The role of SACCOS in rural Tanzania

Abstract

Tanzania is a microfinance country. Out of total population of 34 million people, there are almost 16 million poor people mostly depending on smallholder agriculture. As such they need financial services to sustain their small and micro-enterprises. Rural Savings and Credit co-operatives offer one of the best options for organizing self-help financial services. Although the history of SACCOS dates back to 1938, enhanced promotion came after independence. But in 1976, the co-operative movement was disbanded dissolving 150 rural SACCOS, the National Co-operative Bank, the Savings and Credit Co-operative Union league of Tanganyika and the Cooperative Union of Tanganyika. Pressure caused by the absence of co-operative marketing infrastructure after the dissolution of co-operatives, forced the government to re-establish the marketing cooperative movement in 1982 but without a sound development of rural SACCOS. Marketing co-operatives were allowed to run a financial structure known as the Rural Savings and Credit Schemes. The two however could not co- exist due to lack of management capacity and demotivation resulting from the past history of government control and interference into the affairs of cooperatives The later years of financial services liberalization, saw the emergence of rural Savings and Credit Associations (SACAs). SACCOs and SACAs are different and similar in many ways., but they have one common denominator -they are both people -owned financial institutions organised and ran on co-operative principles. Because of other long history and a long-standing coherent management and governance systems, SACCOs stand out to people a more stable status than SACAs. Invariably, SACAs are viewed as experimental and transitional institutions for small farmers to practice the best ways to become members of co-operative SACCOs Although SACCOs and SACAs operate under difficult technical, professional and poor commodity production condition, the are still economically and socially viable institutions in rural Tanzania. SACCOs and SACAs have carried out a number of innovations and gained some operational successes. They also face the challenges of professional management, product development and outreach. On the other hand, there are a number of openings that give SACCOs and SACAs a high degree of future success. These include a positive policy and legal framework, educational, audit and a commercial banking infrastructure that can sustain a viable rural financial services development which can grow from the village to the national and East African financial co-operative systems.