BORROWING FROM SACCOS

My name is Kim, i like your updates on business and finance. Keep it up FFI. I have been employed for about 6 years now and I think its time for me to grow and even start my own business to grow with. My main worry is that I may start a business that I may not be able to sustain due to heavy initial and working capital involved. On the other hand borrowing costs today are too high. A friend advised me to try borrowing from a SACCO instead of a bank. What is your take on this?

SOLUTION
SACCOs are becoming more common by the day, registered by the Ministry of Cooperatives and are authorized to take deposits from and lend to its members.
SACCO members borrow from within their savings limits. Loans are advanced up to 3 times(even 4) your savings, provided a few other members give security in form of guarantee. This is why most people join SACCOs as a group of friends and/or business partners: to provide security guarantees for each other as and when the need arises.
SACCOs have various loan products for different purposes. For instance; emergency loans (processed within a day), School fees loans and even development loans (as is your case).
Third, interest rates for SACCO loans rarely change and are much lower than the bank interest rates. SACCO rates may go up to 12% p.a with slim chances of revision while banks may go higher than 12% depending on the CBK rates.
As much as what you borrow ideally includes your savings (a third; where you borrow 3 times your savings), the savings still accumulate interest. In effect you will end up having incurring a much lower cost.
For the development conscious, SACCOs usually engage in activities that are very beneficial to their members. For instance, they may buy a large tract of land and sell it at a bargain price to members who can either speculate and resell or develop it.
Now, Banks on other hand usually have high borrowing rates that are constantly being revised, as noted above. They have limits of borrowing and security issues through which people end up loosing their monies and even assets after borrowing loans. Unless you are a reputable company, with staggering cash flows and profits, accessing funds from banks becomes a nightmare and almost impossible. I do not need to highlight the fact that during advertisements, banks paint a very different picture that makes anybody want to subscribe to some car loan, building loan and other products secured on one’s salaries but after analysis, your friend would be right.
Make haste, join a SACCO, contribute faithfully for about six months (the more you contribute, the more you will be able to access in loans at the end of the day), and you will qualify to start building your foundation.
An underlying fact is that whatever you need to borrow should be a good idea enough to pay off the loan and leave something for you. What I mean is, make sure it is a viable business idea. But that’s a topic for another day, right??