The role of informal microfinance institutions in saving

In the future, respondents who operate semi-subsistence or commercial farms are most likely
going to borrow money to facilitate purchase of farm inputs and hiring of temporary
employees. Members with small-scale non-farm businesses are most likely going to borrow
funds to facilitate purchase of stocks, inventories, and raw materials. This means that SACCOs
should be prepared to provide relatively small loans, with repayment plans that accommodate
the needs of farmers and small-scale businessmen. Special repayment terms may need to apply
to farm loans since farmers receive the bulk of their income in lump sum payments at harvest
time, rather than at regular monthly intervals.
When asked “What is the one most important new service that you think your SACCOs should
offer in the future?’’, one-third of the 2008 respondents suggested that SACCOs offer bigger
longer term loans including mortgages, home construction loans and home improvement
loans. Another 15% would like SACCOs to offer loans on tools, machines, bicycles, vehicles
and household items using the item as collateral rather than savings.
Appendix A: Trend of Government Expenditures on Social Services and
SACCOs lending Rate in Tanzania
Year
Real Private Disposable income
Received by lowest 20%
households
(Million Tshs)
I – n)
RGDP
Rate
Average
Interest Rate
Charged by
SACCOs to
borrowers
Gess
Million
Shs
Real GDP
Growth Rate
1961 17.81 4.391 1 290,000 2.0
1962 21.57 4.381 1 341,000 3.8
1963 21.94 4.381 1 350,000 5.1
1964 17.52 4.301 1 377,614 4.2
1965 14.57 4.121 1 400,000 3.5
1966 22.31 4.000 1 411,688 4.1
1967 37.98 3.952 1 428,523 5.2
1968 41.72 3.614 1 433,258 1.8
1999 64.43 3.497 1 438,333 5.8
1970 64.50 2.502 3 443,548 4.2
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