The role of informal microfinance institutions in saving

METHODOLOGY OF THE STUDY
CHAPTER THREE
3.1.0: Measurement of household in living standard.
The poorest 20 % households were chosen to represent average households in the country.
Since poverty measures a sort of inequality that confines attention to a specified slice bottom
of income distribution, it was decided to choose arbitrary private income received by the
poorest 20% of households in the economy as the income of the average households. Then
through econometric, it was estimated the extent to which lending interest rate of SACC0s has
affected income received by poorest 20 % households in the country i.e. how SACCOs has
increased monetary income and contribution expenditures of poorest 20 percent households
in Tanzania.
Income Poverty.
This is defined as the situation when households do not have enough income to sustain the
consumption expenditure of equal or more than 1 USD per day. Income poverty is the main
variable used in this study to assess the impact of SACCOs on the living standard of the
poorest 20 percent households in Tanzania.
Non – income poverty.
This occurs when households have a bit little amount of money but they do not have access to
basic consumer goods and services. Though non income poverty have not been included in
econometric analysis, it has been used whenever a need arise in order to highlight a particular
point
Informal Micro finance Institutions.
These are financial institutions whose activities fall outside the scope of formal financial
institutions. They include informal individual money lenders, savings and credit cooperative
societies and Savings (SACCOs) and Credit Cooperatives Association (SACAs).
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