Abstract:
Linkages banking practices between SACCOS and commercial banks are intended to transform
the less formal institutions by embracing their lending capacities and procedures. The study of
three employee based SACCOS in Moshi district in Tanzania showed that so far linkages have not
improved the performance of SACCOS partnered with commercial banks. It has instead led to low
performance as reflected by increases in loans to savings status, interest on average outstanding
loans, total operating costs level relative to outstanding loans and tends to lower surplus to average
loans ratio. This paper recommends establishment of a maximum level for SACCOS borrowing
for on-lending basing on savings rather core capital and evaluation of transaction costs by
SACCOS before entering into linkage relationship.
