What is saving?
- Saving can be defined simply as holding something back from today’s consumption.
- Saving means with holding some thing valuable to day for future use.
- Saving is not as simple as the word as we talk it. Saving is:
o A Discipline
o A Sacrifice
o Planning. What does it mean?
- Saving is discipline, because it teaches people to use their resource in a wise manner and develop an Asset in the future.
- Saving is a sacrifice, because it teaches people to give up today’s expenses and to with hold valuable resource for future possible out coming instead of consuming immediately.
- Saving is planning for tomorrow (future), because o Saving teaches people to anticipating, forecast and preparing for possible risks and emergencies (bad harvest, sickness and death) Fund mobilization Self-financing Outside financing Direct Indirect Member’s Savings & share mobilization Retained Earnings Government & NGO Funds Borrowings from banks, MFI & NGOs Deposits by nonmember individuals, Associations, Community organizations etc.
o Saving teaches people to think on starting a new business or expanding existing once.
o Saving teaches people to anticipating and preparing for up coming events and expenditures (School fees, Marriage, old age, retirements etc).
- Therefore, saving is everything, which can empower human being to have bargaining power, makes him self secured and person with full confidence.
- In the SACCO society, saving is an asset to members, and a liability to the SACCO society.
- In the SACCO society, saving is collected from member to on lend to members.
- Saving is sources of income to the SACCO society because it lends to members with interest. • This loan interest is the main source of income of the SACCO society
- For a SACCO society it is a must to have a regular Saving flow from members, to efficiently serve financial services to members.
- In SACCO societies we have three kinds of Savings:
o Compulsory Savings
o Voluntary Savings
o Contract Savings (Time Deposits)
- Compulsory saving is a saving that a member forced to save on regular basis; it is a membership saving i.e. must be saved on monthly basis.
- This compulsory saving is collected to on 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 should save on regular basis.
- If a member wants to with draw from the SACCO society, he has the right to take this compulsory saving with one-mouth priors notes to the Board of Directors.
- The society will provide interest for this savings.
If the potential SACCO members are farmers and only receive income once or twice a year, how can they save the appropriate amount at the appropriate time?
- This kind of saving is very important to farmers since they don’t have regular income they can save as voluntary saving during harvest time, and transfer monthly to their compulsory saving accounts. Voluntary savings are deposited and withdrawn as the member sees fit. 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. Technically speaking, this is referred to as saving up.
- 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 lick purchasing seed for cultivation.
Contract savings (time deposits) or fixed deposit
- This kind of saving will not be invited unless the SACCO society acquires good experience in managing their savings and loans properly. 5 Saving in advance for anticipated- future’ obligations is called saving up. Borrowing to meet anticipated future obligations and repaying the loan in the future when the individual has money is called saving down. Saving down is considered as bad financial behavior because it is always less expensive to use once own money rather than borrowing someone else’s money.
- This kind of saving will invited in the future when the SACCO society 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 Assembly of members.
- Time deposit brings the opportunity of high interest rate on savings.
What is a share?
• Share is the capital of the SACCO society and an asset to members.
• Share is a risk protecting capital that collected from members in proportion to compulsory savings
• Since share is risk protecting capital it should be saved in a bank.
• If a member wants to with draw from the SACCO member ship he/she has the right to take it after 12 month or after Audit.
• This is to protect the SACCO from any loss and to give the member the chance of having dividend for the period he stays as a member with in the society.
• Therefore, every member should buy shares based on the amount of compulsory saving he/she deposits in the SACCO.