I get you loud and clear,mozenrat,but your analysis on interest is based on the flawed notion. that the guy in the sacco is essentially borrowing 200,000/- plus his 100,000/-,whilst the bank fellow borrows a full 300,000/-.

The fact is they are all flat borrows of 300,000/-,at the relative interest rates of 12% and 18%,you should view the sacco fellow as follows,assuming they both have 100K under mattress.

Interest Basis Alone (Sacco)
Loan amount 300,000.00/-

Initial Investment (From Mattress 100,000.00/-

Net Gain 200,000.00/-

Net Interest 3years 12% reducing balance on 300,000 58,714.55/-



Total Payback 358,714.55/-

Net Asset gain at the end of Loan period

Shares at the Sacco 100,000.00/-



Loan from Sacco 300,000.00/-



Total Standing after 3yrs 400,000.00/-

Less Interest 58,714.55/-

Less Initial Investment 100,000.00/-



Net Gain 241,285.45



Hence 12% Interest applies to an actual grant of 300,000/-,just like the bank,but at 12%.



Interest Basis Alone (Bank)

Loan amount 300,000.00/-

Initial Investment (From Mattress 100,000.00/-

Net Gain 400,000.00/-



Net Interest 3years 18% reducing balance on 300,000 90,445.87



Total Payback 390,445.87



Net Asset gain at the end of Loan period

Mattress Money 100,000.00/-



Loan from Bank 300,000.00/-



Total Standing after 3yrs 400,000.00/-

Less Interest 90,445.55/-

Less Initial Investment 100,000.00/-



Net Gain 209,544.45



A whopping 32,000/- more,I used your calculator




Learn something new everyday

Walala hasn't this post spiralled into new frontiers on that note i must say it has been very informative.
Not taking account the interest calculations i see monzerates point
@ novestor you have to compare spades to spades
in simplicity 300K sacco @ 12% vs 300K bank loan @ 18% is a no brainer sacco takes the day before one even factors in extra charges by banks
but the reality in to qualify for a sacco u need to deposit 100K and use the X3 loan to fund whaterver u taking the loan for
on the other hand for a bank you only borrow the deficit 200K and thus the spade to spade comparsion of this two options is as monzerate had calculated
Actually this goes back to studies of finance inclusion of all relevant and opportunity costs.
whether the interst caluclation is right dont ask me let the interst gurus do the calculations. but this really is food for thought!!!!!

Never doubt that a small group of thoughtful,committed citizens can change the world. Indeed,it is the only thing that ever has. N we here are eager to change the investment world in kenya

@nanfor..

I agree with you 100% totally kabisa....

Mozenrat,wow you put up a very spirited and consistent argument!!!

Sacco loan is better in conclusion but you have significantly dymistified it....BINGO!!!


The chief value of money lies in the fact that one lives in a world in which it is overestimated.

thanks MoKenya....Never seen that and it seems I will be late in that....I am in Kenya for a short time but would have loved to have seen this earlier as some of the bank practises I have found in Kenya are actually shocking to say the least....No wonder they make such impossible profits in such a small market.