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Unlike in the bank loaning system, the Sacco loans are advanced by the Sacco without collateral. Instead of collateral, the loans are advanced with the support/commitment of other members of the society who become guarantors to the loans.
The By-law provides that Sacco Loans security is the guarantor’s savings. Therefore, when a member defaults in making payments, the guarantors’ shares are taken by the Sacco to offset the loan balance. support/commitment of other members of the society who become guarantors to the loans.