When it comes to saving and investing your money in Kenya, two options often come up—SACCOs and Money Market Funds (MMFs). Both are popular, both are useful, but they serve very different purposes. If you’re stuck trying to decide which one is right for you, this article will break it down in a simple, practical way.
🧠 What Is a SACCO?
A SACCO (Savings and Credit Cooperative Organization) is a member-owned financial institution. The basic idea is simple: you save money, and in return, you get access to low-interest loans.
SACCOs became popular in Kenya in the 1970s, especially among farmers who needed affordable credit. Over time, they’ve evolved to serve a broader community, offering a range of savings and credit products.
Key Features:
- You must become a member by buying share capital.
- You earn annual interest on your share capital and monthly deposits.
- You can borrow 3 to 5 times your savings at relatively low interest.
- Withdrawals can be limited unless you take a loan (unless the SACCO offers a flexible savings account).
💼 What Is a Money Market Fund?
A Money Market Fund is a type of collective investment scheme managed by professional fund managers. It pools money from different investors and puts it into low-risk, short-term instruments like Treasury bills, fixed deposits, and commercial paper.
Key Features:
- You earn daily interest, paid out monthly.
- Funds are accessible in 1 to 3 business days—great for emergencies.
- Ideal for short- to mid-term savings goals like buying a car, upgrading your home, or building an emergency fund.
This year we are using an MMF in the 100K savings challenge, where we aim to save Ksh 100,000 by the end of 2025.
🏦 Liquidity: How Fast Can You Get Your Money?
When it comes to SACCOs, Liquidity is limited. You typically need to take a loan to access your funds, although some SACCOs offer flexible savings accounts.
Whereas MMFs are highly liquid. You can withdraw your money within a few hours to 2–3 days, depending on the fund manager.
This is why MMFs are often recommended by financial educators as the best place to keep your emergency fund.
📈 How Do You Earn Interest?
There are two ways you can earn interest as a member of a SACCO:
- ) Interest on Share Capital: This is earned annually based on the amount you used to join the Sacco.
2.) Interest on Deposits: Earned annually on your monthly contributions.
As for MMFs, interest is calculated daily and deposited monthly. Best part is that you can reinvest your earnings to compound your returns over time.
💰 Taxation: What’s Deducted From Your Earnings?
A 5% withholding tax is charged on interest earned from Saccos. While With MMFs, a 15% withholding tax is levied on interest earned. It’s important to note this when calculating your expected net returns.
🛡 Regulation: Is Your Money Safe?
SACCOs are regulated by SASRA (SACCO Societies Regulatory Authority).
Money Market Funds are Regulated by the Capital Markets Authority (CMA).
Before committing your money, always verify that the institution is licensed by the relevant authority.
🧭 Investment Purpose & Strategy
I have to emphasize the need to align your investment vehicle with your financial goals. Here’s how I would personally approach this:
- SACCOs are suitable for long-term capital preservation and access to affordable loans. Despite this, I don’t currently use a SACCO because it doesn’t align with my goals at the moment.
- MMFs are Perfect for short- and mid-term goals, emergency funds, and savings challenges. I’m using MMFs for various savings goals, including a creativity fund and emergency savings.
✅ Final Thoughts: Which One Should You Choose?
Choose a SACCO if you:
- Need access to affordable loans.
- Are looking for a long-term savings plan.
- Want to be part of a cooperative that may offer additional benefits (e.g., land purchase opportunities).
Choose a Money Market Fund if you:
- Want high liquidity and access to your money within a few days.
- Are saving for short- or mid-term goals.
- Need a home for your emergency fund or monthly sinking funds.
🔔 A Friendly Reminder
Before you invest in anything, take stock of where you are in your financial journey. Don’t follow trends blindly. What works for one person may not work for another. Your goals, responsibilities, and risk tolerance should guide your decisions.
As Gertrude says:
“Don’t just do things because they’re the right things to do—look at where you are in your financial journey.”
Got questions? Leave a comment below or reach out for personalized guidance. And if you’re curious about Gertrude’s 100K Savings Challenge, check out her video here for more.