Abstract
This article uses 496 loans from ABC rural SACCOS located in the Northern zone of Tanzania to describe the effectiveness of loan’s portfolio management. The data analysis is done by using the multivariate regression, descriptive and qualitative methods. The data for this study was collected at the end of May 2013. The findings reveal that women constituted 52.6% of the loan portfolio. Also the doubtful and bad loans were 51 and 31 million TZS which was more than 10% of the loan portfolio. The findings show loans were aged into 4 classes and the loans aging was not very effective because loans of different ages were classified in a single class. The results from the regression analysis reveal that the quality of loan portfolio was positively influenced by the loan size while the influence of gender and location of the borrowers were not significant. Moreover, ABC rural SACCOS used portfolio diversification, collateral, guarantors, letter from the village/ward government offices and the affidavit from the lawyer as credits risk mitigation techniques. The findings also revealed that fluctuation of the price of agricultural produce threatened the quality of loan portfolio. This article recommends that ABC rural SACCOS should seek the effective insurance services, use the effective software for loan portfolio management, search the market for agriculture produce, write off non repaid loans, enhance the repayment of overdue loans and revise the loan classes and maturity in order to improve the quality of the loan portfolio in the SACCOS.
Highlights
Savings and credits cooperatives societies (SACCOS) in Tanzania have been established since 1980s (Maghimbi 2010)
The results from the regression analysis reveal that the quality of loan portfolio was positively influenced by the loan size while the influence of gender and location of the borrowers were not significant
The findings indicate that female borrowers were more sensitized to borrow in a rural SACCOS than male borrowers
Summary
Savings and credits cooperatives societies (SACCOS) in Tanzania have been established since 1980s (Maghimbi 2010). Since their establishment SACCOS play important role in providing. 2014, Vol 4, No 1 the financial services in both rural and urban areas. SACCOS are considered to be more important in rural area of Tanzania because they are semiformal financial institutions which serve many inhabitants in rural areas (Wangwe 2014). SACCOS operate by focusing on the profit and the welfare of members. SACCOS like any other cooperative work to maximize the welfare of members. In SACCOS members participate in setting the interest rates for loans in which members receive back later as dividends
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