As more Kenyans search for ways to grow their money beyond the traditional bank accounts, SACCOs (Savings and Credit Cooperative Organizations) and Money Market Funds (MMFs) have become increasingly popular. These two options provide alternative financial avenues, but how do you choose the one that works best for you?
To better understand these investment options, Newshub.co.ke interviewed Jeremiah Odera, a seasoned financial expert with over eight years of experience in banking, SACCOs, and MMFs. His insights offer a deeper understanding of how each platform works and how they can help you reach your financial goals.
Understanding the Basics
SACCOs are financial cooperatives owned and managed by members who pool their savings together to access affordable loans.
They’re built around community and trust, allowing members to borrow against their contributions at low-interest rates. In contrast, MMFs are investment vehicles, usually under unit trusts, that invest in short-term and low-risk financial instruments like Treasury bills, fixed deposits, and commercial papers.
MMFs usually provide net annual returns ranging between 8% and 11%, depending on the performance of the fund manager and the prevailing market conditions. These returns are calculated daily and paid out monthly with compounding effects.
SACCOs also offer attractive returns, with dividends and interest on deposits typically falling between 8% and 10% annually. However, these returns are based on the SACCO’s financial success and internal policies.
Liquidity and Access to Funds
One major difference between MMFs and SACCOs is how easily you can access your money. MMFs offer high liquidity, with most allowing withdrawals within 24 to 72 hours. This makes them an excellent choice for short-term goals or emergency savings.
SACCOs, however, focus more on long-term savings and often have restrictions on withdrawals. Contributions are meant to accumulate over time, helping members qualify for loans. Jeremiah Odera notes that SACCOs are ideal for people thinking about long-term investments and wealth creation.
“If your goal is to build long-term wealth, then SACCOs are the better choice,” Odera explained. “MMFs are great if you want quick access to your money—what we call a highly liquid investment. In MMFs, withdrawing is easy and fast, but with SACCOs, you usually need to save consistently for at least three to five years before you qualify for loans.”
Borrowing Power
When it comes to borrowing, SACCOs have the upper hand. Members can access loans at interest rates that are usually lower than those offered by banks—often around 8% annually.
However, you need to be an active saver in the SACCO before you can borrow. MMFs do not offer any lending services, so if you’re looking to save and also borrow later, SACCOs are the better choice.
Jeremiah further explains that MMFs are tied to economic conditions. Their returns fluctuate based on factors like inflation, central bank lending rates, and the value of the Kenyan shilling.
“While MMFs have attractive rates, those returns can go up and down,” he said. “SACCOs are more stable in that way. Once you’re a member, you become a part-owner. You earn dividends, and the interest rates rarely fall. Plus, some SACCOs even buy out your expensive bank loans, allowing you to repay at their lower interest rates.”
Risk and Regulation
MMFs are supervised by the Capital Markets Authority (CMA) and are managed by licensed fund managers, which makes them fairly safe investments—though not entirely risk-free. SACCOs are regulated by the SACCO Societies Regulatory Authority (SASRA), but their safety depends a lot on how well they are managed.
Experts recommend that before joining a SACCO, you should do thorough research. Avoid SACCOs with poor management histories or governance issues.
Fees and Charges
MMFs typically charge low management fees, which slightly reduce your returns but are usually not a big concern. SACCOs, however, might charge various fees, such as membership registration fees, monthly maintenance charges, and loan processing fees. That said, SACCO loan processing fees are often cheaper than what banks charge.
If you’re looking to borrow, SACCOs remain a better option due to their favourable interest rates—especially if you save regularly and have a realistic repayment plan.
So, if you’re interested in affordable loans, prefer a group savings model, and are committed to saving over time, SACCOs are a wise choice.
Expert Tip: Don’t Put All Your Eggs in One Basket
Odera emphasizes the importance of diversification. You don’t have to choose just one option—combining both MMFs and SACCOs can work in your favour. He encourages savers to split their funds: use MMFs for easy access to money and SACCOs for long-term financial goals and borrowing options.
“SACCOs and MMFs each serve different purposes,” he explained. “The key is knowing what your goals are. If you need quick access to funds, put some money into an MMF. If you’re focused on building long-term wealth or borrowing affordably in the future, then SACCOs are the way to go.”
He also advised Kenyans to pay attention to current economic conditions when deciding where to invest.
“The shilling has been stable against the dollar for the past eight months, which makes now a good time to consider investing in MMFs,” he added.
Final Thoughts
In summary, both SACCOs and MMFs have unique strengths depending on your financial needs. SACCOs are best for people focused on long-term savings, wealth building, and affordable loans. MMFs work well if you need high liquidity and stable, short-term returns.
Ultimately, the smartest move is to create a financial portfolio that spreads your money across different platforms. By balancing between MMFs and SACCOs, you can enjoy the best of both worlds—flexibility, safety, consistent returns, and access to affordable credit.
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