Why Saccos are an excellent source of business financing

One of our notable strengths as a country has been our ability to mobilise ourselves into Saccos and other small cooperatives.

Our history has something to do with it. After colonial settlers left many people grouped themselves into Saccos to mobilise resources to buy the land. Later on, they realised the power of cooperatives and decided to use them in marketing their produce.

The end result is that generations that followed later realised that the easiest way to mobilise resources and access wealth is through cooperatives.

Of late, however, more emphasis has been placed on investment Saccos rather than producer and consumer co-operatives. In this regard, small scale investors pool resources, get into a business and generate wealth using the capital.

These investment groups, known as chamas, have been able to access instruments that were initially not accessible to regular investors. Their targeted vehicles include land, real estate, stocks and the money market.

The business community has been forced to be creative due to the high cost of credit in the country.

Advantages of a Sacco are many. First is to be able members to access financing on a rainy day.

Saccos are relatively easier to join and loans are cheaper. The flip-side to this benefit is that amounts offered by Saccos are usually smaller.

Secondly, they have a tendency to bring out the supersaver in us. Many members have confessed that they were unable to keep aside as much savings before joining Saccos, obviously because self-discipline is harder than enforced discipline. While in the Sacco, however, their motivation is multiplied.

Thirdly, in industries with major legal risks, such as transport, one needs a lawyer’s services. A Sacco can secure such services at a better rate — spreading the burden— as opposed to a single matatu owner.

Finally, collaboration brings stability to the market. Sacco members can agree on a standard price, minimise price wars and ensure value in the business. This translates to a competition of quality which adds value to the client.

Given our market and the challenges of financing, Saccos offer the best solutions to business microfinance. Their costs are market friendly, they are easily accessible, hardly ask for collateral and are flexible.

Mr Odhiambo is the managing consultant at Elim Consulting. www.elim-consult.com