Saving mobilization

SAVING
MOBILIZATION
Co-operative Officer
Stephen Mwangi.

Saving is sacrificing current consumption
so as to increase the availability of
resources for future consumption (needs).
It is the part of a member’s income that
has not been spent but rather stored for
future use or invested in Income
Generating Activities so that it can earn
more income in the future.
Definition of Savings

Savings is the practise of building large lump
sums of money out of small and often irregular
and fluctuating incomes scarcely big enough to
cover the individual’s most basic needs.
Saving is a discipline and requires sacrificing in
addition to planning.
It is a discipline because it teaches people to use
their resources in a wise manner and sparingly to
develop an asset in the future.

It is a sacrifice because it teaches people to lower
today’s expenses and to withhold valuable resource for
future needs instead of consuming immediately.
Saving involves planning for tomorrow (future), because
people need to forecast and prepare for possible risks
and emergencies like bad harvest, sickness and death. It
also teaches people to think on starting a new business
or expanding existing ones and also teaches people to
anticipate and prepare for events and expenditures like
school fees, marriage, old age and retirements.

a) Smoothening the household cash flow;
b) Accumulation of wealth;
c) Saving for future investment; Households may not be able to
have sufficient capital to start an Income Generating Activity
(IGA). They may therefore commence saving small amounts of
money until the required capital is raised.
d) Means of insurance; Savings play the role of insurance against
income losses, emergencies, bad weather and sickness in the
family that may occur in the future.
Reasons for Saving

1. Safety and confidence: Savers need to be
confident that when they place their savings,
the funds will be safe and will not be lost
through fraud or miss-used.
2. Accessibility to funds: SACCOs should properly
manage its liquidity. The members should access
their funds as and when needed.
The factors that determine a
member’s decision to save with the
SACCO

3. Interest to savers: The higher the interest paid on
members’ savings, the more they are encouraged to
save and the lower the interest, the less they are
encouraged to save. The SACCOs should therefore offer
its members good interest on their savings to
encourage them to save with the SACCO as opposed to
using other informal methods.
4. Cost to saver: Most members would rather not incur
any costs on their savings since they are just saving.
When the costs charged on the savings products are
high it demotivates the members from saving.
SACCO

5. Appeal of product / service to
different market segments:
Majority of the members will save
if the product is appealing to
them.
SACCO

Lack of or inadequate interest paid to savings: People see
no reason as to why they should save because there is
either no interest or very little interest paid to their
savings hence this discourages them from saving.
Increasing debts: Many people have accumulated many
debts because of the ever increasing inflation and poor
spending cultures hence they always end up paying
debts and borrowing more in order to save.
Prioritize saving: In most cases many people see no need
to save since to them it’s not a priority as they have
other basic needs to attend to.
Some of the challenges hindering
Savings

Little to save: People don’t save because they have very
little money and spend a lot hence there is nothing left
to save in most cases. On the other hand, some people
believe that it is those with a lot of money who save so
the ones with little have no business in saving.
Don't want to deal with banks: Most people do not save
because they do not desire to deal with banks. This is
because banks have a lot of bureaucracy which pushes
them away from saving and they end up spending the
money or keeping it in unsafe places.
Some of the challenges hindering
Savings

1. Time minimization, cost of transport minimization,
risk minimization:
2. Wealth accumulation, Building Collateral and
Guarantors for loan:
Members who save with the SACCOs can use the loans
they get to invest in different business or even expand
their current businesses which in turn increase their
profits thus accumulating their wealth. SACCO
members are also able to get loans from larger MFIs
and commercial banks since the SACCOs are in most
cases willing to act as guarantors for getting loans.
Advantages of Savings with the
SACCOs

3. Building easily accessible financial institution, i.e. safe
place for savings and loan within his/her village.
4. Building bargaining power to negotiate with financial
institutions to get long term investment loans.
Members of SACCOs are able to negotiate with financial
institutions if they need loans. This is because the
SACCO guarantees the loan purpose and most SACCOs
further invest in different IGAs which seek to improve
on the members’ financial incomes.
SACCOs

5. Education and training on how to utilize his/her
resources in a wise manner that increases their income.
SACCOs carry out trainings and educate the members
on how best they should spend their savings so that
they can be able to reap more from their savings.
6. Get interest and dividend on their savings and share:
SACCO members are entitled to get dividends for
holding shares within the SACCOs as well as interest
since their savings are given to people as loans hence
this improves on their household incomes.
SACCOs

Saving mobilization

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Saving mobilization