24 Savings and Credit Cooperative Organisation SACCO A SACCO is one form of a

24 savings and credit cooperative organisation sacco

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2.4 Savings and Credit Cooperative Organisation (SACCO) A SACCO is one form of a cooperative society whose business is to provide financial services to its member’s. SACCO’s are legal institutions registered under the cooperative laws (cooperatives Act and cooperative Regulations 1991). Sacco’s are owned by their members through payment of share capital and membership fees to the institution. In addition to the above, as per SACCOL (1998), “a savings and credit cooperative (SACCO) is a democratic, unique member driven, self-help, not for profit financial cooperative. It is owned and governed by members who have the same common bond. A SACCO’s membership is open to all that belong to a group, regardless of race, religion, color, creed, and gender or job status. These members agree to save their money together in the SACCO and to make loans to one another at reasonable rates of interest. Interest is charged to cover the interest cost on saving and the cost of administration .There is no profit paid to any one .The members are the owners and the members decide how their money will be used for the benefit of one another (Bailey, 2001). Saving and credit cooperatives (SACCO’s) which are known as the credit unions in some other countries are defined as cooperatives which furnish their members with convenient and secure means of saving money and obtaining credit at reasonable rates of interest (Kabuga and Batarinyebwa 1995) an observation that is in agreement with (Bailey,2001). 17
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The saving and credit cooperatives are usually organized within a group which is already knit together by a bond of common interests such as workers in same factory or members of the same community who are fairly well acquainted with one another (Kabuga and Batarinyebwa 1995). Further more, the savings and credit cooperatives are cooperative organizations which are guided by the practices, philosophy and principles of the cooperative movement. They differ from the rest of other cooperatives because they are financial cooperative organizations with a social context (Kabuga and Batarinyebwa, 1995). 2.5 Cooperative Societies in Kenya According to The Ministry of Co-operative Development, Kenya (2011), there are 5,000 registered Saccos out of a total of 12,000 registered cooperative movements in Kenya. All these Saccos operate back office operations and they have been able to mobilize over Ksh 170billion and granted loans to the tune of Ksh 120billion. Out of the 5,000 Saccos 200 have ventured into Front Office Service Activities (FOSA). According to The Ministry of Cooperative Development, Kenya (2010), Sacco societies were first registered in Kenya as a thrift licensee in 1964 with the objective of mobilizing savings from their members. However, it was not until 1969 that the Government encouraged the registration of Sacco’s to mobilize savings and give credit to employed people who had a similar common bond. The government enacted the cooperative societies Act and the rules to better manage the Sacco’s in 1966. From 1973, many Government Ministries and Departments registered Sacco’s in accordance with the common bond. By 1975, there were over 1,000 registered Sacco’s in the country offering back office and credit 18
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facilities. Sacco’s in Kenya have grown tremendously and currently they have 3.7 million
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