Umurenge SACCOs is a Rwandan based savings credit and co-operatives whose objective is to pool savings for the members and in turn provide them with credit facilities. Other objectives of SACCO are to encourage co-operation among members, teach them proper investment practices and also proper money management. Unlike banks the Sacco are primarily formed to raise the social welfare of members.
The Saccos have managed to establish themselves in different localities. Whereas in urban areas wage and salary earners have formed Urban Sacco, in rural areas, farmers have formed Rural SACCOs. There are also traders, transport, agakiliro formerly called agakinjiro and community. Many people who initially used to keep money in holes from their houses and in suitcases are getting involved in Umurenge Sacco program and have opened savings accounts and this is sign that the institution is yielding.
The SACCOs initially established in each and every umurenge of the country and membership has grown from 1.6 million people to as many as 3 million and number about 478 Country wide.
The basic structure of the Saccos and credit unions is what differentiates them from banks; they are user-owned financial intermediaries, the dividends from these co-operatives are shared equally among members because they have got equal shares. Members typically have a “common bond” based on geographic area, community, employer, industry or other affiliation. Each member has equal voting rights regardless of their deposit amount or how many shares they own. Their principal products are savings and credit, however some offer money transfers, payment services and insurance. SACCOs sometimes join together to create second-tier associations for the purposes of building capacity, liquidity management and refinancing; these second-tier associations can play a useful role in monitoring.
The key elements of a SACCO are the credits and savings products. Unlike most micro-credit NGOs and institutions they provide a savings product which offers interest and a return on their deposits, which provides a new income stream for the individual and can either be reinvested or withdrawn for use.
SACCOs can be started with relative ease. They are typically started by a group with a ‘common’ bond’ such As carpenters, farmers, teachers, artisans or women and tend to have very little major external support. They do not require donations from outside resources to start-up since it is funded through members’ deposits, which makes the process simpler and more straight forward.
Financial Cooperatives are therefore, created in situation where people cannot obtain essential services from investor’s owned banks or firms. The Cooperatives may reduce the obstacles faced by the farmers or other people and encourage them to create the income generating activities; the financial Cooperatives participate in poverty alleviation.
SACCO is an easy way of organizing a community to save and recycle savings in a given locality. Since the nature of a SACCO is local, it mobilizes savings locally, within the community, and then the profits are returned to members in the form of loans (MINICOFIN, 2007). The money stays and works within the membership and the area. This mutually achieved success helps not only build a sense of ownership and pride in an area but also create a culture of saving and investing.
The benefits from the cooperative and saving schemes according to members has been far reaching. Since Members can form tiers within the cooperative some members without security have been able to access funds for working. This has been so because these tiers use their available deposits as security in case there is someone who defaults.
Also members have managed to gain financial literacy. This has been so because when members come together they exchange ideas on money management and investment issues which expand their knowledge.
The Sacco’s has reduced unemployment in that these cooperatives must employ people who have to work for them like accountants, managers , loan officer, cashiers and recovery officers. Also the money borrowed is used for investment by small and medium investors who in turn provide jobs in the due course.
Most of these cooperative have managed to construct their own properties and offices in different communes (imirenge) of the country by doing so they have contributed to the economy in the infrastructure development sector and has also contributed to job creation.
In education sector these cooperatives do provide loans to parents who need funds to clear their children’s tuition and school dues and pay back when they get money.
For agriculture co-operatives members have been able to access loans to purchase fertilizers for making their land more productive. This has led to increase in harvests and increase in incomes has raised the welfare of members. They have been able to get access to metuelle de santé, pay their children’s tuition and others managed to have access to electricity and water.
Though the interest rate is high compared to the banks (2%)/month and has been used as flat method but with the introduction of the declining method this is expected to fall in the due course.