Understanding Share Capital and Deposits: What Every SACCO Member Should Know

Know the difference, understand your contributions and make informed financial decisions.

When you join a SACCO in Kenya, you will commonly be required to contribute towards share capital and make regular savings or deposits. Although these contributions may appear together on your SACCO statement, they serve different purposes and are governed by different rules.

Understanding the difference between share capital and deposits is important for every member. It helps you understand your ownership in the SACCO, how your savings are managed, your eligibility for credit and what happens to your money when you decide to leave the society.

This guide explains the differences in accordance with the Sacco Societies Act, Cap. 490B, and the applicable SACCO Societies Regulations issued under the supervision of the SACCO Societies Regulatory Authority (SASRA).

1. What is share capital?

Share capital represents the ownership interest that members hold in a SACCO society.

When you purchase shares in a SACCO, you become a shareholder and part-owner of the cooperative society. Your contribution forms part of the SACCO’s capital, strengthening its financial position and supporting its operations.

Every SACCO establishes the minimum shareholding required for membership in accordance with its registered by-laws and applicable regulatory requirements.

Important things to understand about share capital:

• Ownership: Share capital represents your ownership interest in the SACCO.
• Minimum contribution: Members are required to subscribe to the prescribed minimum number and value of shares.
• Dividends: Share capital may earn dividends when the SACCO generates a surplus and declares dividends in accordance with its dividend policy and applicable regulatory requirements.
• Transferability: Share capital is generally transferable to another eligible member when you leave the SACCO, subject to the applicable by-laws and procedures.
• Withdrawal: Share capital is not an ordinary savings balance that can be withdrawn on demand.

Under Regulation 21 of the SACCO Societies (Deposit-Taking SACCO Business) Regulations, 2010, a SACCO must prescribe the minimum number of shares and their par value. The regulations also provide that shares may be transferred to other members when a member exits, but the SACCO shall not refund the shares.

The same general principle applies to non-deposit-taking SACCOs under Regulation 22 of the SACCO Societies (Non-Deposit-Taking Business) Regulations, 2020.

2. What are SACCO deposits?

Deposits are funds contributed by members and held by the SACCO in accordance with the applicable account terms, policies and regulations.

Unlike share capital, deposits represent money belonging to members that is held by the SACCO under agreed conditions.

Members commonly make regular deposits through:

• Monthly salary deductions.
• Standing orders.
• Direct bank deposits.
• Mobile money payments.
• Other approved payment channels.

Deposits help the SACCO mobilise funds to support lending and other authorised financial activities.

However, not all SACCO deposits are the same. It is important to understand the two main categories.

A. Non-withdrawable deposits (BOSA)

These are commonly referred to as BOSA deposits or member deposits.

They are long-term savings that members accumulate in the SACCO and are generally not available for ordinary withdrawals while membership continues.

Their main characteristics include:

• They are accumulated through regular member contributions.
• They may be used as security or collateral for loans, subject to the applicable requirements.
• They may earn interest or rebates as determined under the SACCO’s applicable policies and regulatory requirements.
• They are generally refundable when a member exits the SACCO, subject to the settlement of outstanding obligations and guarantees.

For non-deposit-taking SACCOs, Regulation 23 of the 2020 Regulations governs non-withdrawable deposit accounts.

Under Regulation 23(4), deposits are refundable when a member exits the society, provided the member has fully repaid debts owed to the SACCO and is free from outstanding guarantees.

Regulation 23(6) further provides for refund within 60 days after receipt of written notification of withdrawal from membership.

B. Withdrawable deposits (FOSA)

These are savings held in accounts that allow members to access their money while maintaining membership in the SACCO.

They are commonly associated with the Front Office Service Activity (FOSA) offered by deposit-taking SACCOs.

Depending on the account type, members may use these accounts for:

• Depositing and withdrawing money.
• Receiving salaries and other payments.
• Making payments and transfers.
• Accessing other approved banking services.

Withdrawable deposits operate according to the SACCO’s approved savings policy and the terms and conditions of the particular account.

Under Regulation 23 of the SACCO Societies (Deposit-Taking SACCO Business) Regulations, 2010, SACCOs are required to establish savings policies setting out the terms and conditions for opening, operating and closing accounts, including applicable interest calculations, penalties and charges.

3. What is the difference between share capital and deposits?

Although both are important contributions towards the growth of a SACCO, they serve different purposes.

Feature	Share capital	Non-withdrawable deposits
Purpose	Represents ownership	Represents member savings
Nature	Equity contribution	Member deposit liability
Returns	May earn dividends	May earn interest or rebates
Ordinary withdrawal	Not withdrawable on demand	Not ordinarily withdrawable
On exit	Generally transferred to another member	Refundable subject to applicable conditions
Loan security	Cannot be pledged as collateral under the applicable regulations	May be used as loan security
Contribution	Based on prescribed shareholding requirements	Based on SACCO policies and requirements

Remember: Share capital makes you an owner of the SACCO, while deposits represent your savings held by the society.

4. Do share capital and deposits earn returns?

Yes, both may earn returns, but the returns are treated differently.

Dividends on share capital

Dividends are returns distributed to members in respect of their shareholding.

They are normally declared from the SACCO’s net surplus after the necessary transfers to reserves and in accordance with the society’s dividend policy.

However, dividends are not guaranteed. They depend on the SACCO’s financial performance, applicable capital adequacy requirements and the necessary approvals.

Interest or rebates on deposits

Deposits may earn interest or rebates depending on the nature of the deposit account and the SACCO’s approved policies.

The applicable interest rate, calculation method and payment arrangements should be communicated to members.

For non-deposit-taking SACCOs, Regulation 72 of the 2020 Regulations requires disclosure of the method used to calculate dividends and interest, the frequency of calculation and when the returns are paid or credited.

Members should therefore understand that dividends and interest on deposits are two different forms of returns.

5. Can you withdraw your share capital?

Share capital should not be confused with ordinary savings.

Under the applicable SASRA regulations, a SACCO does not refund a member’s shares when they leave the society. Instead, the member may transfer their shares to another member in accordance with the applicable procedures.

This means that when planning to leave a SACCO, you should understand the share transfer process and the requirements contained in the society’s registered by-laws.

It is important to note that share capital is different from non-withdrawable deposits, which are refundable upon exit subject to applicable conditions.

6. What happens to your deposits when you leave the SACCO?

Members who wish to withdraw from a SACCO should follow the formal withdrawal procedure provided in the society’s registered by-laws.

Before deposits are refunded, the SACCO must establish whether the member has outstanding financial obligations.

These may include:

• Outstanding loans and accrued interest.
• Unpaid charges or other financial obligations.
• Outstanding guarantees for loans advanced to other members.
• Other liabilities owed to the society.

Under Section 36 of the Sacco Societies Act, Cap. 490B, a SACCO has a first charge against a member’s deposits, share capital and any dividends or interest payable for debts owed to the society, including obligations arising from acting as a guarantor.

This provision protects the SACCO and its members against losses arising from unpaid obligations.

Members should therefore ensure that their loans and guarantee commitments are properly settled before initiating the exit process.

7. Why does your SACCO require both share capital and deposits?

Share capital and deposits play complementary roles in supporting the financial stability and operations of a SACCO.

Share capital helps to:

• Strengthen the SACCO’s capital base.
• Support long-term institutional growth.
• Demonstrate members’ ownership and commitment.
• Support the SACCO in meeting applicable capital adequacy requirements.

Member deposits help to:

• Mobilise funds for lending to members.
• Support the SACCO’s liquidity and financial intermediation.
• Provide a basis for accessing credit, subject to loan policies.
• Promote a culture of regular saving among members.

Both contributions are therefore important in building a financially sustainable cooperative society.

8. What every member should know

Before making contributions or requesting a withdrawal, every member should understand the following:

1. Know your share capital balance and your deposit balance separately.
2. Understand the minimum shareholding requirements of your SACCO.
3. Know whether your deposits are withdrawable or non-withdrawable.
4. Understand how dividends and interest on deposits are calculated.
5. Understand how your deposits affect your loan eligibility.
6. Know the requirements for withdrawing from membership.
7. Understand the effect of outstanding loans and guarantees on your deposits.

Your SACCO should provide clear information about the terms and conditions governing your contributions.

9. Building a stronger financial future through SACCO membership

A SACCO is more than a place to save money. It is a member-owned financial institution built on cooperation, shared responsibility and collective economic growth.

By purchasing shares, you participate in the ownership of the society. By consistently saving, you contribute towards building a stronger financial institution while creating opportunities for your own financial growth.

Understanding how share capital and deposits work enables you to make informed decisions, manage your finances responsibly and get the best value from your membership.

Your shares represent ownership. Your deposits represent savings. Both contribute towards building a stronger SACCO and a more secure financial future.