What a SACCO is and why SACCOs were created in Kenya
A beginner's introduction to SACCOs. It explains the key terms, gives a brief history of the co-operative idea in Kenya, and sets out the problem SACCOs were meant to solve.
By the end of this lesson, you will be able to explain what a SACCO is in your own words. You will also understand why SACCOs were created in Kenya and what problem they were meant to solve.
What is a SACCO, in one minute?
A SACCO is a group of people who save money together and lend to one another. The name is short for Savings and Credit Co-operative Society. It is a type of organisation where the people who use it also own it.
Think of a village water tank that everyone pays into and everyone can draw from. A SACCO works on the same idea, but with money.
Words you will hear again and again
SACCO talk can sound technical at first. These six terms cover most of it.
| Term | What it means | Everyday picture |
|---|---|---|
| Member | A person who joins and owns part of the SACCO | Someone who buys into the group |
| Share capital | Money a member pays to own a stake in the SACCO | Your "seat at the table" |
| Deposits | Savings a member keeps with the SACCO | Money set aside in the shared pool |
| Loan | Money lent to a member, repaid with interest | Borrowing from the pool |
| Dividend | A share of the SACCO's surplus paid to members | A yearly "thank you", not guaranteed |
| Common bond | What members share, such as an employer, trade or area | The reason the group came together |
The problem that came first
To see why SACCOs exist, start with the problem. Many ordinary people, such as small farmers and low-paid workers, found it hard to get a loan from a formal bank. Banks often wanted collateral, which is something valuable you pledge in case you cannot repay. They also wanted proof of regular income.
People who could not borrow safely often turned to moneylenders. Those loans could be costly and the terms were often unfair.
The core problem was simple: people had small amounts of money and no fair, safe place to save or borrow.
A brief history of the idea
The story has a few stages. The exact dates and details should be checked, but the broad shape is this.
- The idea begins in Europe. In the 1800s, groups of working people began pooling their money. They did this to protect themselves from costly lenders and to help each other.
- It reaches Kenya. The co-operative idea arrived during the colonial period. Early co-operatives in Kenya were closely linked to farming, such as selling crops and produce together.
- Kenyans make it their own. After independence, co-operatives were promoted as a way for Kenyans to build their own economy. Saving and credit societies grew alongside them.
- SACCOs spread to workplaces and trades. Colleagues in the same job or industry formed SACCOs because they already trusted each other.
- Growth brings oversight. As SACCOs began to hold more members' money, the need for proper rules and supervision grew.
The aim: what SACCOs were meant to solve
When SACCOs were set up, the goals were practical. They can be summed up in five aims:
- Pool small savings so that many small amounts become one useful sum.
- Give members access to credit that is fairer and easier to reach than what they could find elsewhere.
- Keep control with members, usually one member, one vote, however much each person has saved.
- Build a habit of saving through regular contributions.
- Support self-help, in a spirit similar to harambee, where people work together to improve their lives.
How a SACCO differs from a chama or a bank
People often mix these up. All three handle money, but their purpose and ownership differ.
| Type | Who owns it | Main purpose |
|---|---|---|
| Chama | A small group of members | Save and support each other, often informally |
| SACCO | Its members, as a registered society | Savings and affordable loans for members |
| Bank | Shareholders | Run a business that earns profit |
Your next step
This week, write one sentence in your own words: "SACCOs were created to ..." Then ask a friend or relative who belongs to a SACCO what their common bond is. You will see the original idea at work.