Last Updated on January 9, 2023
Saccos are the best alternative banking options as they provide members with low-interest rates while offering them high dividends. The best Saccos in the country pay higher dividends than banks on savings, making them a popular choice among Kenyans looking for savings and investment opportunities.
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What is a SACCO?
SACCO is an abbreviation for Savings and Credit Co-Operative Society. These financial institutions are formed by members who share a common interest or occupation. Therefore, unlike banks, they target a specific niche of customers.
In Kenya, the umbrella body of SACCOs is the Kenya Union of Savings & Credit Co-operatives (KUSSCO). Its main role is advocacy and representation of SACCOs.
Differences Between SACCOs and Banks.
Although both SACCOs and banks offer financial services, they also differ in some aspects. Below are some of the major differences between SACCOs and banks
- Banks are licensed by the Central Bank of Kenya while SACCOs are licensed and regulated by the SACCO Societies Regulatory Authority (SASRA).
- Banks have no specified limit on the number of shares that an individual can own, however, the maximum number of SACCO shares you can buy is 5% of the total authorized shares.
- Voting rights by bank shareholders are determined by the number of shares you hold; however, SACCO members only hold 1 vote per member.
- Bank executives are appointed by the board of management while SACCO members elect their board of management. Therefore, SACCO members have control over who joins the board of management.
Benefits of joining a SACCO in Kenya
Since SACCOs are formed to provide financial support to the members, the benefits you will enjoy as a member will be majorly financial. Below are some of the main benefits you will reap from becoming a Sacco member.
- Facilitates saving– Traditionally, SACCOs were formed by members to hold their savings. SACCOs have an edge over banks when it comes to return on investment. SACCOs offer higher interest rates compared to banks. Thus, the money you save in a SACCO will yield higher returns compared to saving the same amount in a bank.
- Dividend payments –SACCOs are popular due to their regular dividend payments. Mostly, this happens annually with some giving a rate of up to 20% of the share price.
- Access to low-cost loans – SACCOs offer some of the lowest interest rate charges on their loans in the market. Another attractive aspect of the loan service provided by SACCOs is that you can borrow up to thrice the amount of your savings.
With these terms, loan services offered by SACCOs become more attractive than those offered by other financial institutions such as banks.
What Are Dividends In A Sacco?
A dividend is the sum of money you receive from your Sacco out of the profits and reserves made for a certain period. When you join a Sacco, you are entitled to dividends and interests. Members can get their dividends monthly, quarterly, semiannually, or annually depending on the policy.
Saccos pay dividends to all members with balances in deposits and share capital for a given financial year. Most Saccos pay their members’ dividends after approval, usually done after the Annual General Meeting.
When do SACCOs pay dividends?
A dividend payment is the amount of money you receive from investing in the shares of a company or institution. Just like in other businesses, SACCOs make dividend payments when there is a surplus in their reserves at the end of the financial year.
SACCOs make 2 types of payments to their members depending on their portfolio. They reward members who have deposit accounts and those who hold shares with them using different rates. If SACCO has had a profitable financial year, the dividend payments on the shares held will be higher than the dividend payments on the deposit accounts.
The majority of the SACCOs pay the dividends at the end of the year, after the approval by the members during the Annual General Meeting (AGM). However, SACCOs can choose to make dividend payments semiannually, quarterly, or monthly should the members approve of this strategy. Dividend payments on shares held vary across the years. This is because dividends on shares are paid according to the type of financial year that SACCO has had.
How Are Dividends Calculated?
Most Saccos have software and databases that take care of these calculations, ensuring up-to-date statements for members when calculating dividends. Different Saccos have different dividend calculation methods based on the standards that have been set to guide them. Interests on deposits are computed on a pro-rata or flat-rate basis:
Flat Rate Method
This is a straightforward method of calculating dividends to be received by each member. The method uses the following formula in order to get the total dividends that each member deserves to earn.
Dividends = shares held by an individual member/total shares held by all members multiplied by the amount issued as dividends.
Pro-rata Method
This method involves the equal distribution of dividends to all members. It is the most preferred as it allows Sacco to offer interest rates to members on a monthly basis. The annual rate of dividends is first calculated at a monthly rate. If a given Sacco offers interest at a rate of 8%, the monthly dividend rate will be as follows:
Monthly rate = 8/12, which will be equal to 0.67% per month.
This means that each member will be entitled to an interest rate of 0.67% per month. This is a fair method of calculating dividends as it also considers the withdrawals made by a certain member during the entire period.
Top 10 Highest Dividend Paying Saccos in Kenya
There are so many Saccos in Kenya offering dividends, but which is the highest dividend-paying Sacco in Kenya in 2023? We have sampled for you the best and most recognized Saccos, which offer some of the highest dividends to their members.
1. Stima Sacco
Stima Sacco is undoubtedly the Sacco with the highest dividends in Kenya. The Sacco was established in 1974 and has gradually grown over the years to become the best Sacco in the country. It is one of the most reliable Saccos to join as it offers its members a great opportunity to save and get credit.
Its membership is open to all Kenyans as it accepts membership from individuals, groups, and corporates. Stima Sacco has been ranked as the best dividend-paying Sacco in Kenya in 2021. In 2020, Sacco’s board of directors recommended a dividend of 14 percent per share on fully paid-up shares.
2. The Kenya Police Sacco
The Kenya Police Sacco was ranked the second-best performing Sacco after Stima Sacco. Sacco membership is open to all people, contrary to its Sacco name. It was registered in 1972 though it began its operations in 1973. The Sacco has over 52k members and has one of the highest dividend and interest rates.
The Sacco pays dividends and interests every year to all the members who have balances in deposits. It offers loans up to 3 times the savings an individual has made in the Sacco. Members are usually required to repay their loans in 48 months at an interest rate of 13.5% per annum.
3. Mwalimu Sacco
Mwalimu Sacco is also ranked among the best performing Saccos in the country. It is ranked third after Stima Sacco and the Kenya Police Sacco Society. Mwalimu Sacco enjoys the largest membership as it hosts teachers from all over the country.
It prides itself on having assets of more than $440 million. Mwalimu Sacco is the largest African Sacco seeking to provide its members access to affordable financial services. Dividends are earned at the end of every year, depending on the number of shares.
4. Nyati Sacco
Nyati SACCO was registered in 1977 and its initial members were the employees of Securicor Security Services (Currently G4S Security Services). It has thus expanded its membership to cater to other security services employees e.g. Tandu Alarms, Top Flight Security, Absolute Security Ltd, etc.
Nyati Sacco currently has 27,367 members as it also draws membership from the diaspora and the spouses of members and corporates on a non-check-off arrangement.
Nyati also offers both Front Office Services Activity (FOSA) and Back Office Services Activity (BOSA). FOSA is a product where Sacco offers banking services similar to those offered by commercial banks while BOSA is a product where the members can make non-withdrawable deposits and access credit services/ borrow against their savings.
In 2021, Nyati SACCO issued the highest dividend payment of 21% to their members, thus making the best dividend payment in 2022.
5. Mombasa Port Sacco
Mombasa Port Sacco was founded in 1966 by the employees of the then East African Harbours & Railways Corporation. However, in 2010, the SACCO allowed members from diverse groups to join the society. Currently, the SACCO draws membership from investment groups(chamas), corporates, and individuals in the diaspora.
Some of the FOSA products offered include:
- Ordinary Savings Account
- Holiday savings account
- Children account
- Biashara savings account
- Group savings account
- Fixed deposit account
- Company savings account
In 2021, the Mombasa Port SACCO paid dividends at the rate of 20%, making it one of the highest dividend-paying SACCOs in Kenya in 2022.
6. Magadi Sacco Society
The Magadi SACCO Society was founded in 1977. Its target to provide Magadi Soda employees with an avenue to save and borrow at a low cost for them to meet their needs.
In the last 45 years, the SACCO has accumulated over 7,000 members from the initial 50 members. The SACCO has an asset base of over 700 million and member deposits are over 530 million. The SACCO membership is open to all, unlike other SACCOs which restrict membership to a specific group.
Magadi Sacco offers FOSA and BOSA services, with the members qualifying for loans of up to 3 times their deposits. The SACCO paid dividends at the rate of 20%, making one of the highest dividend payments by a SACCO in Kenya during the 2021 financial year.
7. Hazina Sacco
It was registered as a Sacco in 1971 and became a deposit-taking Sacco after being registered by SARSA. Hazina Sacco membership is open to government employees, employees from parastatals and private organizations, private individuals, corporates, and chamas.
The Sacco gives loans of up to three and a half times the value of the savings you have with a repayment plan of 72 months with 1% per month interest. Payment of dividends and interest rebates on shares and deposits are usually made once a year through FOSA savings accounts.
8. Safaricom Sacco
Safaricom Sacco was founded in May 2001 to serve the common bond Safaricom Ltd Employees. At the moment, the Sacco membership has been extended to include family members of already present members and employees from related technology companies.
If you become a Sacco member, you will need to contribute Kshs 3400 towards your share capital which stands at Kshs 40,000. The Sacco pays dividends on share capital to all the members who have met the statutory minimum shares of Kshs. 40,000.
9. Sheria Sacco
Sheria Sacco was formally registered in 1972. Over time, the membership of the Sacco has grown. It boasts of more than 10,000 members drawn from the Judiciary, AG chambers, and government ministries. The membership has been expanded to include any person above the age of 18 years with an income.
The minimum share capital for each member is Kshs. 20,000, which earns dividends for the member. It is important to note that the share capital is non-withdrawable but transferable upon the termination of membership.
10. Unaitas Sacco
It was registered in 1993 by a group of farmers who wanted a place to save and get loans at affordable rates. Over time, the Sacco opened its membership to medium-sized business people, salaried employees, and members from all walks of life. The Sacco boasts of more than 320,000 members countrywide.
It offers loans of up to 3 times your savings with a payment period of 72 months at attractive interest rates. The Sacco has been paying a dividend of between seven and 10 percent over the years but has now introduced a special payout dubbed loyalty dividend that will see qualifying members earn up to an additional three percent.