When it comes to managing finances within a SACCO, understanding the difference between shares and savings is crucial. Here’s a detailed breakdown of each:
Shares in a SACCO
- Ownership and Voting Rights:
– Definition: Shares represent a member’s ownership stake in the SACCO.
– Ownership: Each share a member purchases represents part ownership of the SACCO.
– Voting Rights: Members with shares usually have voting rights at annual general meetings, influencing the direction and management of the SACCO.
- Dividends:
– Earnings: Members earn dividends based on the number of shares they hold.
– Distribution: Dividends are typically distributed annually from the SACCO’s profits.
- Membership Requirement:
– Joining: Purchasing a minimum number of shares is often required to join a SACCO.
– Commitment: Shares are a long-term commitment and are not as easily accessible as savings.
- Risk and Returns:
– Risk: Shares carry more risk as they are tied to the SACCO’s performance.
– Returns: Potential for higher returns through dividends if the SACCO performs well.
Savings in a SACCO
- Accessibility and Liquidity:
– Definition: Savings are deposits made by members for safekeeping and future use.
– Accessibility: Savings can be more easily accessed or withdrawn by members compared to shares.
- Interest Earnings:
– Interest: Savings accounts typically earn interest, though at a lower rate compared to potential dividends from shares.
– Stability: Interest rates are usually fixed or variable, providing a stable but modest return.
- Purpose and Usage:
– Goal: Savings are intended for safe-keeping of funds, emergency needs, and planned expenditures.
– Loans: Members’ savings can be used as collateral to secure loans from the SACCO.
- Risk and Returns:
– Risk: Lower risk compared to shares, as the principal amount is not subject to market performance.
– Returns: Lower returns in the form of interest compared to potential dividends from shares.
Summary
– Shares: Represent ownership, provide voting rights, and earn dividends based on the SACCO’s performance. They are a long-term investment and carry more risk.
– Savings: Deposits that earn interest, are easily accessible, and can be used as collateral for loans. They offer lower returns but are more secure and liquid.
Understanding these differences can help members make informed decisions about how to manage their finances within a SACCO, balancing their need for accessibility, security, and potential returns.
