The role of informal microfinance institutions in saving

2.2.2: Empirical studies from outside Tanzania
In its study, Development International Desjardins (2005) finds that the motives behind the
formation of savings and credit Cooperatives societies (SACCOs) depended on the premises
and an approach to cooperatives challenges. These involved the involvement of the respective
Africa countries to spear head the formation of savings and credit cooperatives societies
(SACCOs) and the involvement of non-Africa promoters who provided either financial or
consultative services to the formation of savings and credit cooperatives societies (SACCOs) in
various Africa.
The study further finds that the autonomous SACCOs based on savings mobilization prior to
granting loans are of recently, being established in Burkina Faso, Cameroon, Zaire (Democratic
Republic of Congo), Rwanda, Benin and Ivory Coast in 1970, in Tanzania in 1938(in Moshi
Town).
The major comparative advantages of credit unions lie in their ability to service large number
of depositors, and use these savings to provide a diversified range of loans to individual
members. Other key strengths are their ability to sustainable achieve a large breadth of
outreach, and also considerable depth as suggested by median savings deposit and loan size
and its distribution in several countries such as Bolivia, Ecuador, Philippines, and Sri Lanka
(Branch and Evans), 1999; Evans, 2001).
Government institutions have often misused the cooperative movement for political purposes.
In fact, government interference is a major cause of cooperative failure- especially in
developing countries. Cooperative performance in rural areas is mixed (Braver man and
Guasch, 1989; Huppi and Feder, 1990), and a change in the regulatory and supervisory
framework as well as technical assistance is often called for to improve performance.
Krahnen and Schmidt (1994) assert that the ownership and governance structure of credit
unions tends to favor depositors over the interests of owners and borrowers, leading to a
safety-oriented policy that sacrifices profitability and efficiency. However, under the risky
conditions of rural areas in developing countries, this conservative policy can indeed be risk-
efficient in the eyes of risk-averse depositors and low-income owners. Krahnen and Schmidt
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