LOAN SECURITIES AND GUARANTEE - HOW IT WORKS AT ZOGHORI SACCO

Zoghori Sacco issues loans to members and these loans have to be guaranteed and the guarantee perfected to 100%. Since the future of loan guarantee and best lending practices are geared towards SECURITISATION, Zoghori Sacco is quickly adopting policies that accommodate this model to ensure their members are protected while accessing well secured and affordable loans. Here are some of the basic answers to some questions surrounding the subject of loan guarantee: 

  • WHO IS A GUARANTOR AND WHO IS ELIGIBLE TO BE A GUARANTOR?

A Guarantor is a person (member) who endorses the loanee and their loan application, agreeing to take the responsibility of repayment of the loan if the loanee fails to meet the loan obligation and such may include savings deductions. A guarantor must be A Member of Zoghori Sacco who has these characters:

  • Actively and regularly contributing in their savings.
  • Actively and timely servicing their loans, if any.
  • Importantly, they must have availability in their deposit savings equivalent or more than what you need for guarantee.
  • Has a good credit record, if any.
  • Must have minimum deposits of 6K.
  • WHO IS NOT ELIGIBLE TO BE A GUARANTOR?

The following do not qualify to be guarantors:

  • Inactive Members those who do not actively contribute to their savings accounts.
  • Loan Defaulters: those members with history of defaulting on their loans
  • Overextended guarantors: those members who have guaranteed loans to an extent they do not have enough availability in their deposit savings and or have surpassed maximum numbers of loans they can guarantee.
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  • WHAT IS THE ROLE OF A GUARANTOR?

A loan guarantor in a SACCO plays a crucial role in ensuring the security and repayment of loans and their roles and responsibilities are:

  • Co-Signer/Endorser: A guarantor acts as a co-signer for the loan, providing an additional layer of security for the SACCO. If the borrower defaults on the loan, the guarantor is responsible for repaying the outstanding amounts.
  • Oversight: A guarantor is encouraged to keep track of the borrower's progress in repaying the loan. This proactive approach helps ensure that payments are made on time and in full.
  • Legal Obligation: Once a guarantor agrees to guarantee a loan, they are legally bound to the terms of the loan agreement. If the borrower fails to make payments, the SACCO has the right to demand payment from the guarantor.
  • Assurance of Repayment: By guaranteeing the loan, the guarantor assures the SACCO that the loan will be repaid, even if the borrower faces financial difficulties
    Social Collateral: In SACCOs, the guarantor system acts as a form of social collateral, leveraging trust and community ties to ensure loan repayment

Being a guarantor is a significant responsibility, and it is essential to carefully consider the implications before agreeing to guarantee a loan.

  • WHEN CAN A MEMBER SELF-GUARANTEE?

A member is eligible to self-guarantee if:

  • They have not guaranteed any other loans,
  • The sum of total sum of loans they have guaranteed is lower than their deposit savings and the amount they are requesting as loan is within that free/available deposit savings.

This option allows members to guarantee their own loans without requiring other guarantors upto a maximum of 90% of their total deposit savings.

  • WHAT TYPES OF LOAN SECURITIES DOES ZOGHORI SACCO ACCEPT?

The Sacco generally accepts the following:

  1. Guarantors and Members Deposit Savings. Members can guarantee each other using their deposit savings as collateral to their loans.
  2. Land Title Deeds and Buildings (Real Estate): Members can use land title deeds and buildings within Kenya as collateral. The SACCO can lend up to 80% of the forced sale value of the land.
  3. Savings Schemes: Members can use their savings schemes as security for loans. The savings used as security are locked and remain inaccessible until the loan is cleared.
  4. Insurance Policies: Some life insurance policies can be used as collateral for a loan. The lender can claim the policy's value if the borrower defaults.
  5. Chattels (Inventory and Equipment): For persons doing business and want business financing, their stocks, inventory and equipment and machinery might valued and admitted as collateral provided they are insured and have enough security.
  6. Government Stocks and Bonds: Financial securities, such as stocks or bonds, can be used as collateral. The lender can sell these assets to recover the loan amount if necessary.
  7. Motor Vehicle and Car LogBooks: Members can use their motor vehicles as collateral, provided the vehicle is not more than 10 years old and is comprehensively insured. The sacco is currently working on a framework that would allow admission of this security.
  • WHAT ARE THE CONSEQUENCES OF LOAN DEFAULTING TO THE BORROWER AND GUARANTOR?

The following befall a borrower in case of loan defaulting:

  • Loss of Savings: The Sacco will first attempt to recover the loan from the member's savings, leading to the borrower losing their hard-earned lifetime savings.
  • Loss of Collateral: If the loan was secured with collateral, such as property or vehicles, the SACCO may seize and sell the collateral to recover the loan amount.
  • Strained Relations with Guarantors: The Sacco may invoke their exclusive rights to engage guarantors through demand letters and eventually savings recovery to repay borrowers loan and the borrower might burn bridges with guarantors.
  • Legal Action: The SACCO may take legal action to recover the outstanding loan amount, which can result in additional legal fees and costs for the borrower.
  • Credit Reference Bureau (CRB) Listing: The borrower may be listed with the Credit Reference Bureau, negatively impacting their credit score and making it difficult to secure loans or financial services in the future.
  • Ineligibility for Future Loans: Defaulting on a loan can make the borrower ineligible for future loans from the SACCO or other financial institutions.

The following befall a Guarantor in case of loan defaulting: 

  • Liability for Repayment: If the borrower defaults, the guarantor is legally bound to repay the outstanding loan amount. The SACCO will hold the guarantor liable for the remaining loan balance.
  • Recovery from Guarantor's Savings: The SACCO may recover the outstanding loan amount from the guarantor's savings or deposits within the SACCO.
  • Strained Relations: Being a guarantor can strain personal relationships, especially if the borrower defaults and the guarantor is held responsible for the repayment.
  • Legal Action: The SACCO may take legal action to recover the outstanding loan amount, which can result in additional legal fees and costs.
  • Credit Reference Bureau (CRB) Listing: The guarantor may also be listed with the Credit Reference Bureau, negatively impacting their credit score and making it difficult to secure loans or financial services in the future.
  • Ineligibility for Future Loans: Defaulting on a loan can make the guarantor ineligible for future loans from the SACCO or other financial institutions especially when listed with CRBs.

Secure Your Future with Zoghori Sacco Loans

Affordable. Guaranteed. Securitised.

At Zoghori Sacco, we're transforming how members access credit—by introducing policies that align with global best practices in loan securitisation and guarantee perfection. Your financial security is our mission.

Why Securitised Loans Matter

In today’s evolving financial landscape, loan guarantees must be perfected 100% to protect borrowers and lenders alike. Securitisation allows Sacco loans to be backed by real assets, reducing risk and unlocking affordable borrowing options.

Benefits of our securitised guarantee model:

  • Fully secured loans with transparent policies
  • Lower interest rates for members
  • Enhanced trust & financial inclusion
  • Smarter risk management for guarantors
  • Compliance with modern lending regulations

Why does my loan need 100% guarantee perfection?  It ensures full protection for both guarantors and borrowers, minimizing risk and delays.

What is loan securitisation in a Sacco? It's a process where loans are bundled and backed by assets, improving financial security and sustainability.

How is this different from traditional Sacco lending? Traditional models rely solely on human guarantees. Securitisation adds asset backing and modern compliance.

 

Start Your Loan Journey Today

Secure your future with a loan that’s guaranteed, perfected, and modernised.

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