Abstract:
Savings and Credit Co-operative Societies (SACCOS) increasingly recognized
as the valuable tool for economic development in low-income countries.
However, recently researchers reported that one of their primary challenges to
their expansion is the high level of inefficient. In this study, we analyzed the
relationship between growth and efficiency of SACCOS using economies of scale
concept. Then we address the role of management of the capital structure and
allocation of resources in the expansion of SACCOS. The study used financial
statement data from 60 SACCOS in Tanzania for the period of 2004–2011. The
findings supports that most of SACCOSare small and cost inefficient because the
industry is young, but the efficiency increases as SACCOS expand. Second the
allocation of resources in liquid, financial and non- financial investment leads to
no expansion in SACCOS. Thus, the growth of SACCOS via increasing loan to
members, members’ savings, shares, and institutional capital should be
encouraged as it increases the efficiency of SACCOS. Also, SACCOS should
minimize the allocation of assets in other investments which are different from
creditto members.
