I got this message in my inbox: I have Ksh1 million which I want to invest in Kenya. I am in dilemma, I don’t know whether to invest in a Sacco or Money Market Fund. I currently earn Ksh 80,000 per month and my plan is to save Ksh 20,000 per month. I am planning to build a house and buy my own car in the next 4 years.
Answer
From my own experience, it’s better to invest half of your money in a Sacco and the rest in Money market Fund. It’s good to diversify your savings because you don’t know what might happen to the company you invest your money. A sacco might collapse and leave you with nothing.
Interest rate
The interest rate for both the Sacco and Money Market Fund is 13%-18%. This means that your Ksh1 million will attract annual interest of Ksh 130,000 to Ksh180,000. Both are good when you consider interest rate.
Dividends
Saccos will pay you dividends annually, something that Money Market Fund won’t do. When it comes to dividends, I recommend Saccos. But the bad thing about this is that you may not be able to sell your shares easily. When you want to sell them,you may not find the buyer.
Instead of investing in share capital, save the money in savings account where you can withdraw anytime.
In case you need dividends, just invest in Sacco—buy shares.
Withdrawal options and rules
Withdrawing money from MMF is easy. All you need is to write an email requesting to withdraw and the money will be available in your account within 48 hours. But in a Sacco, you may not withdraw instantly especially if you realize that the Sacco is going down.
Loans
Saccos offer loans. If you want to apply for a loan which you will use to build a house and buy a car, invest your money in a Sacco. The money will help you secure a loan of up to 5times your deposit. In 4 years, you will save at least Ksh2 million. You will get a loan of up to Ksh10 million which is enough to do your projects.
MMF don’t offer loan products—which is bad for someone who want to invest through credit.
Other investments
Saccos have other investment options like selling plots to members or building and selling houses to members cheaply. In your case, I would highly advise you to invest in Saccos as opposed to MMF.
Security
MMF are regulated by the Capital Markets Authority. At the moment, there are no cases facing any company that operates MMF. This means that your money will be secure under MMF. But when it comes to Saccos, you might easily lose your money. We have witnessed some Saccos go under with money saved by members. This is why I advised you not to save all your money in a Sacco.
Assuming that you will be saving Ksh 20,000 monthly, save Ksh 12,000 in MMF and Ksh8,000 in a Sacco. The Ksh1,000,000 you currently have should be divided into two, half to go to MMF and the rest to a Sacco.
If you don’t want your money to be safe in a Sacco,join a Sacco that is more secure and has a history. A Sacco associated with companies like Safaricom, Kenya Police or a government parastatal won’t go down easily.
