Shares and dividends

When a person joins your SACCO, they don't just open an account. They become a part-owner. That ownership is expressed through shares, and it is what makes a SACCO a member-owned society rather than a bank you borrow from. Understanding shares, and the dividend they can earn, helps members see why buying more shares strengthens both them and the society.

Why it matters: shares are the risk capital that keeps your SACCO standing. Members who understand that their shares are ownership, and not a savings account they can empty on demand, make steadier owners. A well-capitalised SACCO can lend more, absorb shocks, and reward everyone with a fair dividend.

Shares are ownership, not savings

A share is a member's stake in the society. Buying shares means putting risk capital into the SACCO, money that shares in both the gains and the losses.

Every new member buys at least the minimum shareholding set in your by-laws. This is their entry stake as an owner. Members can grow their shareholding over time by purchasing additional shares, deepening both their ownership and the society's capital base. Ownership through shares also comes with a voice at the AGM, but the vote is per member, not per share, so no one can buy control.

How shares differ from savings and deposits

Members often confuse the two, so make the distinction plain.

Savings and deposits are the member's own money, held for them and generally available to withdraw, often earning interest. Shares, by contrast, are capital the member has committed to the society. They are not freely withdrawable, so you cannot simply cash them out mid-year like a savings balance. And shares earn a dividend, not interest: a dividend is a share of the year's profit, paid only if there is a surplus. (Savings has its own separate guide.)

How a dividend is declared

A dividend is decided by the members themselves. It is never automatic and never guaranteed.

• A dividend can be paid only when the year closes with a net surplus after all expenses and loan losses.
• The society sets aside its statutory and other reserves before any surplus is available for distribution.
• The board proposes a rate, but the Annual General Meeting approves the dividend and the amount each member receives, usually in proportion to their shares.
• In a loss-making or lean year, members may receive nothing, and that is normal for owners.

What happens to shares on transfer or exit

Because shares are capital, they cannot simply vanish when a member leaves.

By-laws usually allow shares to be transferred to another eligible member rather than cashed out, which protects the capital base. A departing member is refunded the value of their shares after deducting any loans, guarantees, or amounts they owe the society. Refunds follow the by-laws and any notice period, so one exit never drains the SACCO's capital.

Quick checklist

• Confirm your minimum shareholding for new members is set in the by-laws and explained at sign-up
• Explain to every member how shares differ from savings, ownership, not a withdrawable balance
• Encourage steady share purchases to build the society's capital base
• Declare dividends only from a genuine surplus, after reserves, and only by AGM approval
• Follow the by-laws for share transfers and for refunds net of what a leaving member owes
• Keep each member's share record accurate and up to date in your system