The role of informal microfinance institutions in saving

5. In Kenya and Tanzania the SACCOs are covered by cooperative law, are registered
with the Ministry of Agricultural and cooperation.
6. Both countries have narrow margin of the level of profitability of SACCOs due to high
costs incurred in rural, remote areas. This low level of profitability prevents the
institutions from major appropriate provision for unforeseen events (return on assets
ranges from 1-7% return in capital ranges 10-50%.
7. Both countries encourage to reach a very large number of women in a short period of
time by creating new financial products better suited to their demands also allows them
to transform a much larger proportion of the savings mobilized into loans to apply
higher interest rates with a view to making the institution as a whole sustainable and to
make an effort to extend the scope of their activities towards new members,
particularly less privileged new members living in remote areas villages.
8. The recent economic liberalization in both Kenya and Tanzania has broken in the
marketing of cash crops like coffee and tea and encouraged the appearance of private
operators on the scene who can choose to deal with cooperatives or by pass them by
buying directly from individual producers.
9. The process of creating SACCOs starts in the field i.e. Most of a few former members of
an existing SACCOs decide to form a new SACCOs further to change in their personal
situation.
2.2.10.4: IMPORTANCE OF SAVINGS MOBILIZATION AND MANAGEMENT IN
ECONOMIC DEVELOPMENT.
1. Savings represents that part of income that has not been consumed. This provides resources
for investment purposes. There are three broad types of savings at the level of the domestic
economy namely: voluntary savings, involuntary savings and policy induced savings generated
to increase output in a situation of less than full employment.
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