Tuesday, February 10, 2009

THE IMPORTANCE OF SACCOS

THE IMPORTANCE OF SACCOS AS MICROFINANCE INSTITUTIONS IN TANZANIA
1. Definition, aims and Mission of SACCOS;-
Savings and Credit Cooperative Society (SACCOS) is defined as private and cooperative financial intermediary where membership is open and voluntary. It belongs to its members who manage it democratically. It is thus the crucible of the members’ economic and cooperative education.

The SACCOS aims a meeting the financial needs of all its members men/women, old/young, rich/poor in particular, by encouraging savings and granting loans to the members.

In order to provide the best and most durable satisfaction to its members, the SACCOS is concerned about its own financial stability and to do so it must achieve profitable management on an on going basis.

The mission of the SACCOS is to make available on site, to any one wishing to join it, financial services under the best conditions, while enabling the cooperative to cover its operating expenses and providing for the economic education for its members.

2. The importance of SACCOS
The importance of the SACCOSs in poverty alleviation and the general economic growth of Tanzania should not be under estimated; down here are the special features of the SACCOSs which make them important and special financial institutions on which the government of Tanzania should pay attention, these features are;-
2.1 Accessibility; - most of these microfinance institutions are established even in rural areas where banks can not be established bringing financial services closer to the people who could otherwise not be accessible to these services, this increases entrepreneurial morale to Small and Medium Enterprise (SME) operators in Tanzania.
2.2 The SACCOS are more flexible and not complicated as they are established by the people themselves, therefore the people themselves can establish by laws which are more flexible accommodating even the people who are extremely poor and economically marginalized, also no business plan or any detailed description of their business is required for the members to access loans.
2.3 The use of collateral substitutes; So long as these people are poor, therefore the majority does not have the formal collaterals required by the banks, in stead of this collateral substitutes like group guarantee, deposited savings and un surveyed houses are accepted as collateral substitutes for members to access loans.
2.4 The SACCOS also as Microfinance institutions encourage savings to their members, the culture which was not present in the past, these savings can be used for investment and also they receive dividends each year which is also an added income to the members.
2.5 The pricing of their loans is not very high as it is determined by the member themselves and therefore it is fairly done considering the sustainability of their cooperative.
2.6 SACCOSs are targeted to serve the poor, this is done through organizing groups, train them on the necessary requirements for them to access the loans and the way the loans are to be spent, this ensures a good repayment rate and in turn these microfinance institutions becomes more strong to serve the poor as they don’t loose capital out of defaults.
2.7 The screening of good clients is done by the members themselves as they become responsible in case of default; this reduces the screening cost which is avoided by the formal banks and also reduces the risk of loosing money through defaults.
2.8 SACCOSs help individuals and house holds to meet their basic needs and protect against risk. When the house holds and individuals have basic needs and protected against risks, the possibility of establishing small business is great.
2.9 Improvement of economic welfare of the community and enterprise stability or growth of low income households is the role of the SACCOs as microfinance institutions in Tanzania. If the community is well off and enterprises are stable the development of the latter is unquestionable.
2.10 The SACCOS as Microfinance institutions have the role of economically empowering all kinds of people, thus promoting gender equality and improve household wellbeing.
2.11 The availability of small loans through the SACCOS within the community brings about the possibility of establishment of small businesses some of which can develop and result to big business establishments.
2.12 The SACCOS also have been a source of employment to the people who work as employees of the SACCOs; hence they are part of the employers list.

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