who decide to join a SACCO has to buy shared thus making all the members an owner of the cooperative. Moreover, they also have to pay a mandatory minimum monthly contribution.

SACCOs are generally regulated and registered organization which are run by professional management teams. SACCOs have emerged as an effective way of reaching to the unbanked. These organizations offer a simple, accessible, and reliable option to the people to invest, save, and raise capitals for their needs.

How does it differ from banks?

SACCOs offers similar financial services as that of traditional banks. Even the experience of using those services is quite the same. However, there are a few key differences between the two. Let’s have a look at these differences.


One of the main difference between traditional banks and SACCOs is ownership. Banks are generally owned by investors who may or may not be account holders. However, in a SACCO, you become a partial owner of the organization the moment you open an account there.


Unlike traditional banks, SACCOs are not-for-profit organizations. They work in the best interest of their members. They are free from the stress of corporate investors and stock price fluctuations. However, one must not think of SACCOs as a charity organization. SACCOs have to collect revenue, take financial decisions, pay salaries, and compete with other financial institutions.

Top 4 benefits of using SACCOs

First-Cost-efficient financial services. Since SACCOs are a not-for-profit and memberowned organization, they pass on their success to its members by offering higher interest rates for savings, lower interest rates on loans compared to banks, and lower fees. Second-Community association.

SACCOs play a crucial role in supporting the local economies by providing financial education & awareness. They also reach out to support small businesses.

SACCOs are also known for supporting the local charitable organizations in the community. Third-Shared branching. Shared branching is a unique feature of SACCO. This is because SACCOs are often local institutions and they lack a widespread network of ATMs and branches.

However, in many cases, users can utilize the branches and ATMs of SACCOs for free via a shared branching network. Users can also make withdrawals, deposits, pay loans and access many other financial services. However, it’s important to know that to leverage shared branching both your SACCO and the branch that you want to use should be a part of a shared branching network. Fourth-Improved customer service.

SACCO offers superior customer services as compared to that of traditional banks. A customer who values building relationships and rapport with loan officers and tellers, he will only prefer SACCOs over any traditional bank.

African countries leading in the cooperative sector

One of the biggest reasons behind SACCO’s success is that it takes the advantage of the strength and trust of a local community. SACCOs have seen immense success in the African continent due to two reasons. First, the convenience that it provides to its member.

Second, its business model is built on the foundation of local communities. In Kenya, SACCOs have around 14 million members with more than Sh732 billion in deposits and more than Sh 1 trillion in assets. Likewise in Uganda, there are more than 16,500 cooperative societies registered in the country.

Ethiopia saw a surge in the number of SACCOs in their country from 26,672 in 2009 to a whopping 53,982 by the end of 2014. The annual growth in these five years was recorded to be at 17 per cent. As per the survey conducted by FinAccess in Kenya, around 66.4% of the adults use deposits and savings instruments.

This includes bank accounts, MFIs, and SACCOs. Out of this 48.7% told that they require to save for their daily expenses. And the most common medium for these savings were mobile bank account loans and SACCO loans.

This survey also shows that SACCOs are one of the most trusted financial service providers in the country.

Digitizing SACCOs in times of Covid-19 There are three main arguments in support of SACCO’s digitization. First, is the fact that people in all parts of the world especially in Africa have a high level of comfort when it comes to mobile financial services. Africa is a massive market when it comes to mobile financial services like mobile money, mobile banking, etc.

Moreover, it also has a lower banking penetration due to which the unbanked people are directly dependent on SACCOs for their credit and savings. So, it only makes sense to marry both of them. Another argument is of the COVID-19 pandemic.

The COVID-19 pandemic has forced payment industry and banking sector to adopt social distancing measures to curb the spread of the disease. In such times it is imperative that SACCOs adopt a digital channel that can minimize human contact.

The success of m-Pesa which is the world’s biggest mobile money player also encourages that such an experiment might do wonders in the continent.

Related Articles

Back to top button