I joined a local community SACCO, with much excitement. But the monthly penalty charges of Ugx. 10,000 for not saving is becoming a problem.
Saving culture is a good one.
But saving is not enough. You must save and invest. Instead, SACCOs re-lend to other members at a favorable interest rate lower than commercial banks. It makes sense. At the start, many SACCOs by-laws and or constitution is poorly developed and there is lots of excitement. However, after a few months, things start changing.
Folks who would save consistently, start skipping. And before you know it, the SACCO is running low on liquidity.
To solve the problem, the few SACCO top honchos will review the constitution or by-laws – provide for the board of directors and some two or three top positions especially the Treasurer and membership manager, in addition to the CEO or SACCO manager. Also, they will provide for a quorum at meetings.
Before you know it, a meeting will be called, and new proposals are made and decided on. If you had saved say Ugx. 200,000. They will introduce a mandatory equity share capital of say Ugx. 100,000. And new mandatory savings provisions monthly made.
Before you know it, a message will drop in your inbox or WhatsApp about the requirement to save at least Ugx. 50,000, or a penalty of Ugx. 10,000 shall be charged for failure to do so.
In this SACCO of mine, I started saving in 2015. I deposited Ugx. 2,000,000. However, they insist one must deposit money on their bank account. Although they have tried to innovate by introducing mobile money. The last time I tried to save using mobile money, they could not trace by deposit. I lost that Ugx. 100,000, despite showing them the statement and details of the number I sent the money.
I decided to just relax that SACCO and wait for interest income earning. I was daydreaming.
Last week, I received my statement.
As an investigator, I always look at every line to examine what increased or reduced my bank or savings balance.
What I saw in the statement was alarming. Over time, my savings have reduced from Ugx. 2,000,000 to the current balance of Ugx. 890,000! Unbelievable! There are monthly charges of Ugx. 10,000 per month.
I tried to call the SACCO treasurer using the contacts in an email in vain. I tried the membership manager, in vain. I decided to send an email. It is about four days since I sent an email, no one is sending me a response.
I visited the website and read details about the penalty for inconsistent savings. The management of the SACCO thing appears to be transparent, but the critical details are hidden. Key decisions taken are not communicated.
How can a SACCO mean to empower members financially to become a dream killer? How can people chew someone’s savings without shame like that?
In my email, I have requested to get all my money and close the account. I am afraid, they may never revert. So, I have lost this money.
I now realize that many SACCOs are fraud schemes: here is how the fraud works:
- Few people discuss to form a SACCO
- They make hazy by-laws without clear terms on savings and frequency. They reach out to folks they know well
- Once members save some money and the cash balance grows to say Ugx. 20m.
- The Founding SACCO members will sit and make some ‘serious by-laws’ with some of the clauses providing for mandatory savings or purchase of equity by each saver – specifying a minimum balance of say, Ugx. 100,000, depending on the minimum saving balances of the current members
- If the SACCO has about 100 members, equity of Ugx. 50,000 is 5,000,000.
- And then will provide for penalty for failure to save monthly of say Ugx. 10,000, and say that would be applied to pay running costs and membership management fees.
The SACCO administrators will by eating all the equity in the form of salaries. And before you know it, they will give each other loans from the pool. They will never state the person they have given loans. But will say, “Loan value, xx” before you know it, they are solving their financial issues from the group savings.
That is SACCO for you.
Be careful before you join any SACCO. Unless you are one of the main people.
I have found company internal SACCOs better only if they are blessed by the company Board. Otherwise, go enjoy your little savings. Life is too short to give out your little money to other monsters to enjoy.
If you truly want to save, open a fixed deposit account. Or go save with a Mutual Fund which is licensed by the capital markets authority.
Copyright Mustapha B Mugisa, 2020. All rights reserved.