SACCOL -Savings and Credit Co-operative League of South Africa

SACCO is the acronym for Savings And Credit Co-operative. There is no difference between a credit union and a SACCO. The term "credit union" is generally not used in Africa and specifically in South Africa to avoid confusion with the various labour movements. However some habits die-hard.

A Savings and Credit Co-operative (SACCO) is a democratic, unique member driven, self-help cooperative. It is owned, governed and managed by its members who have the same common bond: working for the same employer, belonging to the same church, labour union, social fraternity or living/working in the same community. A Savings and Credit Cooperative’s membership is open to all who belong to the group, regardless of race, religion, colour, creed, and gender or job status. These members agree to save their money together in the SACCO and to make loans to each other at reasonable rates of interest. Interest is charged on loans, to cover the interest cost on savings and the cost of administration. There is no payment or profit to outside interest or internal owners. The members are the owners and the members decide how their money will be used for the benefit of each other.

Savings and Credit Cooperatives are democratic organisations and decisions are made in a structured democratic way. Members elect a board that in turn employ staff to carry out the day-to-day activities of the SACCO. The number of board members is between nine and fifteen. Members also elect a supervisory committee to perform the function of an internal audit.

Co-operatives create the opportunity for people to take responsibility for their own financial organisation. The democratic process is an integral part of the co-operative and encourages people to take control of their own financial affairs. Among the many advantages of SACCOs are:

Savings are mobilised locally and returned to members in the form of loans. The ideal model invests 80% of mobilised savings to members in the form of loans. The money stays and works within the members.
SACCO interest rates on both savings and loans are generally better than rates given by banks and the reason for this is that SACCOs have very low overheads as compared to banks who pay low interest on savings but charge a lot of interest to cover their overheads.
SACCOs encourage members to save, essential for economic empowerment.
SACCOs educate their members in financial matters by teaching prudent handling of money, how to keep track of finances, how to budget and why to keep away from hire purchases and loan sharks
SACCOs pay dividends on shares to their members once the SACCO is established and profitable. Members therefore take pride in owning their own SACCO.
SACCOs do not raise equity from outside interests. All money borrowed to members is money mobilised by members. Because its members funds members are committed to paying back their loans.
Shares and loans are insured. Upon the death of a member the estate will not have to repay any loans outstanding to the SACCO and the value of any shares owned by the deceased will be repaid double to the estate.
SACCOs perform a critical and unique function as financial intermediaries. They mobilise significant volumes of personal savings and channel them into small loans for productive and provident purposes at the community level.
SACCOs are members of SACCOL who is a member of the African Confederation of Cooperative Savings and Credit Association (ACCOSCA). SACCOL is also a direct affiliate to the World Council of Credit Unions (WOCCU).

Operating a SACCO is basically the same as operating your own bank, on a co-operative basis. The business is buying and selling money within a group of people who work in the same place, or as in some cases, members of the same community. It is not a Stokvel. But Stokvels could become a member of your SACCO. It is not a burial society. But a burial society could become a member of your SACCO. It is not a private company, but it is a privately owned co-operative. It is not an insurance company, but you will enjoy the benefit of loans insurance. There are no management fees or commission to pay to anyone or any interest outside the co-operative movement. As a member of the co-operative you are an owner and as such you retain all the profits of the organisation. You also decide what to charge for interest on loans and decide what to pay on savings. You decide what to do with the surplus. You are accountable only to yourselves, the members of your Savings and Credit Co-operative.

To run a SACCO a number of things will need to be organised, much of which depends on your groups ambitions to grow the SACCO. The SACCO will need to choose a name, open a bank account, and decide where it will operate from, decide who will do the bookkeeping and promotion and develop the policies for your SACCO.

SACCOs are owned and controlled by their members and anybody may join as long as they fit the common bond requirement. Each member has one vote; no matter how much money he or she invests. The members then elect a Board of Directors, (always and odd number) consisting of the members, from which an Executive Committee is chosen. The Board appoints a Credit Committee and an Educational Committee. The members also appoint an external auditor to ensure that their funds are managed properly. Each SACCO has statutes and executive authority is delegated to the Board. The Board decides on policy matters and implementation thereof by the various committees. A clerk handles the day-to-day running of the SACCO and as the SACCO grows, a Manager and other staff are hired.

The various products that SACCOs offer over the long term are most often member driven. Typically a SACCO starting out will offer members various short and long term savings and loans:

Shares: Every potential member must purchase a minimum share as determined by the SACCO making each member an owner of the cooperative. Once the share has been fully paid up, all other contributions will go towards savings.

Savings: A member’s monthly contribution is usually split between various types of savings accounts. Savings unlike shares are withdrawable on demand. Each SACCO determines amongst its members what the minimum savings per member will be.

Quick/Emergency loans: Emergency loans are short-term quick loans available to members to meet unforeseen circumstances, not budgeted for. Typical Emergency loans are between R100 - R300 with a repayment period of R100 per month.

Loans: Members are encouraged to save toward loans. Loans are ratio based on member’s savings and shares. Individuals who have established their credit worthiness through regular savings and are able to show an ability to repay a loan can earn the privilege of borrowing these savings in the form of a loan. Some loans are made for productive, income generating activities, a business idea or toward a house; other loans are made for provident purposes such as schools fees, funerals and weddings.Funeral and Loans Insurance: This is a very popular product with members, and SACCOs usually nominate, once generating income, to apply for such insurance.

Term deposits: Some SACCOs are offering their members 1 year fixed deposit accounts at varying interest Xmas, educational and housing savings: These are popular products among our SACCO members.

SACCOs products are membership driven. SACCOs know local conditions and it is for the SACCO leadership to map out the progress and developmental plans of the SACCO to meet member’s demands and needs.

As soon as you start your own Savings and Credit Co-operative you take greater control over your financial life. Banks have to pay high overhead costs for branches, elaborate computer systems and many salaried employees. Banks also have to return a profit to their shareholders. In a Savings and Credit Co-operative the user of the service is the owner and the profits stay with the members. Overheads are very low and salaries are minimized because of the contribution of volunteers.

This allows the Co-operative to offer very specific financial services to members for a lot less than a bank can. As a matter of principle, SACCOs endeavour to pay interest rates on savings that are equal to or higher than inflation, to safeguard members savings from the effects of inflation. Stop order deductions make savings easy and assure loan repayment, almost eliminating risk. There are no direct charges to members. If a member dies, his/her loan is paid off by credit insurance, which the SACCO pays for out of its operating income. However, certain age limitations apply.

After you have paid for the costs of running the co-operative, any surplus or profit is distributed to the members according to their patronage. There are no losers, only winners.

Savings and Credit Co-operatives first appeared in Germany in the 1870's. The idea moved to North America in 1900 with European immigration. Canada, the United States, Australia and Ireland have the most established movements. In many regions of these countries SACCOs are much larger than the commercial banks. There are 28 countries in Africa that have established credit unions. In May 1996, South Africa became the 28th African country to become a member of the African Confederation of Savings and Credit Co-operatives (ACCOSCA). Globally there are almost 100 million individual members in 60 + countries around the world. SACCOL is a member of World Council of Credit Unions, through its membership in ACCOSCA. Through this relationship SACCOL enjoys a reciprocal relationship with member countries throughout Africa and throughout the world.

SACCOL was formed in 1993. It evolved from the Cape Credit Union League (CCUL), which was formed in 1981. At this time various Catholic Church parishes decided to form Credit Unions and CCUL was formed to help them to coordinate their activities and standardise their operations. At this time though the Credit Unions were formed as social organisations and did not operate their cooperatives as businesses. This brought about a whole lot of problems. Because the Credit Unions did not pay good interest on savings but gave out loans very cheaply, members were not interested in saving with the SACCO, only getting loans from the SACCO. Without savings and shares the SACCOs were unable to grow. However, because members were enjoying the cheap loans, they did not want to change the way they operated. Without growth, it was inevitable the SACCOs would stagnate. A second problem that existed in those days were people were scared to take up leadership positions as there existed a state of emergency in the country during this period. This resulted in the ministers of the parishes taking a leadership position in the SACCO. If the minister was transferred to another parish, it would depend whether the incoming minister knowledge about a SACCO and whether he was interested in continuing its activities.

However the idea of a SACCO grew in impoverished communities as an alternative to other savings schemes, where you could get cheap loans. In 1987, the CCUL extended its activities outside of the Western Cape Region and formed itself into the South African Credit Union League.

The problem of non-viable SACCOs still existed and in 1991, when the World Council of Credit Unions did an assessment of the viability of the movement in South Africa, they found that only three of the existing 47 SACCOs were viable.

As a result of much discussion within the movement it decided to change its entire orientation toward a business orientation. The viable cooperatives argued that making a surplus and developing strong SACCOs was in member’s interests in the longer term, rather than short-term gain of cheap loans only. Thus the Savings and Credit Cooperative League of South Africa (SACCOL) in was born in 1993.

Although traces of credit unions in South Africa date back to the 1940’s, apartheid closed these original organizations. Savings and Credit Cooperatives (SACCOs) as they are known today did not fully re-emerge until the early 1990’s. There are currently 28 SACCOs serving 9,800 members with savings, loan, transmission and insurance products at rates generally better than banks. None of these SACCOs or SACCOL, the National League is receiving any form of subsidy/donation at this time.

Year	SACCOs	Members*	Savings dep.	Net Loans	Total assets
2006	38	12,608	R 46,416,168	R 34,536,722	R 50,727,069
2005	39	11,525	R 35,632,154	R 27259,927	R 42,752,022
2004	35	9,049	R 24,469,260	R 21,081,899	R 29,972,251
2003	30	7,990	R 18,424,398	R 16,779,823	R 22,890,694
2002	30	8,454	R 14,893,630	R 14,707,855	R 19,298,451
2001	28	5,870	R 8,403,766	R 12,400,349	R 17,211,483
2000	21	4,110	R 5,460,668	R 7,349,175	R 10,530,860
1999	21	3,402	R 2,522,072	R 5,703,450	R 8,014,594

SACCOs in South Africa carry out the tradition of ensuring financial literacy amongst their members by teaching prudent handling of money, the importance of savings, how to keep track of finances, how to budget and the importance of avoiding hire purchases and loan sharks.

UpDated: D.de Jong, 20 Oct 2006