Common SACCO Loans

Savings and Credit Cooperative Organizations (SACCOs) loans provide a cheap financial lifeline to their members. They offer various loan options tailored to meet every financial need. First, Let us explore the differences between FOSA and BOSA, how to obtain a loan from SACCOs, the types of loans available, and how to choose the right loan for you.

FOSA vs BOSA

FOSA (Front Office Service Activity)

FOSA is the front-end banking service of a SACCO, and it is designed to offer members access to convenient banking services. The functions are similar to those of a commercial bank teller who provides financial services to SACCO members.

Savings Accounts: Members can open and manage savings accounts, allowing them to deposit and withdraw money as needed.
Checking Accounts: Members can maintain checking accounts for everyday transactions, such as paying bills or purchasing.
Personal Loans: Members can apply for personal loans for various needs, such as medical expenses, education, or household improvements.
Financial Transactions: Members can conduct financial transactions directly at the SACCO’s office, including transfers and payments.
Personalized Service: FOSA offers a more customized service experience than traditional banks, as it is tailored to meet the specific needs of SACCO members.
Lower Fees: Members benefit from lower banking rates and transaction fees, making it a cost-effective option.
Community Focus: FOSA services are community-oriented, hence focusing on making members feel supported and like they belong among members.

BOSA (Back Office Service Activity)

BOSA is the back-end operation of a SACCO. The arm focuses on providing long-term financial facilities. It is concerned with its members' financial health and development through structured financial support.

Savings Mobilization: BOSA encourages and manages the collection of savings from members, which is crucial for SACCO’s financial stability and growth.
Loan Processing: It handles the processing of various types of loans, ensuring that members receive the financial support they need for investments.
Financial Management: BOSA offers financial management services, helping members plan and manage their finances effectively to achieve their long-term goals.
Better Interest Rates: BOSA often provides better interest rates on savings and loans than commercial banks, making it an attractive option for members looking to maximize their financial returns.
Focus on Development: The primary aim of BOSA is to support member welfare and development, offering financial products that enable members to invest in their futures, such as development loans and mortgages.
Enhanced Member Welfare: BOSA’s focus on long-term financial products and member development fosters a supportive environment where members can achieve their financial goals with the SACCO’s assistance.

How to Get a Loan from SACCOs?

Step-by-Step Guide:

Membership: First, become a member of SACCO by purchasing shares and making regular savings contributions.
Loan Application: Submit a loan application form and the required documents, including proof of income and identification.
Review Process: The SACCO reviews your application, assessing your savings history and loan repayment ability.
Approval and Disbursement: Once approved, the loan amount is disbursed directly to your bank account or used to settle specific payments as agreed.

Eligibility Criteria:

Regular contributions to the SACCO.
A minimum period of membership (varies by SACCO).
Proof of ability to repay the loan.

Types of Loans Available to SACCO Members and Their Conditions

Every Sacco has its own combination of BOSA loans depending on the foundational goals of the founding members; however, some facilities are common across the board. Here are some of the standard loan facilities and conditions set forth by some of the leading Saccos in the country.

I. Self-Guaranteed Loans

Purpose: General personal expenses such as medical bills, education, or household needs.
Waumini Sacco Conditions: Based on member savings and repayment ability.
Upto 95% of deposits
Member must not be a guarantor
Interest is 1% per month on reducing balance

II. Development Loans

Purpose: For long-term investments like home construction or business development.
Sheria Sacco Conditions: Applicant must make minimum monthly contribution as applicable to all members
The Loan Guarantee is as provided in the credit policy
Mode of recovery is checked off or Standing Order
Maximum amount granted: Kshs. 40,000,000
The interest of 1% p.m. on reducing balance
An insurance fee of 0.5% of the net loan
The maximum repayment period is 60 months.
Given x 4 of deposits
Easy top-up facility
The processing fee is Kshs. 1000

III. Emergency Loans

Purpose: For unexpected expenses such as medical emergencies or urgent repairs.
Mwalimu National Sacco Conditions: Granted for unforeseen circumstances.
The applicable interest rate is 1%p.m on reducing balance.
Repayable in 24 months.
Multipler is x5 (subject to 1/3 salary rule).
Only one emergency loan can be granted at a time.

IV. School Fees Loans

Purpose: To cover educational expenses.
Hazina Sacco Conditions:
School Fees and College Fees Loans shall be advanced subject to the member's ability to pay without any limits
Given at 5 times of a member’s deposits.
Interest rate of 1% per month on reducing balance.
Maximum repayment period of 12 months.
No documentary evidence is required

V. Asset Financing Loans

Purpose: To purchase assets such as vehicles or equipment.
Kimisitu Sacco Conditions: Loan limit of Ksh.10,000,000
Multiplier of X4 member deposits
The interest rate is 1% per month on reducing the balance
Repayable in 24 months

VI. Business Loan

· Purpose: Members should own businesses.

· Safaricom Sacco conditions: The loan is intended to encourage members to own businesses as groups or individuals.

Loan issued 5 times Chama savings.
Savings are locked as collateral.
Repayable in 24 months
Interest @ 1.5% pm on reducing balance
Collaterals like title deed log book accepted.
Available to individuals, Chama, and corporations with FOSA Account
Proof of availability to repay
Administration fees apply where collateral is used.
Financing LPO’s, Bid Bonds and Business ventures
Limit: 50,000 to 3M
Terms and Conditions apply
Disbursed within an hour of application

VII. Mobile Banking Sacco Loans

Digital lending has been the fastest way to obtain credit since the advent of Mpesa in the country, and Saccos have been included. Almost all Saccos have taped into the space to provide instant credit to their members at better rates than the other lenders.

Some notable facilities include:

· Rununu Advance & Kona Advance from Safaricom Sacco

· MCash loan & Thibiti Loan from Maisha Bora Sacco

· Mobi Loan from Mhasibu Sacco

· E-Loan from Tai Sacco

· M-Chuna from Chuna Sacco

How Do I Know Which Sacco Loan Is Right for Me?

Assess Your Needs

Purpose: Clearly define why you need the loan (e.g., personal, development, emergency).
Amount: Determine how much you need to borrow.

Evaluate Your Financial Situation

Savings: Consider how much you have saved in the SACCO.
Repayment Ability: Assess your income and ability to meet monthly repayments.

Compare Loan Options

Interest Rates: Look at each loan type's interest rates and total cost.
Terms and Conditions: Review the repayment terms and any additional requirements or restrictions.

Seek Advice

SACCO Advisors: Consult with SACCO loan officers for guidance.
Financial Advisors: Consider seeking advice from an independent financial advisor.

SACCO loans offer a flexible and member-focused alternative to traditional bank loans. You can make informed decisions about your financial needs by understanding the differences between FOSA and BOSA, the loan application process, and the types of loans available. Always consider your financial situation and seek professional advice to choose the right loan when necessary.

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