Sacco Societies
The primarily objective of a sacco society is to promote savings among its members and utilize the savings to on lend to the same members at reasonable and affordable rates for a flexible repayment period. Natural and unexpected misfortunes such as death or total permanent disability of members are risks not covered by the society when granting loans. These incidences when they occur affect the society in two major effects;
- When a member dies before a loan is fully repaid, the society suffers loss of funds for further credit to other members, and also reduced profit since the loan ends up being written off as bad debt.
- The total savings for the deceased member may be utilized to pay off the out standing loan. The dependents therefore receives nothing from what their breadwinner had saved with the society.
Group creditor insurance was developed in response to the growing need to provide protection cover for consumer debt. The cover is used to repay the outstanding balance of the loan in the event of the borrowers untimely death , or on becoming totally and permanently disabled through accident or sickness. The plan has an added benefit for funeral expenses of say upto Kshs. 150,000/= per member.