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“Financial Literacy is just as important in life as the other basics”

John Rogers Jr.

By Sharron Makiti

Financial literacy has varied definitions, all leading to people or organisations making informed decisions on
generating revenue, investments, expenditure and savings. This consequently defines the financial health of
an individual or an organisation.
SACCOs are member owned, which places the success or failure of Co-operatives solely on members. As such, the
success of a SACCO, received by members through dividends and the ability of the Society to meet and sustain loan
demands of its membership translates to financial stability.
With a financially healthy membership, SACCOs are able to reap big from the benefits that come in hand. This
includes but not limited to timely payment of SACCO loans, increased deposits, increased loan portfolio and,
increased investment.

a) Timely payment of SACCO loans b) Increased Deposits

Members have to save first, three to six months for most Financial literate members are aware of the goal of their
SACCOs, before they can qualify to receive a loan. A member saving. Well guided members will increase their savings
joining a SACCO is saving towards a particular goal, which to reach that goal in the shortest time possible. This will
mostly is spelt out by the SACCO through the different increase the amount of deposits received by their SACCOs.
financial products. Sometimes this may not be the case.
c) Increased Loan Portfolio
SACCOs should put in place measures to take members
through the best, easy and fast way to reach their goals. This SACCOs use members’ deposits to extend loans to members.
includes spelling out the difficulties that members shall face Sometimes the loan demand is higher, which forces some
in the process, and how well to deal with it. SACCOs to borrow money from other financial institutions
to meet that demand. Increased deposits expand SACCOs’
Recent research by FinAccess showed that while 70 capacity to extend loans to members without securing loans
percent of Kenyans are saving through traditional financial from outside to do that. Therefore, money circulates within
institutions (banks, MFIs, and SACCOs) and informally the SACCO, including the interests charged on those loans,
(chamas, social networks and shopkeeper) in 2019, 50 thus increases SACCOs’ income generation.
percent of Kenyans have loans.
d) Increased Investment
Meanwhile, CBK Annual Report and Financial Statements
2017/18 showed that gross Non-Performing Loans (NPLs) Similarly, deposits that remain after the demand for loans
of credit markets (SACCOs included) increased from Sh235 has been met are used in large investments. This diversifies
billion in June 2017 to Sh298 billion, a similar period in SACCOs’ revenue generation, with profits being shared to
2018. members as dividends. This translates to a financially stable
membership.
In order to reduce the default rate of loans and to reduce
on NPLs, SACCOs should invest more in members’ financial Therefore, SACCO leaders should strive to ensure that
literacy. For instance, save for emergency reasons, members members receive proper financial education as this, if factors
should be encouraged to take loans that are self-servicing. remain constant, leads to SACCOs fulfilling their mandate to
the membership through achievement of set goals.

54| SACCO Star Magazine