What does it mean to be a guarantor?
A guarantor is a person who guarantees to pay for someone else's debt if he or she should default on a loan obligation. A guarantor acts as a co-signor of sorts, in that they pledge their own assets, savings or services if a situation arises in which the original debtor cannot perform their obligations.
DO’s and Don’ts on Guarantorship
- A member should NOT guarantee a partially completed form, read the contents (The Devil is always in the details) and understand them well. Put on some glasses if you cannot read between the lines.
- It is wise to form guarantorship club/s amongst your friends; colleagues; where you know others better and becomes easier to co-guarantee one other easily.
- Read and understand the nature of the guarantee. A prospective guarantor must not sign a document that he has not read or sign a document which is in fact a blank form or a partially completed form. A person signing such a document would have no defense in law should he decide to challenge it in the court of law or in a court tribunal.
- You may opt to seek professional (Sacco Staff) advice on the legal implications of the guarantee before signing
- Be wary about giving a photocopy of your identity card or passport to anyone other than the Sacco.
- Do not have a financial, business or moral interest in the transaction and are uncertain as to the nature of the loan. Your instinct is always RIGHT.
- Have doubts as to the ability or integrity of the borrower
- Feel that you are under undue pressure or duress to do so
- Do not understand the terms of the guarantee and do not have an independent party explaining it to you
- Believe that you have no capacity to settle the debts of the borrower if he fails to pay
If a member defaults on a loan, the law allows the guarantor to sue that member in a Cooperative Tribunal. (For further information contact the Sacco offices)
ALWAYS ensure that:
- The maximum amount to be guaranteed is clearly stipulated and whether it is inclusive of accrued interest
- You are aware of your liabilities in the event that variations are made to the terms and conditions of the loan
- In a joint or joint and several guarantee, all the guarantors sign the guarantee
- The name of the borrower is clearly stated on the guarantee document
You seek clarification or explanation on any of the terms of the guarantee, if in doubt. If necessary, seek advice before signing
What does the law dictate on Guarantorship?
PART IV – GOVERNANCE OF SACCO SOCIETIES
Application for loan or credit facility
Where security is required with respect to a loan, the Sacco society may accept as security against any loan, an endorsement by a guarantor or co-guarantor, assignment of an interest in real or personal property, deposits or wages of the borrower or any collateral as may be prescribed by the authority.
No director, officer, employee or a member of the board of a Sacco society shall act as a guarantor of any person with respect to a loan advanced or credit facility granted to a person by that society.
Charge against shares and savings deposits
A Sacco society shall have a first charge against deposits and share capital and upon any dividend or interest payable to a member for any debt due to the society from the member, either as a guarantor or endorser of a loan or credit facility or for any other obligation.
Protection of deposits
If a member has outstanding loans or credit facilities owing to a Sacco society, the member or guarantor’s deposits as the case may be, shall offset he loan or credit facility before the member or guarantor may receive any net from the members’ or guarantors’ protected deposits.
Security for loans
A guarantor shall be adequately informed of the nature of the liability prior to signing an agreement creating guarantor liability.
Source: Sacco Act 2008
Here are some hilarious definitions of a guarantor according to some member’s:
1. Swahili/Slang Version
“Boss, niaje? Ni-guarantee Sign hapa nataka Loan, Si sisi ni mabeshte ebu sign hii form”
– English Translation –
“Boss, how are you? Guarantee me, sign here I want a loan, we are friends aren’t we? Sign this form”
2. Swahili/Slang Version
“Wee boss, ebu ni guarantee 200K hio ni kidogo, kwani unasavingi how much?”
– English Translation –
“Youuuu guy, guarantee me 200K, that’s little money, is it that you don’t save or what?”
3. Swahili/Slang Version
“Cheki, niko na speedy, nipelekee form yangu round wani guarantee nitachukua form after meeting na sonko”
– English Translation –
“I am in a hurry; take my form round to all my buddies to guarantee me I’ll take the form after meeting with my boss”
4. Swahili/Slang Version
“Nitafutie Guarantors, niko less by 1M, Loan ikitoka, tutajibambe baadaye”
– English Translation -
“Assist me in looking for guarantors, I am remaining only 1M in guarantee, when the loan is disbursed we shall go and party somewhere”
The type of language we use determines on whether to sign the loan form or not however hilarious or absurd it may sound. It is funny and disheartening how serious issues like that of guarantors is taken lightly.