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SACCOs vs. MMFs: Which One Should I Choose?
Money Management

SACCOs vs. MMFs: Which One Should I Choose?

Saving money in Kenya has never been easier. If you start exploring ways to do it, you will quickly notice that you are spoilt for choice. Many schemes promise significant returns and protection from inflation, some come with an insurance guarantee. And all boost of how low risk they are by how safely they can protect your initial capital. 

But two money-saving instruments have grown in popularity in Kenya: SACCOs and Money Market Funds (MMFs). They both promise one thing: to make your money work for you. 

Kamau is a 35-year-old civil servant. He recently had a big family emergency that depleted his emergency saving, and he was looking to start building one again. On top of that, he also has to start saving for kindergarten fees for his child, who will start school soon. After researching and crossing different saving schemes off his list, he remained with SACCOs and MMFs. How does he decide between the two?

To accomplish your saving goals, you need to choose a vehicle that aligns with that goal. And if you are like Kamau and torn between putting your saving in a SACCO or MMF, you should first understand how they compare.

This article will explore both advantages and disadvantages of SACCOs and MMFs, what they are best used for and what you should consider when you are at crossroads on what saving path to take. Read on.

Read Also: 10 Reasons to Start Saving Now 

What are SACCOs?

Savings and Credit Co-Operative Society better known as SACCOs are member-based institutions that offer various financial services, from saving to loans to members. They are a type of self-help organisation that pools resources from a group of people with shared goals, ideals, and values. 

The pooled resources are invested and utilised in a manner that can generate more income for the collective. The generated income is then divided among members according to their contributions and shares. The income is paid out as interest on savings or dividends on shares.

SACCOs are member-driven co-operatives. They are controlled, owned, and managed by their members. Often, members have a similar link, such as sharing an employer, belonging to the same religion or social fraternity, or living in the same town. However, membership is open to other groups of people irrespective of their backgrounds.

The first SACCO established in Kenya was a diary cooperative that dates back to 1908. The industry has evolved since then, and there are 175 registered deposit-taking SACCOs in Kenya. They are licensed, supervised, and regulated by THE Sacco  Societies Regulatory Authority.

Read Also: Saccos in Kenya: To Join or Not?

Advantages and Disadvantages of SACCOs

SACCOs have become alternatives for traditional banks in Kenya as more and more people take them up. They are heavily regulated, and funds are managed by professionals who work round the clock to protect members' money. But are they the best place for you to be keeping your money? 

To answer that, you need to understand the advantages and disadvantages of using this investment vehicle.


  1. Ownership and higher returns - When you buy shares of a SACCO, you become part owner of the cooperative. The value of shares can appreciate as SACCO grows, and you can earn dividends and interest as well if you save money with them. Unlike in a bank where you will only earn interest.
  2. Access to cheap and quick loans - SACCOs allow you to borrow against your savings which can help you get loans faster and skip all the formalities that other credit institutions can subject you to. The loans also have friendlier terms compared with other creditors.
  3. Investment opportunities - SACCOs can provide different investment opportunities by partnering with other cooperatives. For example, SACCOs will partner with housing cooperatives to allow their members to buy homes and access affordable mortgages and construction loans.
  4. Saving discipline - When you join a SACCO, you commit to making a minimum deposit every month. This will help you develop your saving culture and forces you to stay committed. 
  5. Front-office Services: Most SACCOs have ventured into offering all kinds of financial services that were previously associated with only banks. These services include current accounts, finance automation, investment advice, bankers' cheque, mobile/internet banking, etc.

Read Also: How to Build Wealth in Kenya Using Saccos


  1. You need collateral and guarantors to borrow - You can only borrow against your shares and savings; this limits the amount of credit you qualify for. You will need guarantors to co-sign your loan if you require higher loans. The co-signer must be a SACCO member ready to put their shares and savings on the line for you. If you can’t find one, your access to credit might be blocked.
  2. Liquidity Problem - Getting access to your money when you have an emergency can be a headache. You will need to write a letter of notice to the SACCO, look for a member to transfer your shares to, and get penalised as well. The whole process can take months.
  3. You have no say in how the money is invested - The SACCOs trustees and board are in charge of making the investment decisions. Even though they are required to act in your best interest and avoid risking your money, if this goes south, all members will share the loss.
  4. No Deposit Insurance - Your savings in a SACCO are not insured like savings in other financial institutions like banks. The KDIC insures bank deposits.

Read Also: Factors to Consider Before Joining a SACCO 

What are SACCOs Best For?

Given their high returns and capital appreciations, SACCOs are best suited for people investing in long-term goals. They can help you keep track of your savings goals since you must contribute a minimum amount monthly. Additionally, you can reinvest the interests and dividends you earn even to earn more.

Some long-term financial goals you can chase using SACCOs include: Retirement savings, saving for your child’s college tuition, and saving to buy a house.

Read Also: 'I Save Ksh35K Monthly, But I Don't Know How to Invest'

Money Market Funds (MMFs)

Money Market Funds are unit trust funds that pool investors' money and invest it in low-risk liquid instruments. MMFs are managed by licensed professional fund managers who invest in different instruments on behalf of investors. 

This investment vehicle is relatively safe and heavily regulated by the Capital Markets Authority (CMA). They are required to stay transparent, act in clients' best interest, and have an auditor who reviews their performance and reports to the regulatory body.

MMFs aim to provide investors with returns above inflation rates, lower their clients' risk exposure, and allow for easy liquidity. For this reason, they invest in various liquid vehicles like:

  • Treasury Bills - Have a maturity period of three to twelve months
  • Highly-rated debt-based corporate bonds 
  • Short-term commercial papers 
  • Other cash equivalents like fixed deposits

MMFs have gained popularity in Kenya thanks to their low entry points, with some funds allowing for minimum investments of Ksh1,000. Their diversified portfolio allows investors with insufficient capital to reap the benefits of investments that could be out of their reach.

Read Also: Where Do I Keep My Savings? Money Market Fund

Advantages and Disadvantages of MMFs

Their commitment to investing in low-risk instruments has made MMFs the most accepted unit trust fund in Kenya. But just like every investment, it has its equal shares of merits and demerits. Understanding them will help you make a more informed decision.


  1. Easy withdrawal - The most significant advantage MMFs offer over other investments is the ability to access your money quickly. Most MMFs will allow for a certain number of monthly withdrawals, and if you want to withdraw before maturity, there are no hefty penalties.
  2. Low-risk investment - Since MMFs invest in low-risk short-term vehicles and are strongly regulated, your chances of losing money are low. This can give you peace of mind knowing your savings are safe.

Read Also: Ways to Invest When You Have a Low-Risk Tolerance

  1. Higher interest rates - Your MMFs savings will likely earn higher returns compared to other instruments with the same risk level.  Investors are promised attractive returns of 7% to over 10%, which is above what banks' deposits offer. Additionally,  MMFs allow for the reinvestment of interests for members to benefit from compound interests.
  2. Professional fund manager - MMFs grant you access to professional fund managers who are likely to make a more informed research-backed investment decision when diversifying and allocating assets. The experts are licensed and often audited to ensure they are protecting investors' funds.
  3. Low transactional costs - Transactional costs are shared among all investors, which translates to MMFs investors paying nominal fees.


  1. Investments are not government-insured - KDIC does not insure the money you save on MMFs. You will likely not be compensated if anything goes wrong and the initial investment is lost.
  2. Returns are not constant - The interest you earn is tied to the returns the MMFs fund manager makes when investing. If they register low returns, you will earn low returns.
  3. No appreciation or dividends - When you invest in MMFs, you are not buying shares. Therefore, the only return you will earn is interest on your saved amount. The will be no ownership for you to earn dividends, and cash doesn’t appreciate; in fact, you lose purchasing power. 

Read Also: How Do Unit Trust Investments Work in Kenya? 

What are MMFs Best For

Given their high liquidity and accessibility, MMFs are best for people saving for short-term goals or who need to pack their money where they can easily withdraw. If you are saving for a Christmas vacation for your family, for instance, you can save in an MMF account and withdraw it when you are ready to pack your bags. 

Other short-term goals you can save for using MMFs include building an emergency fund, weddings, home repairs, and maintenance, following year school fees for your children, etc.

Read Also: 8 Principles of Investing for Every Young Professional

What to Consider When Deciding between SACCOS and MMFs

Time Horizon: When choosing between SACCOs and MMF, your investment horizon can play a significant role. An investor with short-term goals will want an investment that gets him access to his money when he needs it. 

If you plan to renovate your home within two months, your money will do better in an MMF account than in a SACCO. And if you are planning to buy land in the next five years, saving in a SACCO can be more attractive.

Reason for Saving: Are you saving for an emergency, or are you saving to increase your creditworthiness to qualify for loans? MMFs liquidity makes it a suitable place to park your rainy day funds, while SACCOs can help you qualify for higher loans. 

Risk Tolerance: How much risk are you willing to take to meet your savings goal? Both SACCOs and MMFs are heavily regulated, and they rarely bust. Nonetheless, before you settle on any specific one, perform your independent research. Look at the type of investments they have and assess their risk exposure. A SACCO that invests in high-risk instruments can expose your savings to high risks.

Investment Capital: How much are you willing to commit at the beginning? The minimum investment amount to invest in MMF can be as low as Ksh1,000, and you don't have to make monthly payments. Depending on the SACCO you are joining, you will be required to pay joining fees, buy a specific number of shares, and make a minimum monthly contribution.

Your Expected ROI: How much are you looking to make in profits? MMFs only pay you interest, while SACCOs can earn you interest on your savings plus dividends on the shares you hold.

Read Also: How To Turn Your Savings Into Investments


Deciding between SACCOS and MMFs or making any other investment decision can be an overwhelming experience, especially if you are just a beginner. Both of these investments have their fair share of benefits and drawbacks. The best way to know which to choose is to go through your investment roadmap and evaluate everything. 

Create a "pro and con" list and go through investment to see what will work best for you, depending on your goals, risk tolerance, and expected returns. Also, you should keep in mind that MMFS and SACCOS aren't the only saving instruments available, explore other options as well and factor them into your decision-making. 

Settling on an investment strategy that works well for you will keep you more financially stable. And if the exercise proves too daunting, consider talking to a financial expert to guide you instead of making half-baked decisions.

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Farah Nurow is an experienced Content Writer who enjoys writing creative and educative articles meant to provoke readers' thoughts. He loves sunny weather and thick books. You can connect with him on LinkedIn.

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