Types of savings products

The SACCO members have the urge to develop and to make their lives better. The question remains therefore ―How can they make their lives better?‖ Saving for the future is one of the ways that they can improve on their livelihood. It is therefore essential to know the various savings products available so that one makes the best choice and selects what suits them best. Savings products can broadly be classified in to three namely;
 Compulsory savings products
 Voluntary savings products
 Contractual savings products.
Compulsory Saving:
These are funds that must be contributed by all members of the SACCOs as a condition of membership and in some instances to access credit (loans). Compulsory savings can be considered as part of a loan product rather than actual savings product since they are closely tied to receiving and repaying loans. Compulsory saving is a saving that a member is forced to make on regular basis; it is a membership saving and must be saved on a weekly or monthly basis. This compulsory saving is collected to lend to
members. If members fail to save on time they will get penalized based on the saving policy of the society. Unless the member quits from membership, he or she should save on regular basis. If a member wants to withdraw from the SACCO, he will have the right to take this compulsory saving. The SACCOs are supposed to provide interest for this savings. There are 2 kinds of compulsory loans i.e.
Group saving: composed of a certain percentage of the loan portfolio contributed monthly or weekly. Saving continues through the loan period and therefore protects the portfolio on one hand and serves, as an investment fund for economic ventures of the group members to supplement the loan in case of emergency needs.
Personal or individual saving: This is where each borrower is required to save a minimum amount per month but motivated to save more voluntarily.
Voluntary Saving:
Voluntary savings are savings, not for access to credit, but for the sake of saving. These are not an obligatory part of accessing credit services. They are provided by both the borrowers and non borrowers who can deposit or withdrawal according to their needs.
The voluntary savings are best fit for people who don’t receive constant cash flow like farmers who get incomes when they sell off their produce once or twice a year. They can make voluntary saving during harvest time, and transfer monthly to their compulsory saving accounts. Farmers, and other individuals, can save the full amount for the coming year’s compulsory savings in advance with the SACCO by depositing 12 months worth of saving in a voluntary account. Following that, each month on the appropriate day the member will come to the SACCO to withdraw the amount of one month’s compulsory saving from the voluntary saving -account and deposit it in the compulsory saving account. This maintains the fundamental function of the SACCO and allows individuals with seasonal incomes to be members. This ensures regular flow of cash to the SACCO society and promotes members participation. This kind of saving can be withdrawn at any time when the owner needs it. The SACCO society may or may not provide saving interest for this voluntary savings. Farmers are highly advised to save on voluntary saving for small capital investment like purchasing seed for cultivation.
Contract Saving:
These are the kind of saving accounts where by the person saves to meet a particular goal.
These include:
1. School fees savings accounts: This is the type of account used by most parents so that they are able to save for their children’s education.
2. Target Savings Accounts: This is where the client opens up an account particularly to meet a particular target like buying land, paying a mortgage among others.
3. Fixed Deposit Accounts: This is the savings accounts were by a person deposits once and they withdraw the money after a period of time. The time ranges from 3 months onwards.
This kind of saving is not used by most SACCOs unless the SACCO has acquired and mastered the good skills in managing the loans and savings effectively. It can be short-term saving like if someone wants to pay school fees; he may save to pay school fees. It can also be long term like fixed deposit accounts were time deposit bring the opportunity of high interest rate on savings. This kind of saving is good in the future when the SACCO is in a good capacity and position of managing its savings and loans properly and if there is a shortage of feasible financial demand by members. This kind of saving can be collected from members and none members but the amount, period of collection and interest for this saving should be decided by the General Meetings of  members.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: