The Role of Savings and Credit Co-operatives (SACCOS) in Rural Tanzania

Abstract

According to the population census of 2002, 74% of the Tanzania population is rural and dependent on subsistence farming and livestock. Only six per cent of the 44 million ha of arable land, is under cultivation (TAS: 2001). The population of cows is recorded at 16 million, but for quality reasons, cannot be exported. On the export sector, Tanzania continues to depend on the four major traditional crops - coffee, cotton, tobacco and cashewnuts. Except for tobacco, the other cash crops have recently been shaken by declining prices. This economic picture demonstrates four scenaries for the Tanzanian economy: First, Tanzania is financially a micro-project, microenterprise micro country. Studies on financial services development, have demonstrated the increasing demand on loans but shortage of savings. On the other hand, poverty studies have located that 50% of the Tanzanian population is poor. At the same time, the incidence of poverty in the rural areas has bee explained to be more severe than the urban areas. Second, despite a high incidence of poverty in the rural areas, there is still high potential for the development of agriculture, industry, commerce and services. But one of the limitations to development of national resources is severe deficiencies in technology, skills and tools to expand output and the proper management of natural resources. The third scenario, is the gap between real subsistence production and the potential surplus output for the market. Under peasant production system, any marginal surplus output is a burden to small farmers because the marketing activity is not part and parcel of agricultural production. A recent visit to Magu district in Mwanza region, we were informed by group of farmers that last year, they got into problems when they produced surplus maize. The marketing concept and general business development in the rural setting, is an important stage for the sustainable development of rural financial intermediaries.