The role of informal microfinance institutions in saving

• Building competence in SACCOs through capacity building initiatives deserves
1.1.14.1: SACCOs
priority to enable these institutions operate more efficiently and competitively.
SACCOs and community banks will need assistance in acquiring technical and
managerial competence and institutional capacity building. However, the main
challenge that these institutions will face is that of managing the transition from that
kind of dependence towards sustainability.
These institutions operate under the co-operative Societies Act, 1991 in offering savings and
credit services to members. They are also covered under the Banking and Financial institutions
Act, 1991 as financial intermediaries but the Bank of Tanzania does not supervise them.
The Government recognizes the following important guidelines for efficient sustainable
operations of SACCOs:
• As savings-based institutions, regulation and supervision are necessary once the
institutions reach more than a small group of members.
• As savings –based institutions, it is important to ensure that lines of credit for loanable
funds to not undermine incentives to promote savings.
• Pricing policies for SACCOs should promote savings and allow sufficient interest rate
spread for the profitable operations of the SACCOs.
• Promotion of SACCOs is best separated from their supervision in order to ensure that
supervisors apply standards objectively.
• Widening the scope of operation by establishing cooperatives in various sectors of the
economy-for example energy, transport, communication, insurance, water fisheries,
housing, trade, industry, finance and forestry.
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