Kenyans Prefer Sacco Loans: Here Are The Reasons

With a strong and thriving cooperative movement, Kenya is one of the top nations in Africa. Over 622 billion shillings in savings and nearly 1.2 trillion shillings in loans have been mobilized by saccos in Kenya.

For the following reasons, Sacco members favor Sacco loans over bank loans more:

1. Flexibility When Obtaining Loans

Most Sacco loans are flexible, and the eligibility requirements are less strict than they are at banks. Guarantors or even non-titled home products, including televisions, bicycles, sewing machines, etc., which are typically not accepted by banks, can serve as security for the loan.

2. Simple Loan Repayment Terms

Additionally, the loan repayment terms are more flexible than those that Kenyan banks need. Others have officers collect daily repayments from members starting with as little as twenty shillings. Some Saccos have a policy of collecting loan payback upon the occurrence of an event, such as the payment of farm produce.

3. No need for security

Members that have a common bond together typically create SACCOs. Members are able to guarantee loans for one another because of their shared bond.

This makes it possible for both those who have chargeable securities and those who don’t to access loans.The majority of banks only offer loans in exchange for charged security like title deeds or logbooks.

4. Income from Dividends

After deducting operating costs, the Sacco distributes the interest it has generated to its members as dividends at the end of each year. Sacco is, in a sense, reimbursing you for a portion of the costs you expended to pay back the loan. On the other hand, the bank’s interest earnings belong to the bank’s shareholders, and a typical borrower will not receive a share.

5. A Range of Loan Options

Most SACCOs will offer a variety of loan products to meet the demands of their members. The SACCOs will offer standard loans, loans for development, emergency loans, loans for school expenses, etc. The special needs of the Sacco members are being met by these loan products. In contrast to bank loans, which are intended for the general public and do not address the unique demands of an individual, it makes the loans serve a greater purpose.

6. Loans that are self guaranteed

The majority of SACCOs in Kenya let you take out loans equal to up to a specific percentage of your funds. In this situation, your savings serve as collateral for the loan you will be obtaining. Because of this, the majority of members can now directly use the lending facilities without having to find guarantors or security.

Your deposits or savings in your bank account cannot ever be used as collateral for a loan from a bank.

7. Processing Loans Is Simple

A Sacco loan is processed more quickly than a bank loan. In contrast to the bank’s loan assessment and approval process, a Sacco loan’s formalities and required appraisals are less onerous. Some SACCOs will handle a loan application in as little as 30 minutes, whereas a bank loan may take anywhere from 7 days to 3 months to process and deliver funds.

8. No Additional Fees

Most Sacco loans include upfront fees; any additional fees are communicated to the borrower. Bank loans come with additional fees in addition to the interest rate, making them quite expensive. Most banks will not reveal these fees to applicants and instead tend to bury them in lengthy terms and conditions that many clients never read and/or never fully comprehend even after signing.

9. Reduced Probability Of Auction In The Event Of Default

One is unlikely to experience the humiliation of having the loan recovered at an auction as the majority of Sacco loans are insured using deposits from other members. In the event of a default, the majority of banks won’t hesitate to auction off your property. As a result of persons being sold at auction by the banks, many people have experienced mental suffering that has led to suicides.

10. Multiple loans option

As long as you have the means to repay the loan, the majority of SACCOs permit their members to have multiple loan products. Most banks won’t let you apply for additional loans until the initial loan has been repaid in full. Because of the Sacco loan policy’s flexibility, members now have access to money in case of an emergency.

11. Reduced Interest Rates

Sacco interest rates are renowned for being cheaper. for average, SACCOs will charge 1% per month for loans with declining balances, while some loan types may have significantly lower interest rates.

12. Discrimination in Loan Pricing By Banks

The complete cost of taking out the loan will be included in the loan pricing. The majority of banks won’t offer the same loan to two separate borrowers at the same rate. The loan will have a risk factor added by the bank. The bank uses techniques that are never disclosed to the customer in determining the creditworthiness of the customer.

Saccos, on the other hand, have fixed prices regardless of a person’s perceived credit worth.

Conclusion

Millions of Kenyans depend on saccos for their livelihood, and they provide their members with flexible financing terms that are both appealing and inexpensive. Bank loans are typically pricey and out of the grasp of the majority of people. In Kenya, mobile loans are likewise outrageously expensive, with some charging interest rates of up to 500% annually.

Join a Sacco now to begin saving for higher borrowing capacity. Savings in this Saccos may only be 10 bob per day.