The role of informal microfinance institutions in saving

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which is expressed as a percentage of the starting of market value of an investment, while return on a portfolio (whereas a portfolio is defined as a combination of two or more assets) is a weighted average of return on the particular assets making up the portfolio. Where there is diversification of investment, it is called portfolio investment. Levy and Sarnat (1994) argue that when there is diversified investment, the investor reduces the risk while increasing the return on his investment. This makes the objective of diversified investment to maximize returns at a given level of risk. Risk (standard deviation) of the assets involves events which may or may not occur, and is defined as the variation of returns from those expected, and its probability of occurrence can is calculated. When there is a spread of outcome, the stock is deemed as risky. The standard deviation is used to measure the risk of the invested assets. When there is high standard deviation, the stock will be deemed as more risky, that the one with lower standard deviation. Investor considers both risk and returns when making investment decisions, preferring higher returns and lower risk from his/her investment. This implies that if the investment has a higher rate of risky, it will be chose by the rational investor if its return is higher to offset the risk should it occur. Brealey and Myers (2000) argue that investors may reduce the standard deviation of portfolio return if they choose stocks, which do not move together. This is from the idea that if assets are moving together, when they are combined together, they will increase the risk instead of reducing it. A common measure used to measure as whether the assets are moving together is correction coefficient. A positive correlation coefficient (usually taken as +1) shows that the combined assets will not reduce the level of risk, while a negative correlation coefficient (usually taken as - 1) shows that the combined assets will reduce the level of risk of portfolio. On the other hand, when correlation coefficient is zero, the risk of portfolio will equal the sum of variance of assets, while its return equals the individual assets returns. There is also a view that investing in a portfolio regardless their individual behavior will not reduce all risk when put together in a portfolio selection. There are two types of risks associated with the stocks. These are market risk and individual stock risk. A well diversified stock reduces stock risk, while not a market risk. This is because market (systematic) risk, apart 98
from being influenced by individual stock risk, it is also influenced by other internal and external factors affecting the general economy of the country (Nyamsogoro, 2001). Further argument is proposed by Palmer (1999) that an investor should identify specific risk to each asset and then propose suitable measure to manage it. Accordingly, although the increasing number of assets reduces risk, there is a limit. Increasing number of assets will reduce the risk up to a certain point when the risk will be reduced further. Rollin (1999) points the following to be advantages of utilizing the concept of efficient portfolio. The incorporation of interrelationship among different business entities in various economic conditions, the facilitation of optimization of earning-risk trade off; and specific capital allocation profiles. Portfolio will be optimal when there is no other combination of assets which give higher return volatility ratio. The large number of financial assets increases the change of having a wider combination of assets. In general, investors can invest his funds in financial assets registered in the stock exchange forming portfolio, or in other economic sectors such as agriculture, mining or general business sector. 2.1.3: PORTFOLIO INVESTMENT IN THE CONTEXT OF TANZANIA The portfolio is said to be optimal if there is no other portfolio (combination of assets) giving the higher return-to-volatility ratio. The large the number of assets one has the wider the alternative combination will be. Having interested in constructing a portfolio of a registered stock for example, using the Nairobi stock exchange (over fifty registered companies representing various economic sectors) are will be having wider combination alternatives than when one uses only four registered companies in Dares Salaam stock exchange (DSE).Even so, having fewer registered companies or a less developed capital market does not necessarily mean it is not possible to form an investment portfolio. If for example, the findings (of 20 stocks minimum) of Newbould (1993) hold then it would mean that investors investing only in Dares Salaam would never benefit from diversification unless the number of registered stock in DSE is equal or more than 20. According to Tanzania Investment Center, Tanzania has an important investment opportunity in Mining sector, tourism, fisheries, manufacturing, petroleum and gas, financial services, infrastructure development, and in agricultural sector. 99
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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
Page 47 and 48: Cameroon in its English-speaking ar
Page 49 and 50: Since they have appeared on the sce
Page 51 and 52: Tanzania was the first country in A
Page 53 and 54: Type / Name of institution Microfin
Page 55 and 56: enhancing loan recovery and improvi
Page 57 and 58: embarked on building links with Sac
Page 59 and 60: • Encouraging and supporting, thr
Page 61 and 62: This shows the true nature of a maj
Page 63 and 64: Savings mobilization The potential
Page 65 and 66: It has been argued that the formal
Page 67 and 68: It is suggested that governments, i
Page 69 and 70: Local Counterpart Local MF NGOs wor
Page 71 and 72: Local Counterpart Small Industrial
Page 73 and 74: Local Counterpart Program Amount Go
Page 75 and 76: • PROMOTION AND ROLE MODELS. Help
Page 77 and 78: (iii) The target group being foreig
Page 79 and 80: (iv) Existence of pressure of the M
Page 81 and 82: (c) Government should honor stakeho
Page 83 and 84: 1.1.16: INCOME DISTRIBUTION Policie
Page 85 and 86: TABLE 8: Formal Sector Distribution
Page 87 and 88: percent households decreased from a
Page 89 and 90: Also the significance of this study
Page 91 and 92: loans to their respective members i
Page 93 and 94: • Having adequate and timely secr
Page 95 and 96: LITERATURE REVIEW 2.1.0: INTRODUCTI
Page 97: It further defines savings and cred
Page 101 and 102: Investment Guarantee Agency (MIGA)
Page 103 and 104: 2.1.7: THE ROLE OF STOCK MARKET IN
Page 105 and 106: isk{Solnik 1974}. As a consequence
Page 107 and 108: • Access for New Firms- The prest
Page 109 and 110: of financial systems. The success o
Page 111 and 112: Mkwizu (1992) points out that Tanza
Page 113 and 114: (1994) conclude that this conservat
Page 115 and 116: areas. However, repayment schedules
Page 117 and 118: plus services (Aghion and Murdoch 2
Page 119 and 120: � Lack of appropriate and adequat
Page 121 and 122: savings of the community. Community
Page 123 and 124: ingenious entrepreneurs behind them
Page 125 and 126: Reforming the national small busine
Page 127 and 128: linkages based on both market and n
Page 129 and 130: combinations: private sector, gover
Page 131 and 132: Tanzania and most of its neighborin
Page 133 and 134: 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
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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
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iggest commercial city have more SA
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small farmers are most likely to sa
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15 TPB … 16 TGT … 17 IFAD-Mbeya
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and bank balances which have been o
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However, operating income per total
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The Research Institutions in Tanzan
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microfinance services in both rural
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(xi) Do you inform SACCOs about you
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• Provide modern facilities and i
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validate this observation by asking
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fact that their SACCOs serves all k
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What is more disturbing than the fa
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Year Real Private Disposable income
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Year Real Private Income Received b
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Model R R Squar e Adjusted R Square
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213
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215
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CONCLUSION The performance of micro
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5.14 Please list in the other impor
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Bank and other institutions engagin
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Table 18A: SITUATION FOR THE SACCOs
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Table 19: SITUATION FOR THE AUDITED
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(a) Specific Recommendations. The r
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APPENDIX E: QUESTIONNAIRES USED TO
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5.15 How have you been financing th
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Real Pinco RGD Rate Real GV Inv Dum
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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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