What is the difference between a SACCO and a Saving group?

In Uganda, SACCOs and Saving groups are regulated by the Uganda Microfinance Regulatory Authority (UMRA), it is responsible for tier 4 microfinance which includes both SACCOS and Self-help groups. The term SACCO is often used to refer to both saccos and self-help groups, My aim for this article is to shine some light on the difference between a Sacco and a self-help group,. In this article, I go over the following?

1. What is a SACCO and What is a self-help group
2. How is a sacco similar to a self-help group
3. Differences between a sacco and a saving group interms of
   - Registrations and registation requirements
   - Lincencing and licencising fees
   - Membership, leadership and membership size
   - Mode of operation
   - Savings, Loans and Investment
   - Share out policies
   - Fund security and Accountability

Main difference

The main difference between a sacco and self help group is that self help group are time bound which means Members of the savings group must share out their savings at least once a year.

What is a SACCO? and What is a Self-Help Group?

A Sacco is a Savings And Credit Cooperative which is a financial institution which performs mainly two activities

1. mobilising and receiving savings from its members
2. providing loans to those members.

A self-help group on the other hand is a member-formed and member-owned group where members collect money and set their own rules on how the money is to be shared out and how loans are to be given.

Similarities between SACCOS and Saving groups.

Saccos and saving groups are similar in a way that they both

1. Mobilise and collect savings from their members
2. Disburse loans to their members

Differences between a SACCO and a Saving group

1. Membership, leadership and membership size. Saving groups have between 10 to 30 members while saccos are required to have at least 30 members before registration but can have up to 1000 members. Saving groups whose membership exceeds 30 members are advised to break into 2 groups or to register a Sacco.
2. Registration and Registration requirements. While SACCOS are required by law to be registered to UMRA, saving groups are not. However, UMRA produced guidelines that require savings groups to be registered with the District Community Development Officer of the District in which the savings group was formed. Saccos have tighter regulation requirements than savings groups
3. Licencincing and licencing fees. For a sacco to be recognized by law it must be licenced by the UMRA while this is not a requirement for saving groups. A SACCO licence by UMRA as of this writing costs UGX 500,000 with yearly renewal. At present UMRA does not provide any licences intended for self-help groups.
4. Mode of operation. Saccos usually operate this way. For a member to join the Sacco, they pay a membership fee, which is different depending on the Sacco, then a member has to buy shares into the Sacco, each share for a specific price which is also set when establishing the Sacco and then a member is supposed to contribute a specific amount say 30,000 every month. For a savings group, members also join at the beginning of the year by paying a membership fee, they are supposed to contribute a specific amount in a given period say weekly, or monthly.
5. Savings, Loans and investments. In saccos, members make periodic contributions in terms of savings. These savings can be withdrawn at any time by the member but can also be converted into shares. In a saving group, members can also make periodic contributions but these cant be withdrawn at any time. In a sacco, members take Loans which they must return with an interest which is usually 2% to 3% per month. The same applies to savings groups. Saccos at times make investments interms of buying assets ie land, which they can sell to make a profit for the Sacco but saving groups don't usually do this because savings are only kept for a year.
6. Share out policies. At the end of the financial year, members of a sacco share profits made from loans and investments, the profits are distributed according to the number of shares a member has. In saving groups, each member will get what they saved during the year and the profits are shared amongst the members. They are sometimes shared equally and at times depending on the total savings of the member.
7. Fund security and accountability. Saccos usually have more security for member deposits due to the bookkeeping carried out by sacccos and the fact that savings are usually kept in banks, but this is not the case for savings groups since for most groups, there is no proper record keeping and funds are usually entrusted to an individual who keeps that money in their individual account and in the villages the saving boxes are still kept by a single individual. All this leads to low security

Conclusion.

I am hoping this article gave you some insight into the differences between the operations of saccos and saving groups.