The role of informal microfinance institutions in saving

using poor farming technology and mainly depending on weather, cash crops are produced by
both small scale and big scale farmers. Thus poverty reduction strategies among different
occupation groups are not the same, but will differ following the type of activities done and
the place /areas where the activities are done.
To crop producers the common strategy will be to increase the quality and quantity of crops
produced while also expecting to sell them at higher price value than the cost of production
hence getting profits. To animal keepers in developing countries the strategy could be to
increase the number and quality of animals produced and sold.
To traders, the strategy could be to expand business size, sales and profits. To employees in
the formal sectors, the strategy could be to invest the borrowed funds in the ventures which
will supplement their earned salary income.
Still in terms of investment, there are wide ventures where investment could take place. These
are like physical investment i.e. investment in physical projects such as livestock, farming,
manufacturing industries, or investing in financial assets of the companies listed in stock
exchange i.e. shares and stock of private companies or treasury bills, treasury bonds of the
Government. Such investments in financial assets have several policy implications such as
increasing the number of people owning companies, while also increasing participation of
households in monetary policy and fiscal policy operations of the country whereby monetary
policy is defined as actions of the Central Bank to change the volume of money supply in
order to achieve certain predetermined objectives such as employment, poverty reduction,
stable balance of payment etc. On the other hand, fiscal policy aims at achieving the same
objectives through changing the composition and rates of government expenditures and
government revenues, in terms of domestic and external/foreign resources.
The contribution of Savings and Credit Cooperative Societies (SACCOs) and other organized
microfinance institutions to reduce poverty and income inequality in the country is the
combination of policy and non policy factors, the role of the Government, the number of
households joining SACCOs, the amount of loans given to SACCOs members, the amount of
loan used for intended investment purposes by SACCOs members, the rate of interest rate
charged on micro loans given to SACCOs members, taxation policy of the government on
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