The role of informal microfinance institutions in saving

To SACCOs, they (SACCOs) are also expected to establish better management and loan
recovery policies which will enable them (SACCOs) advance loans to members at affordable
low interest rates. The economy consist people of different categories such as rural households,
urban households, rural food and cash crop producers, rural cattle keepers, rural micro traders
and few personnel employed in the Government and private social and economic sectors. In
urban areas, most people are employees in the formal Government and private sectors and
few are urban farmers. Also some people in urban areas practice trading at both large and
small scales in both urban and rural areas, we find a significant number of people being
dependant though more dependants are found in urban areas than in rural areas due to the
nature of occupations done there, since activities in rural areas allows employment of many
active working people than in urban areas where major activities are formal office
employment, employment in manufacturing industries and trading which can not employ
many more people as in the case of rural areas.
The differing of activities and employment in both rural and urban areas also cause these to be
differences in income inequality and poverty trends between rural and urban areas. In urban
areas we find high level of income inequality among different categories of households than in
rural areas. However, low income inequality in rural areas may be also caused by low level of
monetary income received by most people in rural areas.
The different activities done by households in both urban and rural areas also mean the
existence of different SACCOs. Thus we have SACCOs for food crop producers, cash crops
SACCOs, traders SACCOs, fishermen SACCOs, Teachers SACCOs, Armies (e.g. Police) SACCOs
etc. All having the aim of assisting the Government to reduce high level of poverty and
income inequality in the society.
Thus, the role of SACCOs to reduce poverty among its members depends on how and where
the borrowers’ funds are invested, and also how well the formulated Government policies will
facilitate performance improvements of members’ micro activities.
For example, to rural community, most people engage in food and cash crops production, few
in cattle keeping and some combine both crops production and animal keeping. In most
developing countries such as Tanzania, most food crops are produced by small scale farmers
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