The role of informal microfinance institutions in saving

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CHAPTER 5 5.0. CONCLUSSIONS AND RECOMMENDATIONS 5.1 CONCLUSSIONS Financial development is playing an important role in Tanzania’s economic progress. Financial failures, particularly insufficient institutions and high transactions costs limit poor people’s access to formal finance and prevent low income people from borrowing, and saving. Providing extended access to financial services would enable Tanzania to reallocate capital, through mobilizing savings and increasing investments. The result could be increased capital accumulation, which in turn can lead to economic growth in Tanzania. From a micro perspective, individuals acquiring adequate financial services would be able to improve their private economy, through accumulating larger lump sums, for school, medicines, houses, stationary etc. which can increase human capital, the individuals ‘productivity and ultimately contribute to poverty. Since Tanzania has a history of high inflation, which has led people distrusting financial institutions and monetary saving and borrowing. Therefore gaining people’s confidence is crucial, as is providing services with positive real interest rates. If individuals believe saving in an institution as being too risky, they will wisely consume or save in a non-monetary form. An essential element is making financial services available for as many people as possible. Developing and improving occupational SACCOs, saving and credit cooperatives, can be one effective alternative to formal banks. SACCOs are reaching low-income people with financial services. If improvements are made and regulations are recognized they could operate as an intermediating institution, allocating resources between low income savers and borrowers. The financial ideal would be available, widespread formal services, resulting in the whole population having the opportunity to take part in the formal economic activities. Then there would be no use for an informal sector. But at present formal banks are far from having the capacity to offer financial services to the majority of Tanzania’s population, i.e. people with low income. 234
In general, SACCOs in Tanzania have problems for financing their activity. The SACCOs are short of funds for necessary investments in education and technological resources, such as computers, building an office or keeping a safe, thus they could need external support. One advantage within a majority of the SACCOs is that, even if struggling hard, they have remained self-reliant. Self reliance indicates potential for being sustainable, however at the same time a precondition for sustainability as affording to provide members adequate services. The level of knowledge concerning operating the SACCOs and financing saving products, differs among SACCOs. But poor bookkeeping skills are a prevalent problem in many SACCOs. However, SACCOs do have advantages; for example, occupational SACCOs have a great possibility reaching potential members, since they are situated at working places. Emphasizing SACCO’s uncomplicated rules and regulations can be another way to attract potential savers and borrowers. Members in the two occupational SACCOs studied find higher liquidity and a more beneficial interest rate to be the most important improvements to be made, before wanting to increase savings. Finding liquidity important might be an indication on members being worried over the future economic situation, they want to be certain that their savings are available at any time. A great majority in the survey performed finds the SACCOs security to be insuffient, and moreover that providing safety on savings is one of the most important qualities when using financial services offered by the SACCOs. In sub-Sahara Africa, there is ample evidence that the poor, particularly those in the rural sector, value both deposit and credit facilities. The existence and growth of cooperative banking and combined savings and credit institutions in the microfinance sector in sub-Saharan Africa reflects the growing demand for both savings and credit facilities. There are strong linkages between formal and informal microfinance institutions (MFIs). The formal institutions have, in some cases, drawn on the savings mobilization methods earlier developed by traditional informal MFIs. In some cases, the former have also become bankers to the latter. 235
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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
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2.2.10.3 THE COMPARATIVE ANALYSIS B
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2. The importance of savings in the
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Commercial Banks are like the other
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presence in carrying on the traditi
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A summary profile of selected NGOs
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(ii) Competitive Financial Environm
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� Likewise, these institutions wi
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METHODOLOGY OF THE STUDY CHAPTER TH
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among variables such as the support
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• Checklist response • Rating a
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• What are the roles of instituti
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In each Region, a total of 20 SACCO
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3.1.8: Data Processing The data res
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3.1.12: Limitations • Difficult i
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Those students who are to write a M
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V. Generalizations and interpretati
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The method of collecting Primary an
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characteristics of participants, th
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How? Through experiment approach /g
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which the problem has got to be stu
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4.1.2: Responses to Questionnaire.
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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 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: Real Pinco RGD Rate Real GV Inv Dum
Page 237 and 238: Finally, governments in Sub-Saharan
Page 239 and 240: 5.3.11 If the answer to 10.0 is “
Page 241 and 242: 5.3: RECOMMENDATIONS OF THE STUDY (
Page 243 and 244: REFERENCES: Ally M.Kimario, Marketi
Page 245: Working paper number 466, IDS, Univ
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