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SACCO Shares vs SACCO deposits
seppuku
#1 Posted : Sunday, January 29, 2012 2:14:50 PM
Rank: Veteran


Joined: 5/11/2010
Posts: 918
Hello good people of the earth! I have had this question gnawing at the back of my mind for a while now. It appears simple, even to myself, but I do not know the answer. I joined a SACCO not so long ago. Every time I read through their documents, two confusing terms keep coming up: shares and deposits. The reason I am confused is that every month I "deposit" money into my SACCO account ostensibly to buy more "shares". Then I come across a statement like this in their annual report:

"The management committee proposes a dividend of 30% (2010: 25%) on members’ share capital
and 11.7% (2010: 11%) on the members’ deposits for the year ended 31 December 2011."


What, pray tell, does this really mean? Somebody please set it straight for the greenhorns... Anxious
Learn first to treat your time as you would your money, then treat your money as you do your time.
BGL
#2 Posted : Sunday, January 29, 2012 3:23:24 PM
Rank: Veteran


Joined: 10/11/2009
Posts: 1,207
Share capital = Represents your ownership of the SACCO, It is not withdrable, if you decide on leaving the SACCO you have to transfer/sell them to someone else.

Deposits = Money that you demand and is paid back to you within the limits stated on the by-laws of the SACCO when you decide on leaving the SACCO.
History will not remember you for your IQ. It will remember you for what you did. “Genius is 1 percent inspiration, 99 percent perspiration.” Thomas Edison
jerry
#3 Posted : Sunday, January 29, 2012 3:44:44 PM
Rank: Elder


Joined: 9/29/2006
Posts: 2,570
When you join a SACCO you have to BUY "a share of the SACCO" to become a MEMBA! This is normally a small amount compared to deposits. It's like 3k, 5k, and you earn dividends on this. This is what gives you ownership of the SACCO. The deposits you make earns you interest. The share-capital takes care of the infrastructure like seats, computers, cars, buildings, etc. Note also that you can transfer your deposits (or part of ) and still remain a member thro ur shareholding. In SACCOs each member has an equal share of theWhole and hence voting is one-MAN-one-VOTE.
The opposite of courage is not cowardice, it's conformity.
seppuku
#4 Posted : Monday, January 30, 2012 9:15:13 AM
Rank: Veteran


Joined: 5/11/2010
Posts: 918
Thanks for your replies. You sucked out a bit of the mystery. However, it's funny that SACCOs then, appear to have an infinite number of shares. I say this because whenever a new member joins, they need not purchase shareholding from another member as is the case with limited companies.

Secondly, I do not see anywhere in the by-laws where the distinction between shares and deposits is made clear - as if it is not important enough a matter to investors. Yet, looking at the part of their annual report that I quoted two posts ago, the distinction is obviously imperative. In other words, I do not remember specifying the distribution (between shares and deposits) of my salary-deducted remittances to the SACCO. Nobody asked me. In fact, in their allotment form, I can only see boxes for shares, benevolent fund and loan repayments.

Lastly, it seems that in my SACCO, different members can have different amounts of shareholding - although the policy still stipulates a one-member-one-vote policy. This is in contrast to jerry's assertion.

Now, here are two other things I am wondering about.

a) Is it always the case that dividends earned on shares by far exceed interest paid on deposits?

b) Assuming a) above, doesn't it make sense then, to own more in shares than in deposits?

PS: One of these days I'm planning to make a trip to my SACCO office and I hope I'll come out wiser. In the meantime, let anyone feel free to share what they know about these matters for the benefit of others who may be in need of the same information. I'll be back with answers too, when I get them.
Learn first to treat your time as you would your money, then treat your money as you do your time.
seppuku
#5 Posted : Monday, January 30, 2012 9:46:49 AM
Rank: Veteran


Joined: 5/11/2010
Posts: 918
Here's the closest the by-laws come to distinguishing between shares and deposits: "The Management Committee
may classify share and deposit accounts and may declare dividends at
variable rates for each type of account"


Think Think Think

Sasa hii ndio kusema nini?
Learn first to treat your time as you would your money, then treat your money as you do your time.
luxel
#6 Posted : Tuesday, January 31, 2012 2:42:48 PM
Rank: Member


Joined: 7/17/2008
Posts: 152
@seppuku,
It is not always the case that dividend are higher than interest. How much to pay for each category is just a management decision depending on the objective e.g if they want to raise share capital (to meet sasra regulations) they are likely to offer a higher dividend to entice members. Remember that once you buy more share to enjoy the high dividend you will not be able to reverse the investment in future if they decide to lower the dividend yield.

Jerry assertion is correct. i.e regardless of the amount a member has in share capital, when it comes to voting you are entitled to one vote just like every other member.
Layman
#7 Posted : Tuesday, January 31, 2012 2:56:40 PM
Rank: Member


Joined: 9/21/2006
Posts: 422
Location: Nairobi
luxel wrote:
@seppuku,

Jerry assertion is correct. i.e regardless of the amount a member has in share capital, when it comes to voting you are entitled to one vote just like every other member.


.......and that explains why they are not limited companies so saccos or Co-operatives dont have to display xristics of LTD Companies, please dont compare the two.
jerry
#8 Posted : Tuesday, January 31, 2012 4:03:05 PM
Rank: Elder


Joined: 9/29/2006
Posts: 2,570
@seppuku. Rate of dividends and interest payment may not be the only determinant when it comes to doing ur savings. Some saccos secure loans on deposits only and not on shares. So if u are for credit like me u go for deposits. But is it true as a member u can choose how much goes to Shares?
The opposite of courage is not cowardice, it's conformity.
seppuku
#9 Posted : Wednesday, February 01, 2012 8:08:01 AM
Rank: Veteran


Joined: 5/11/2010
Posts: 918
@luxel, that's an important point you make.

@jerry, that too. I'll check with my SACCO about what they base their credit issuance on.

Meanwhile, I am waiting to see my first statement so I can tell for sure where my monthly contribution has been going. Is it to shares or to deposits? That has not been made very clear to me.

@Layman, not to discount your contribution but I think any two things can be compared and contrasted - at least in theory. It occurs to me that SACCOs have a notion of "ownership" analogous to what happens in a Limited Liability Company. In both, you "own" a chunk of the whole by purchasing shares against which dividends may be paid. In contrast, possessing more shares in a SACCO does not equate to greater voting power for you.
Learn first to treat your time as you would your money, then treat your money as you do your time.
anika66
#10 Posted : Monday, February 13, 2012 12:56:15 AM
Rank: Member


Joined: 2/25/2010
Posts: 157
This is very good education for me. In my sacco they have a system where if you save upto a certain category, then you are required to 'hike' your share (the ownership part) to a certain level. I didnt know that this share earns some income, now that i do, i am going to try ane ensure I save more so as to reach the next band which will qualify me to enter a certain blacket. Thanks Wazua for all the financial education I am getting
Keeping it all in the family
theking
#11 Posted : Monday, February 13, 2012 7:38:57 AM
Rank: Member


Joined: 1/25/2010
Posts: 344
in saccos,the main service is shares but a new requirement came up that all saccos must have FOSAs.....front office savings accounts. these r savings accounts just like any other bank accounts where a member can DEPOSIT money n earn INTEREST. But normally all payments one makes will by default go to shares unless explicitely stated as account deposits. thats my understanding. some saccos now no longer issue cheqs or EFTs for dividend payout,but deposit the cash in one's savings acc.
Layman
#12 Posted : Monday, February 13, 2012 8:25:59 AM
Rank: Member


Joined: 9/21/2006
Posts: 422
Location: Nairobi
theking wrote:
in saccos,the main service is shares but a new requirement came up that all saccos must have FOSAs.....front office savings accounts. these r savings accounts just like any other bank accounts where a member can DEPOSIT money n earn INTEREST. But normally all payments one makes will by default go to shares unless explicitely stated as account deposits. thats my understanding. some saccos now no longer issue cheqs or EFTs for dividend payout,but deposit the cash in one's savings acc.


Wewe boss, go slow and find out at least some minimum facts before you unleash this kind of misinformation. Am sure even the cairman of your sacco or even some eomployees of your sacco can enlighten you. Theres no requirement that any and I mean ANY sacco must have FOSA. Where did you get that from????????? Please go to the Governement Printer (iko hapo Haile Sellasie Avenue next to Kenya Poly) and get yoursels a copy of the Sacco Societies Act (I thinks its Kshs 40 only) and refresh your mind. Ok, let me assist you here in the meantime. The relevant ministry realized that the saccos that operated fosas were doing it haphazadly without any regulation and hence the establishment of SASRA so that any sacco that OPTS volutarily to operate fosa must apply for a licence from Sasra and must meet the minimum set requirements. The main aim of this is to protect members deposits.

The Saccos currently licenced t operate FOSAS are less than 100 saccos out of more that 13,000 sacos in kenya. More info please google sasra and go to their website. Sasra is Sacco Societies Regulatory Authority.

On Shares, each sacco decides on its own (through AGM) the minimum value of shares that every member mush have then all the other moneys coming from such members go to deposits automatically. Since members contribute monthly, the first few months contributions got to Shares until the full value is realized and thereafter to deposits. Its very rare to find a sacco where shares for every members is valued at more than kshs 5,000/=, very rare indeed. However, wanjikus refer to everything they contribute to the sacco as SHARES.
Museveni
#13 Posted : Tuesday, September 03, 2013 10:27:59 AM
Rank: Member


Joined: 8/16/2012
Posts: 657
Back in 2009

Merge or perish, Kenya saccos warned


Cooperative and Marketing minister, Joseph Nyaga. Photo/FILE



Today 2013

Merge or perish, Sasra tells saccos



PHOTO | FILE Sacco Societies Regulatory Authority chief executive Carilus Ademba at a previous function.

Quote:
The Sacco Societies Regulatory Authority (Sasra) is giving three options to the 65 saccos that are unlikely to meet the threshold. One of the options is merging with those that have complied.


Quote:
Most of the saccos that have not complied are finding it difficult to raise their capital levels to Sh10 million as required due to their small membership, often less than 2,000, and financial problems carried over from past mismanagement.

Some started front office services without a clearly thought out business plan and competition from other saccos, commercial banks, and deposit-taking microfinance institutions have only exacerbated the situation.(Brings this to mind)

Quote:

Out of those registered, three-quarters or 99 have capital adequacy ratio of 8 per cent against the regulatory minimum of 10 per cent while a quarter or 33 have investments in non-core assets in excess of the regulatory maximum of 10 per cent.

These will be required by June 2014 to have fully complied with these requirements. They will either have to sell some of the non-core assets or raise their core capital to bring the non-core assets at below 10 per cent.


Which saccos haven't complied?

Possibilities before June 2014..
Live and learn; and don’t forget, nothing ventured, nothing gained.
Murenju
#14 Posted : Wednesday, September 18, 2013 6:27:47 PM
Rank: Member


Joined: 7/13/2006
Posts: 94
Location: Nairobi
Has Kimisitu Sacco complied? I happen to have keyed in their vision!
Knock hard and it will be opened. Ask and you will be answered. Seek and you shall find.
Gathige
#15 Posted : Wednesday, September 18, 2013 8:38:07 PM
Rank: Veteran


Joined: 3/29/2011
Posts: 2,083
Murenju wrote:
Has Kimisitu Sacco complied? I happen to have keyed in their vision!


@Murenju, Tuko Sawa.
"Things that matter most must never be at the mercy of things that matter least." Goethe
webish
#16 Posted : Wednesday, September 18, 2013 9:05:48 PM
Rank: Member


Joined: 10/19/2009
Posts: 670
Location: Nairobi
Gathige wrote:
Murenju wrote:
Has Kimisitu Sacco complied? I happen to have keyed in their vision!


@Murenju, Tuko Sawa.


just seen the website of this sacco and came across this. I'm impressed Saccos are thinking out of the Box Applause Applause

"Kimisitu has partnered with Text Book Center and Hot point Appliances Ltd in pacts that will see members enjoy discounts from items bought in respective outlets or their networks countrywide."

Life is joy, death is peace, but the transition is very difficult.
Museveni
#17 Posted : Friday, September 20, 2013 9:01:50 AM
Rank: Member


Joined: 8/16/2012
Posts: 657
The power of group investment

A very very good read.

Pros:

- Nice background on the featured groups


Cons:

- FEP & Home Africa prominently featuring as examples of successful 'Chamas' based on expected achievements

- Too thin info [investment avenues] on Amalgamated Chama Ltd, makes it look like a budding pyramid scheme.
Live and learn; and don’t forget, nothing ventured, nothing gained.
faa
#18 Posted : Thursday, October 24, 2013 9:23:34 AM
Rank: Member


Joined: 5/8/2007
Posts: 700
Murenju wrote:
Has Kimisitu Sacco complied? I happen to have keyed in their vision!


what about finnlem..any idea?
nashx
#19 Posted : Tuesday, November 20, 2018 6:51:12 PM
Rank: Member


Joined: 2/28/2014
Posts: 180
Location: Nairobi
seppuku wrote:
Hello good people of the earth! I have had this question gnawing at the back of my mind for a while now. It appears simple, even to myself, but I do not know the answer. I joined a SACCO not so long ago. Every time I read through their documents, two confusing terms keep coming up: shares and deposits. The reason I am confused is that every month I "deposit" money into my SACCO account ostensibly to buy more "shares". Then I come across a statement like this in their annual report:

"The management committee proposes a dividend of 30% (2010: 25%) on members’ share capital
and 11.7% (2010: 11%) on the members’ deposits for the year ended 31 December 2011."


What, pray tell, does this really mean? Somebody please set it straight for the greenhorns... Anxious


What I have always wanted to know is how Saccos are able to pay 30% for dividends on share capital (even deposits at 11%) yet they give loans at about 12%d'oh! d'oh! d'oh! d'oh!
Offering my personal finance knowledge for free
madhaquer
#20 Posted : Tuesday, November 20, 2018 9:37:09 PM
Rank: Member


Joined: 11/10/2010
Posts: 226
Location: Nairobi
Rule of thumb: Shares earn Dividends, Savings earn Interest.

Shares are used for the Sacco initial capitalisation, fixed assets and excess will be invested (The returns of this investments are the Dividends).
Savings are used to issue out loans and the interest charged on loans is used as working capital, some may be retained and the rest paid out to savers (As interest on savings).

Some SACCO have high shareholding therefore making it possible to loan out members with the excess capital.

Some SACCO's tend to be high on liquidity than others meaning they may be having cash sitting without borrowers and this is put into projects like buying land, encouraging some form of asset finance like car loans etc.. some of this projects net over the 12% revenue of the typical development loans. *Check and learn your SACCO's products.

A SACCO that is trying to grow it's shareholding, will most likely allocate a higher % of returns on shares (dividends) than returns on savings (interest).

As a member it is important to note that: Savings determine borrowing power. The maximum amount you can borrow is determined by savings. But the shares sit and earn dividends. Depending on the SACCO, you may use shares as security for a loan.
I would advise all who have over 500k in shares and deposits in a SACCO to always try to attend the AGM and read the financial reports.
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