The role of informal microfinance institutions in saving

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Efficiency and Effectiveness Analysis Effectiveness and efficiency are important criteria for institutions performance. Effectiveness measures the magnitude and the scale of institutions performance. On the other hand, efficiency measures quality productivity and returns on assets and resources. Below is the table summarizing important measures of institutions effectiveness and efficiency? Table 16 has been adapted and modified based on Oketch et al (1997) statistical findings of surveyed and analyzed micro financial institutions in the period covering 1994-1996. Table 16: Average Effectiveness and Efficiency Performance measures of Institutions Efficiency/Effective Measure % Change 1994-1995 % change 1995-1996 Average 0f % Change Deposit Mobilization 129.61 170.25 145.1 No. of Loans 94.0 105.4 101.1 Deposit/ loan ratio 147.1 237.1 220.0 Total Income/total expenses ratio 118.8 (298) (100.4) Personnel cost 114.8 91.9 103.3 Operating income cost 63.7 58.4 61.0 Net Loan portfolio/ Total assets ratio 65.6 15.3 63.2 Investment/Total Assets ratio 115.0 126 106.1 Lending Income/Total ratio 87.9 179.5 106.6 Deposit/Staff ratio 162.56 171.4 170.5 Adapted and modified from Oketch et al (1997) Statistical Sheet. Table 16 suggests that on average in the period 1994-1996 deposit mobilization increased by 145.1%. In the year 1995-1996 the change in deposit mobilization was higher by 40.64%. This increase in deposit mobilization suggests the increase in the effectiveness of financial mobilization. 190
However, operating income per total costs, net loan portfolio per total assets and total income per total expenses suggest that micro financial institutions did not perform well in the stated period. Operating income per costs increased at a decreasing rate of 5% suggesting that costs outweighed operating income. Furthermore, net loan portfolio per total assets decreased by more than confirming the decline and limited capacity of lending of the micro financial institutions in Tanzania. Total income per total expenses ratio indicates that most of the financial institutions were operating at a loss. In the period between 1995-1996 the total income in comparison with total expenses declined by 298%. In spite of the loss, micro financial institutions continued to operate. It is only subsidy, government support and donor grants which enabled most of micro financial institutions to remain in business. Financial institutions in Tanzania should continue with reforms and change the way of doing things in order to reduce loss and dependence. Innovative measures should be taken in order to rescue the situation. Micro Financial Institutions Managers Micro financial institutions managers have got a key role to play for better performance of micro finance institutions. First and foremost managers must focus on capacity building, motivation of employees and training. The success of micro financial institutions requires committed, motivated and well trained employees. The analysis has shown that most of micro financial institutions have limited number of qualified employees. Managers should take deliberate measures to improve management systems. Employees should be highly motivated and staff development should be on top of the agenda. Investing in people is one of the prerequisite for micro financial institutions development and better performance. Managers must aim at reducing transaction costs, adopting group lending mechanism and promoting the link between formal and non-formal financial institutions. Informal financial institutions will help formal institutions to solve the problem of information, reduce costs and increase the outreach for saving mobilization and service delivery to rural poor. Managers must understand and segment their customers. This analysis has shown that rural poor can serve if given the opportunity. The tendency of most of micro financial institutions to require high minimum amount for opening saving account should be avoided. Lowest 191
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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
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The SACCOs, is a complex organizati
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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 and 186: small farmers are most likely to sa
Page 187 and 188: 15 TPB … 16 TGT … 17 IFAD-Mbeya
Page 189: and bank balances which have been o
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
Page 237 and 238: Finally, governments in Sub-Saharan
Page 239 and 240: 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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