Savings And Credit Cooperative Societies Research Articles

DETERMINANTS OF FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN NAKURU TOWN, KENYA

The Savings and Credit Cooperative Societies (SACCOS) are financial institutions in the line of co-operatives societies that aims to meet common needs of the members through savings mobilization, loans and financial advisory services. They enhance economic growth and development by availing funds to members so as to engage in viable business ventures. Despite this contribution, SACCOs have not been able to perform effectively in Kenya due to financial instability in their operations. Therefore, the researcher felt the need to investigate the determinants of financial performance of Saccos in Nakuru Town, Kenya. The objectives of the research study were based on; membership size, frequency of supervision and employment management practices. It was further guided by theories; organizational theory and trade-off theory. Descriptive survey research design was employed and helped in detailed capture of important information for the study. Census technique was used to include all Managers of 32 SACCOs in Nakuru town who provided data through structured questionnaires. Inferential and descriptive statistical methods incorporated means, standard errors, correlation coefficients and regression coefficients to analyze the data. The study findings showed that membership size affected financial performance of SACCOs. The correlation between the membership size and financial performance was positive and statistically significant (r= 0.564; p<0.001). The employment management practices were found to affect financial performance as expenditure was 35.8% lower (P< 0.1) within the budgeted estimates. SACCOs were recommended to improve their service delivery to attract more potential members and still keep the existing ones. The researcher further recommended better alignment of employment management practices to organization structure to make them more relevant as they play key role in financial performance. This research work would benefit the Saccos through encouraging them to engage in practices that can lead to financial stability in their organizations. As such, they will be able to deal with obstacles that hinder their service delivery to their members.

Savings and Credit Cooperative Societies (SACCOs)in Kenya

The article seeks to retrace the historicity of Savings and Credit Cooperative Societies (SACCOs) in Kenya with the view to establishing its theo-social justification. Put it differently, beyond economic development, can we socially justify it? Can SACCOs be justified theologically and philosophically? The initial specific objectives were; to determine the extent to which all stakeholders in society can play a role in promoting ethics and integrity in the management of community based savings and credit cooperative societies without the feeling that it belongs to ‘other’ people in economic circles, to assess the extent to which ecclesiastical institutions can invest in community based savings and credit cooperative societies, and to investigate its historicity in order to inform the future studies and researches in this area. The findings in this article will be essential in making a theo-social justification for future reference. The researcher validated the research instrument by having the research supervisor go through the questions to identify whether they had construct, content validity and face validity.

Effect of Mobile Communication Services on Performance of Saccos in Kenya

The ubiquitous nature of mobile technologies and devices, present new challenges and opportunities for Deposit-Taking Savings and Credit Cooperative Societies (SACCOs) as they integrate them into their processes with the hope of improving their performance. To enhance their performance, Deposit-Taking SACCOs have adopted and are using mobile communication services including mobile messaging, mobile call services, mobile email, mobile chatting and mobile conferencing services. However, the effect of these mobile communication services on performance of Deposit-Taking SACCOs has not been well studied. Even though some studies have indicated the positive potential of mobile communication services, other studies indicate that they have no effect on organizational performance. Given these contradictions, this study sought to investigate the effect of mobile communication services on performance of Deposit-Taking SACCOs in Kenya. Descriptive and explanatory research designs were adopted using quantitative and qualitative approach to data collection, analysis and reporting. The study used a sample of 86 Deposit-Taking SACCOs drawn from a target population of 110 Deposit-Taking SACCOs that were licensed by SACCO Societies Regulatory Authority as at 31st December 2011. A structured questionnaire administered to two managers (from information technology and finance departments) in each SACCO was used to collect primary data. Inferential analysis revealed the exististence of statistically significant positive effect of mobile communication services on performance of Deposit-Taking SACCOs in Kenya. The study therefore recommends investments and increased utilization of mobile communication services within DepositTaking SACCOs in Kenya.

EFFECT OF RISK MANAGEMENT FUNCTION ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES IN KENYA

Purpose: The main objective of the study was to establish effect of risk management function on financial performance of savings and credit co-operative societies (SACCOs). The total assets of SACCOs grew from 257 billion to 301.5 billion while total deposits increasing from 182.7 billion to 205.9 billion from December 2013 to December 2014 financial years (SASRA, 2014). With savings of kes. 380 billion and asset base of Kshs. 493 billion, SACCOs control 39 percent of total loan accounts in Kenya (SASRA, 2012). Howevwer, some SACCOs have gone under liquidation thus putting billions at risk. This has led to the introduction of CRBs to control all financial institutions to reduce the information asymmetry effects between lenders and borrowers. The target population was 181 and a sample of 135 licensed deposit taking SACCOs as at 31st December 2014 was used. Stratified random sampling technique was used for each type or category. Secondary data from publications, CRBs, journals and financial records was used. Primary data was collected using structured questionnaires which had both close ended and open ended questionnaires. The study used multiple regression and Pearson correlation to test for significance and relationship respectively of the independent variables and the dependent variable.Findings: The findings indicated that risk management function had a positive and significant effect on financial performance of SACCOs in Kenya.Recommendation: The study recommends that lenders should review their risk management techniques regularly in order to coup with the rapid advances in technological changes. The study also recommended that SACCOs should always subject their clients to credit reference bureaus whenever they grant a loan.

Saccosmeter for Measuring Performance of Savings and Credit CoOperative Societies in Tanzania

Good and poor performing Savings and Credit Co-operative Societies (SACCOS) exist in Tanzania. Such existence results into having SACCOS which are doing well and others which are not doing well in terms of performance. The apparatus or tool for measuring the performance of SACCOS remains inadequately established. That was a knowledge gap on which the collected data for this paper focused on. The paper was intended to establish SACCOSMETER (SM) for SACCOS. The SM is an apparatus or tool which can be used by members, board members, management and other stakeholders to measure performance of SACCOS. The specific objectives were to develop SM and demonstrate application of SM by stakeholders of SACCOS. Primary data were collected using a questionnaire which was administered to one hundred and twenty SACCOS selected through stratified random sampling. Descriptive statistics and binary regression were used to establish SM of SACCOS. This was through enabling the author to establish fourteen performance indicators of SACCOS. The possession of the performance indicators were fifty percent of overall sample SACCOS scored more than seventy percent of performance indicators and therefore they were good performers. Others, fifty percent of the overall sample SACCOS scored seventy percent or less on performance indicators as poor performers. It is argued that SM of SACCOS should be developed, availed, maintained and applied by the stakeholders of SACCOS in order to have accurately measured performance of SACCOS in Tanzania. The accurately measured performance guides formulation of relevant intervention for improving SACCOS' performance.

Bank requirements and governance for savings and credit co-operative societies (SACCOS) in Tanzania and Kenya

As suppliers of wholesale commercial funds to savings and credit co-operative societies (SACCOS) for on-lending to their clients, banks are key stakeholders. According to the agency theory, banks influence the operations of SACCOS. However, empirical knowledge remains scant on the measures banks apply to control these operations and on SACCOS’ governance-related reactions to bank requirements. In an attempt to fill this gap, this paper explores measures used by banks to monitor and control SACCOS-partners in addition to assessing SACCOS’ governance-related reactions to bank requirements. The paper utilizes data collected through in-depth interviews held with both the management of five banks selected primarily because of their active involvement in wholesale lending to SACCOS. In addition 11 SACCOS linked to these five banks were selected in Tanzania and Kenya. Thematic content analysis was used to analyse the data. The findings reveal that measures applied by banks to monitor and control SACCOS-partners include accessing and investing in information on SACCOS-partners and their clients, and requiring both guarantees and forced savings. Compliance with these measures was found to result into two governance-related reactions: 1) improved compliance with own by-laws, regulations, policies or procedures, and government regulations; and 2) realignment and/or reduced compliance with some of their own by-laws, policies, regulations, and procedures, and thus some of the government regulations, to accommodate bank requirements.

English

The Savings and Credit Cooperative Societies (SACCOS) which are co-operative financial models are flourishing in most of the developing economies recently. However, loan repayment capacity remains a challenge that threatens their future. Using financial statements data for the year 2012, from 36 SACCOS in Kilimanjaro Region, Tanzania, and using descriptive statistics and regression models in the analysis, this study examines the relationship between financial performance and loan repayment capacity. It thus examines the extent by which SACCOS are capable of recovering the loan issued and also the financial ratios that explain loan repayment capacity in SACCOS. The study depicts that there is a severe financial risk management problem among Tanzanian SACCOS. Focusing on sustainability is significant for improvements of loan repayment, but focusing on profitability in SACCOS results to an adverse loan repayment. The study asserts that the primary focus of SACCOS should not be profit but member’s wealth maximization and sustainability of the institution. Moreover, we suggest that in addition the traditional means of dealing with financial risk, the uses of a modern risk management tool like credit scoring should be considered in evaluating borrowers. Key words: SACCOS, loan repayment, Tanzania.

The contribution of savings and credit cooperative societies to income poverty reduction: A case study of Mbozi District, Tanzania

This paper explores the contribution of Savings and credit cooperative societies (SACCOS) in reduction of rural households’ income poverty. Specifically, the paper looks at; activities undertaken by SACCOS that can lead to reduction of income poverty; comparing income levels between SACCO’s members and non-members; determining the impact of SACCOS to household’s income poverty reduction, and exploring community’s attitude towards SACCOS. A total of 160 respondents were involved in the study on which this paper is based; 80 SACCOS members and 80 non-members. Data were collected using a structured questionnaire, focus group discussions and key informant interviews. Quantitative data were analysed using SPSS where descriptive and inferential statistics were determined: qualitative data was analysed using content analysis. Study findings show that SACCOS perform different activities in the provision of financial and non-financial services to members. They provide shares, investment opportunities, savings, credit, and training on entrepreneurship skills. T-test analyses show a highly significant difference (p<0.001) between the two groups on income earned from agricultural activities and household expenditures; for the assets owned by household there was also a significant difference (p<0.05). Using MLR analysis, the impact of SACCOS to income poverty reduction was significant (p < 0.05). Generally, the respondents’ attitude towards SACCOS was favourable. The paper concludes that SACCOS play a significant role in improving the conditions of smallholder farmers. The paper recommends that SACCOS be empowered to enable them perform better and provide a range of services to members thereby helping beneficiaries to reduce their income poverty. Key words: Micro-finance institutions (MFIs), SACCOS, poverty and credit.

Intensive Growth Strategies and Outreach Performance of Tanzania-Based Savings and Credit Cooperative Societies

Research on performance of Microfinance Institutions (MFIs) has attracted a great attention as the demand for microfinance services increases. One of the popular microfinance models is reaching the poor through Savings and Credit Cooperative Societies (SACCOs). A critical area is to assess what drives the SACCOs performance. Most research on SACCOs concentrate on assessing their performance without looking at the contribution of key performance drivers such as growth strategies. Little research has been done on the influence of intensive growth strategies (product development and market development) particularly on the SACCOs outreach performance in Tanzania. This study investigates the contribution of both product development and market development on outreach performance (increased number of SACCOs’ members). Through a multiple regression analysis, the study tests seven hypotheses which are geared towards finding the contribution of both product development and market development on outreach performance. A cross-sectional survey design and multistage probability sampling technique enabled the participation of 167 key SACCOs’ managers (loan officers) from three zones of Tanzania whose views were collected through questionnaires. The study has revealed the significant contribution of both product development and market development on outreach performance. SACCOs need to design growth strategies which suit the needs of their clients and their characteristics. Although an outreach performance can be driven by intensive growth strategies, we suggest that, the SACCOs’ growth should also be harmonized with their financial performance.

The impacts of financial linkage on sustainability of less-formal financial institutions: Experience of savings and credit co-operative societies in Tanzania

Abstract The developing economies are experiencing a growing trend of financial Linkage between formal and less-formal financial institutions. Normally, less-formal financial institutions receive loanable funds from formal financial institutions as an approach to meet their financing deficit, while formal financial institutions engage in linkage as a mean to expand business. The main concern of stakeholders regarding this practice is how such linkage can affect the performance of the less-formal financial institutions. In Tanzania, the Savings and Credit Co-operative Societies (SACCOS) are the most used less-formal financial institutions which are also highly involved in financial linkage. In this study therefore, we used Tanzania SACCOS’ financial statement data, for the period of 2004–2011, and panel data regression model to examine the relationship between financial linkage (measured as financial dependency ratio) and sustainability (measured as Operational Self Sufficiency) of less-formal financial institutions. The findings suggest that the higher the level of financial linkage the more the SACCOS become unsustainable. Implying that, to be sustainable institutions, the SACCOS should try keep away from the use of external funds in their loan portfolio.

English

Maize is the most important food crop in Tanzania, covering 45% of the cultivated area. Maize farmers have adopted many improved maize varieties but different studies have produced different estimates of adoption rates. A survey was, therefore, conducted in 2001 to estimate the area in improved maize seed, to collect opinions regarding maize recycling, constraints to production and strategies to obtain improved maize seed. The seed sector sold an average 7,750 tons of improved maize seed per year from 1997 to 2000, but also indicate a clear negative trend in sales. While during the 1997/1998 season 9,500 tons were sold, it was reduced to 6,660 tons in the last season. Although the amount of hybrid seed sold was roughly the same for the three seasons, it was the sales of open pollinated varieties (OPVs) that decreased to less than a half in the third year. Based on an estimated national maize area of 2 million ha and a seed rate of 15 kg/ha, the estimate of the area planted with fresh improved maize seed was 26%. Considering the use of OPVs that have been recycled for two years, the area grown with improved maize seed was 46%. Drought, low prices of the produce, pests and diseases, and high input prices were mentioned by the extension officers as the most important constraints for maize production. The high costs of improved seed, poor availability and lack of knowledge were some of the reasons why farmers did not use improved seed. The major strategies farmers use to obtain improved seed were purchase from agro-dealers, recycling of their own seed, and the formation of Savings and Credit Cooperative Societies (SACCOs). Since the survey, seed sales have increased but this increase is mostly in hybrids, and has been accompanied by an increase in area , so the proportion of maize area in improved varieties remains at a low 27%. Research and development efforts should, therefore, be directed to solve the farmers&rsquo; major production constraints such as drought, lack of markets and low produce prices, and pests and diseases. Knowledge of how to obtain and grow improved varieties, including good husbandry practices, is critical in adopting improved varieties. Key words: Survey, improved maize seed, adoption rate, Tanzania.

The Role of Corporate Strategy On Compliance With Government Regulations Among Saccos In Kenya

Saving and Credit Cooperative societies are financial service providers and their services include receiving deposits, multiplying the same by a factor in order to grant loans, receiving cash deposit and making payments inform of cash withdrawals. The creation of a regulator, the SACCO Society Regulatory Authority (SASRA) to supervise all deposit taking savings and Credit Cooperative Societies (SACCOs) was received with mixed feelings within the industry. While the new regulatory environment promises to calm the nerves of the SACCO members who now have their savings under close supervision, there has been disquiet in the industry from a number of big societies. There is lack of an in-depth understanding of the cooperative Act and regulation in most SACCOs to integrate the regulatory requirements in the corporate strategy and operational policies for day-to-day running of the SACCO. The objectives of the study included: to assess the role of stability strategies on compliance with government regulations in SACCOs; to evaluate the role of concentration strategy of SACCO on compliance with government regulations and to examine the role of diversification strategy and on compliance with government regulations in SACCOs. The study was carried out in Baringo Teachers SACCO head office and its seven FOSA branches in Baringo County - Kenya. It involved a population of 86 employees of Baringo Teachers SACCO from which a sample 40 was drawn using purpose sampling techniques. The findings of the study indicate that there exist corporate strategies in SACCO and roles of corporate strategy were highlighted in the study. The compliance on government regulations resulted in tax compliance, timely reports and protection of members’ funds, something that was confirmed by most managers. The research also revealed the role of diversification strategy of products and services in SACCOs.

Expansion of rural financial services through linkage banking in Tanzania: Is joint action between savings and credit cooperative societies (SACCOS) a promising approach?

Most Tanzanians do not access financial services. Rural areas are particularly disadvantaged, as the country has one of the lowest levels of access relative to regional and international norms. Commercial banks are conspicuously absent from rural areas, while savings and credit cooperative societies (SACCOS) are much more prevalent. Even so, both commercial banks and SACCOS have limitations that inhibit their ability to extend financial services to a large part of the population. This paper argues for increased collaboration between commercial banks and SACCOS to expand outreach through linkage banking. Linkage banking leverages the superior operational systems of the banks with the outreach and relationships of the SACCOS. To succeed, however, linkage banking must be approached as a long-term partnership that involves considerable capacity development.

Is wholesale lending to SACCOs a win-win encounter?

Using the case of the CRDB Bank in Tanzania, this study finds that wholesale lending creates a win-win situation for banks, as well as for Savings and Credit Cooperative Societies (SACCOs). Banks minimise costs of lending, widen outreach and 'cherry-pick' the best borrowers. SACCOs are able to meet their members' demand for credit, negotiate lower interest rates and produce graduates who can access financial services directly from banks. The bank's demand for good governance compels SACCOs to develop their capacity so as to attain best practices. Attention to prudentially regulate SACCOs potentially creates financial exclusion.