BY NBM WRITER
A majority of individuals are attempting to create wealth through savings and credit cooperatives thanks to the fact that one can never grow until he/she invests. Suppose you have made the wise decision of saving and investing for your future, where would you put your money? In a Co-operative Society, a Savings and Credit Co-operative Society, or, maybe, both?
Before deciding where to put your cash, it is important to understand the difference between the two – co-operative societies and Savings and Credit Co-operative Societies (SACCOs) are often misunderstood by some people and used interchangeably. However, they are different in more ways than one.
While a co-operative promotes the welfare and economic interests of its members and is open-ended in its operations, a SACCO is limited to holding savings and providing credit to its members. Members of SACCOs collect financial resources together and borrow from them according to their shares. It is at the back of this that a discussion on how to create wealth through co-operatives is timely. Most people do not understand what a co-operative society is, and what it does.
“The key thing to look at is what you want to do especially with your money and how you want to grow it. Some people are at the stage where they need to leverage a bit; they need to get a loan to pursue their interest, buy a house, a car, education and the likes… for such kind of a member, a savings and credit cooperative would be the best place to go to,” John Mwai, Investment manager at Safaricom Investment Cooperative told the Nairobi Business Monthly in an interview.
According to the International Co-operative Alliance, co-operatives are open to all persons who are able to use their services and are willing to accept the responsibilities of membership. They have the right to join the society when they wish and leave it at their own will.
A co-operative society is also open to all persons without gender, social, racial, political or religious discrimination. However, co-operative societies formed for particular groups may limit membership to only those groups. For example, a teachers’ co-operative society may restrict non-teachers from joining in and a farmers’ co-operative society may limit their membership to only include farmers.
Mr Mwai points out that co-operatives have the freedom to act independently to govern themselves and set their own operational rules. They are controlled by their members and if they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy. However, it is important to note that this does not exempt co-operatives from government regulations and laws that govern co-operative societies. In Kenya, co-operatives are governed by the Co-operative Societies Act.
“For investment cooperatives we come together, members come together to pull their funds to invest in common purposes like buying property. If they like they can subdivide, or sell parcel of land and then share with members as dividends,” he explains.
Co-operatives work for the sustainable development of their communities through policies approved by their members. They are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity and contribute to the growth of their communities by investing locally.
Understanding the difference between a co-operative society and a savings and credit co-operative will allow you make a wise decision when it comes to achieving your investments goals.
While savings and credit cooperative organisations are investment vehicles, Mwai says, what matters as far as wealth creation is concerned is; “how are you reinvesting your money, and how are you saving that income?”
He adds that if one wants to succeed in attaining wealth, at least he/she should have a well thought out plan.
“You need to take a risk that is calculated. If you don’t have any risk that you are taking on-board, it means your returns are lower. Also in as much as you are getting into investments, it’s good to diversify,” says Mwai,
From where he sits, the choice of investment vehicle should depend on what an investor would like to achieve. That is why co-operatives train and educate their members, elected representatives, managers and employees so that they can contribute to the co-operative’s development. Different co-operatives offer different types of training to their members. There are also specialized training institutions that offer training curriculums which can be adopted by different societies.
“Every other month or two we have a periodical. We also have investor forums where we chose specific topics on diverse things; it can be on legal, land buying process, investment, it can be anything around what concerns our members. We pick these topics and then we are able to invite our members. So we don’t just invest to get returns from them but also imparting knowledge to them,” says Mwai.
He points out that as it stands right now, inflation is at the high of 8. So if one gets into an investment that’s bringing 5% he/she is losing money. So the whole idea is; investors ought to look at the expected return then factor in inflation, and look at other factors overall. If you don’t have any risks that you are taking on board, Mwai argues, your return will be lower at best.
“In as much as you are getting into an investment, it is good to diversify that investment base. It is also important to take some risks, but it has to be calculated in overall because at the end of the day even if one investment goes down you can still benefit from the other investment in terms of returns and dividends… for those who are looking for investment out of their idle cash then an investment cooperative is the perfect vehicle,” says Mwai.