The role of informal microfinance institutions in saving

4.1.2: Responses to Questionnaire.
The study recognized the importance of determining the response rate in order to validate and
justify the findings.
4.1.3: Business Environment.
The environment in which SACCOs operates is very crucial for their growth and development
as well as their contribution to the overall economic development of the country. Institutions
and businesses interact daily at different levels. These range from direct contacts such as
issuance of business licenses to much more indirect channels of government actions including
effect of fiscal and monetary policies.
The challenge of this study was to determine the perception of SACCOs of their operating
environment and come up with strategies that will support SACCOs to grow and improve
their performance within their domain of operations.
The study therefore attempts to evaluate the legal framework, business regulation, Taxation,
Microeconomic policy, business culture and infrastructure as they affect Sacco’s operations.
Responses
Rural Financial Institutions are the cornerstone of financing rural development and micro-
enterprises in developing countries. Small farmers and the poor require the support of
the rural financial institutions in order to finance their development programmes.
In the words of Padmanabhan (1988: 10) ‘’Lack of economic growth was seen as a
consequence of shortage of physical capital. A vicious cycle low capital, low incomes,
low savings and consequent low capital seemed to be operating in rural areas. It was
this thinking and reasoning of 1950’s which led to the mushrooming of specialized
rural financial institutions .The logic of traditional rural credit financing based on the
following assumptions;
Assumptions related to saver /borrower behavior are that the rural poor can not save
and therefore will not respond to saving incentives, and the farmers need cheap loans
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