Savings and Credit Cooperatives vs Banks: Where Is Your Money Better Off?

Posted on January 30, 2018 | By Judith Musyoki savings and credit cooperatives vs banks

Want to save up money or get a loan in Kenya? Basically, your only options are banks and Savings and Credit Cooperatives (aka SACCOs). The latter is a sort of a credit union. They both offer features such as saving and loans, but the experience is very different.

Banks have been there for ages. Savings and credit cooperatives are relatively new on the market of finance. But old doesn’t always mean good. We’ll tell you the basic differences between banks and SACCOS in Kenya to help you find the best place for your money.

The main difference lies in ownership

Surprised? Banks and Saccos have different forms of ownership. Believe, it’s a big deal because it greatly defines how your money feels there. People who stand behind banks are the investor(s). They put their money in the venture and logically expect very high returns. They make a profit at your expense. This explains draconian interest rates on bank loans.

A SACCO exists “not for profit”, but for the support and satisfaction of people who hold its shares. Registered SACCOs in Kenya give their members access to better deals in form of a higher interest rate on savings and lower – on loans.


The greatest thing about banks is that their loans are always available. Although you might need collateral to borrow larger amounts. Other pleasant features are a dense net of ATMs and mobile banking with a transfer feature.

Things to keep in mind when dealing with a bank

  • Notorious high-interest rates that can go higher during the loan’s lifespan.
  • Interest rates on savings are very low.
  • Except for interest rates, banks make money on various fees they withdraw from your account. Be ready to pay insurance fees, minimal amount fees, accrued interest fees, processing fees, account maintenance fees and so on. With some banks, you even have to pay for paying your loan off early. They call this ridiculous fee “early repayment charge”.
  • Finding a no-fee savings account can be hard. You can look for one at online-only banks.

Due to the rate capping, banks rates in Kenya now are at a maximum of 15%. Banks give out loans very reluctantly as they find unsecured lending very risky. This option is saved for mobile banking loans, which aren’t interest capped. Such situation forces many individuals and SMEs to run for other expensive money lenders.

If you still decide to get backed up with a bank, ensure you choose a reliable institution. Beware of banks that heavily rely on customer’s deposits.


Savings and credit cooperative societies exist to serve their members, not to build up profit. In Kenya, SACCOs emerged a few decades ago to fill the gap of financial services in small towns. Now they are threatening major commercial banks with their higher member satisfaction rate.

Advantages of SACCOs over banks

  • Your savings attract a high-interest rate. At MOMBO SACCO, your annual percentage yield is 6%. It means that you get 6% of your savings as interest every year. You can either withdraw them twice a year or leave them on your savings account.
  • Members can get loans at a steady interest rate as low as 12%. You can have a peace of mind that the rate won’t grow with the lapse of time. For comparison, local banks almost never offer loans at a total cost of credit lower than 20%. Usually, their offer is double the SACCO’s rate.
  • At MOMBO SACCO, you can get a loan that is 5 times bigger than your savings.
  • Your high interest rate on savings compensates the interest rate you pay on a loan. To make this happen at a bank, you need to hold a very big amount of its shares.
  • While repaying a loan, you keep building up your savings account. With the draconian rates of banks, it is psychologically impossible.
  • You can borrow money even after you give up employment. A bank would require collateral (assets) in such case.
  • As a member, you can control your Sacco by attending meetings and electing officials accountable to you.
  • Unlike banks, SACCOs in Kenya trade their shares at affordable prices. For example, the MOMBO’s share costs only KES 100. Your risk is minimal because your liability as a member is equal to the amount of your shares.
  • Unlike other SACCOS, MOMBO SACCO uniquely offers 2 streams of revenue. Except for 6% interest on savings, a member gets dividends on shares as well.

To find the best place for your money, ensure you do your research and compare terms at both registered SACCOs in Kenya and banks. Open a savings account with the society that values your input. The money you earned with a dedicated work is worth a dedicated treatment.