The role of informal microfinance institutions in saving

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Financial institutions are expected to collect extended loans on time. Based on data collected by Oketch et al (1997) the problem of loans repayments exists in Tanzania. However, Oketch et al (1 bid) did not undertake detailed analysis on the causes of the problem of non-performing loans. Other factors such as timing of loan processing and delivery, projects appraisal methods and repayments arrangements are key issues to consider. Table 15 below summarizes the percentage of non-performing loans of sampled micro financial institutions in Tanzania. Percentage of non-performing loans of performing loans is the ratio of the amount of loan due but not paid to total amount of loan. 100% of non-performing loans implies that the total loan due is yet to be repaid by the borrower. Table 15: Percentage of Non-Performing loans. No. Branch % Non-Performing 1 Chaburuma … 2 Chalinze 95 3 Isike 96 4 Igunga 100 5 Kisarawe … 6 Korogwe … 7 Magu 98 8 Tukuyu … 9 Arusha 99 10 Hai … 11 Mbeya 100 12 Mwanza … 13 Lumumba … 14 KCB … Loans (Late 10/Total % 186
15 TPB … 16 TGT … 17 IFAD-Mbeya 39 18 MEDA 96 19 PRIDE … 20 Nyanza 00 21 Iwindi 100 22 Wino 2 23 Mwanza … 24 Usafi … 25 Mkwepu … 26 Marangu West … 27 WETCU … 28 Juhudi … 29 Morogoro --- Source: Oketch et al (1997, sheet 1) Table 15 suggests that there is a serious problem of loans repayments in Tanzania micro financial institutions, particularly in banks. Recalling the fact that banks extend loans in millions to big borrowers, we can therefore argue that big borrowers are mainly responsible for loan defaulting. This argument is supported by almost 100% of on time repayments of loans in SACCOs and NGO’s. So long as NGO’s and SACCOs extend loans to low income earners and the poor, we can therefore propose that NGO’s and SACCOs maintain relatively high repayments rates. It is noticeable in the Oketch et al study, ‘’PRIDE Tanzania and four of the SACCOs in the sample appear to have higher repayments rates. This is probably explained by the group guarantee mechanism and peer pressure which is the hall mark of successful micro financial across the World’’. (Oketch et al, 1997, p.23) It is obvious that there is poor performance of loans repayment in micro financial institutions in Tanzania. What are the causes of this poor credit performance? Of course there are different answers to this question. According to Co-operative and Rural Development Bank (1991, p.27) 187
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THE ROLE OF INFORMAL MICROFINANCE I
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DECRALATION I, Mwakajumilo, Stephen
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DEDICATION To Almighty God, to whom
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ACRONYMS AND ABBREVIATIONS AGOA = A
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TABLE OF CONTENTS Title Page I Abst
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2.2.7 The prospects of SACCOs in Ta
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CHAPTER 4 PRESENTATION AND DATA ANA
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TABLE 18B: Value of loan from SACCO
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To SACCOs, they (SACCOs) are also e
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micro projects, general entrepreneu
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which are viewed as not credit wort
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parts of Tanzania. They are member
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Cooperatives were introduced in Tan
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1.1.3: WHY IS THIS THESIS UNDERTAKE
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Cumulative Number of Number of Year
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Year Number of Members Value of Sha
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Year Percentage of Consumption of l
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• Bureaucratic constraints, lack
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6. To identify gaps/shortfalls (i.e
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economy with respect to the unhealt
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organizations, help members achieve
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The cooperative formula was then co
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savings and credit cooperatives tha
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Cameroon in its English-speaking ar
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Since they have appeared on the sce
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Tanzania was the first country in A
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Type / Name of institution Microfin
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enhancing loan recovery and improvi
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embarked on building links with Sac
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• Encouraging and supporting, thr
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This shows the true nature of a maj
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Savings mobilization The potential
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It has been argued that the formal
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It is suggested that governments, i
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Local Counterpart Local MF NGOs wor
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Local Counterpart Small Industrial
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Local Counterpart Program Amount Go
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• PROMOTION AND ROLE MODELS. Help
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(iii) The target group being foreig
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(iv) Existence of pressure of the M
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(c) Government should honor stakeho
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1.1.16: INCOME DISTRIBUTION Policie
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TABLE 8: Formal Sector Distribution
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percent households decreased from a
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Also the significance of this study
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loans to their respective members i
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• Having adequate and timely secr
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LITERATURE REVIEW 2.1.0: INTRODUCTI
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It further defines savings and cred
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from being influenced by individual
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Investment Guarantee Agency (MIGA)
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2.1.7: THE ROLE OF STOCK MARKET IN
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isk{Solnik 1974}. As a consequence
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• Access for New Firms- The prest
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of financial systems. The success o
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Mkwizu (1992) points out that Tanza
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(1994) conclude that this conservat
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areas. However, repayment schedules
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plus services (Aghion and Murdoch 2
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� Lack of appropriate and adequat
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savings of the community. Community
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ingenious entrepreneurs behind them
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Reforming the national small busine
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linkages based on both market and n
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combinations: private sector, gover
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Tanzania and most of its neighborin
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favorable rates and help keep finan
Page 135 and 136: The SACCOs, is a complex organizati
Page 137 and 138: 2.2.10.1: Advantages for the SACCOs
Page 139 and 140: 2.2.10.3 THE COMPARATIVE ANALYSIS B
Page 141 and 142: 2. The importance of savings in the
Page 143 and 144: Commercial Banks are like the other
Page 145 and 146: presence in carrying on the traditi
Page 147 and 148: A summary profile of selected NGOs
Page 149 and 150: (ii) Competitive Financial Environm
Page 151 and 152: � Likewise, these institutions wi
Page 153 and 154: METHODOLOGY OF THE STUDY CHAPTER TH
Page 155 and 156: among variables such as the support
Page 157 and 158: • Checklist response • Rating a
Page 159 and 160: • What are the roles of instituti
Page 161 and 162: In each Region, a total of 20 SACCO
Page 163 and 164: 3.1.8: Data Processing The data res
Page 165 and 166: 3.1.12: Limitations • Difficult i
Page 167 and 168: Those students who are to write a M
Page 169 and 170: V. Generalizations and interpretati
Page 171 and 172: The method of collecting Primary an
Page 173 and 174: characteristics of participants, th
Page 175 and 176: How? Through experiment approach /g
Page 177 and 178: which the problem has got to be stu
Page 179 and 180: 4.1.2: Responses to Questionnaire.
Page 181 and 182: Outreach and Savings Mobilization
Page 183 and 184: iggest commercial city have more SA
Page 185: small farmers are most likely to sa
Page 189 and 190: and bank balances which have been o
Page 191 and 192: However, operating income per total
Page 193 and 194: The Research Institutions in Tanzan
Page 195 and 196: microfinance services in both rural
Page 197 and 198: (xi) Do you inform SACCOs about you
Page 199 and 200: • Provide modern facilities and i
Page 201 and 202: validate this observation by asking
Page 203 and 204: fact that their SACCOs serves all k
Page 205 and 206: What is more disturbing than the fa
Page 207 and 208: Year Real Private Disposable income
Page 209 and 210: Year Real Private Income Received b
Page 211 and 212: Model R R Squar e Adjusted R Square
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Page 217 and 218: CONCLUSION The performance of micro
Page 219 and 220: 5.14 Please list in the other impor
Page 221 and 222: Bank and other institutions engagin
Page 223 and 224: Table 18A: SITUATION FOR THE SACCOs
Page 225 and 226: Table 19: SITUATION FOR THE AUDITED
Page 227 and 228: (a) Specific Recommendations. The r
Page 229 and 230: APPENDIX E: QUESTIONNAIRES USED TO
Page 231 and 232: 5.15 How have you been financing th
Page 233 and 234: Real Pinco RGD Rate Real GV Inv Dum
Page 235 and 236: In general, SACCOs in Tanzania have
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Finally, governments in Sub-Saharan
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5.3.11 If the answer to 10.0 is “
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5.3: RECOMMENDATIONS OF THE STUDY (
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REFERENCES: Ally M.Kimario, Marketi
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Working paper number 466, IDS, Univ
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The role of informal microfinance institutions in saving

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