Saturday, January 10, 2009


1. Theoretical review
Cooperative referred as group of people who work together voluntary to meet their common economic social and cultural needs through a jointly owned and democratically controlled enterprise. The cooperative is the member, and depends on its members for its existence. When the members do not understand and do not know what the cooperative is, what are their functions, what it is capable of giving to the member, and what one may not expect from it there is no chance for the existence of this with this cooperative. Honest, openness, social, responsibilities and caring for others are believed of the cooperative members (Maynard and Beckman, 1952).
Savings and Credit Cooperative Societies (SACCOS) is a financial organization owned and operated on not for profit basis by its members according to cooperative principles. The main objectives being promotion of development of habit of putting some money aside as savings among its members and creation of a source of credit for its members at controlled rate of interest exclusively for provident or productive purposes.
The Savings and Credit Cooperative movement in Tanzania started in 1961, when the Government drafted money by law to enable any group with a common bond of occupation, association and residence adopt the by law and register. It was a protection move against the urban areas rampant with shameful activities of Pawn Brokers and Money lenders who were charging exorbitant and illegal rates of interest and, or instituting a mechanism for attitude change of unwise spending of Rural Peasants who were earning sizeable sums of money during harvest time, but go back to poverty.
Main functions include Promotion of Savings and credit opportunities to the members, Promotion of financial stability among members, Enhancement of the habit of saving regularly, borrowing wisely and paying promptly. Another function is to links SACCOS members with other SACCOS movement such as active member of SCULT. Never the less, it looks for the best credit facilities opportunities available and extends to the members at reasonable and agreeable interest.

2. Policy review
Cooperative development in Tanzania can be traced during 20th century. Unfair marketing and processing practices and political discrimination were among the factors caused the establishment of cooperatives association mainly in cash cropping areas. After independence in 1961 the government policy was to make the cooperative movement an engine for economic development. Therefore government promoted the existing cooperatives and became important tool for the economic development of the rural sector (Report, 2001).
The policy of Socialism and self reliance for the period of 1967-1976, transformed the cooperative to the rural development process based on Ujamaa villages. Thus, individuals or groups allowed forming multipurpose cooperative societies. Activities for the multipurpose cooperative ranging from Marketing Agricultural produce, procurement and distribution of inputs and whole sale and retail trade and transportation (Report, 1991).

This was followed by the open market policy in 1986, made the Government with support from World Bank and International Monetary fund to undertake the structural and economic adjustment program. This policy had a negative impact in cooperatives such as abolition of price control, elimination of subsidies, liberalization of marketing of agricultural inputs and outputs (Report, 1991).

New policy of cooperative development (2002) was the second cooperative policy after that of 1997. The main policy objective includes the availability of sustainable development of members and using cooperative as a tool for achievements. The impact of this policy has been revealed in different aspect including the establishment of cooperatives in other sectors of the economy and make the total number of 5789 cooperatives country wide (SACCOS, 2004).

The Cooperative Poverty Reduction policy is performing in line with vision National Strategy for Growth and Reduction of Poverty( NSGRP)commonly known as (MKUKUTA). Cooperatives have been penetrating in rural areas and are involved with agricultural crops and credit and saving activities (Report, 2005).
3. Empirical Review
The importance of community organizing in Tanzania revealed longtime before independence. It was in 1925 when the first coffee cooperative known as the Kilimanjaro Native Planters Association (KNPA) established. Registration of KNPA was done in 1932 when the cooperative ordinance cap (Cap 211) enacted and KNPA split into two and formed one secondary society known as Kilimanjaro Native Cooperative Union (KNCU).
Saving and Credit Cooperatives Societies are among cooperative financial institution formed as a grass roots based financial institution. This was introduced as the best ways in building the community financial strength and sustainable cooperatives development. There are more than 1719 SACCOS established country wide with 251531 members who managed to accumulate about Tshs 13.1 billions of share value, 2bilions deposits and 28billions savings. This made cooperative members to finance their activities and improve national productivities, their income, and well-being.

Moreover, the government has shown the political commitments and willingness (affirmative action) to support 2002 cooperative policy by strengthening the Cooperative support institutions such as the Moshi University College Cooperative and Business Studies, (MUCCoBS), Cooperative Auditing And Supervision Corporation (COASCO), Tanzania Federation of Cooperation (TFC), Savings and Credit Cooperative Union League of Tanzania (SCCULT). The existence of these Institutions contributes to empower Cooperative membership through acquisition of education, new knowledge and skills, strong saving and credit cooperatives societies and cooperative banks that provide good financial services to members, just to mention few.

The importance of SACCOS in Tanzania is crucial. The emerging of SACCOS in rural area has been seen as ‘Mkombozi’[1] to community. SACCOA promotes community ownership and empowerment. It is contributing to give voices to community in accessing financial resources needed. Also provides security framework to qualify for bank loans to improve community’s efforts in income generating activities.

SACCOS promotes community ownership and peoples’ voice is the driving force in relation to the cooperative principles. Members have equal right to participate in development of their society.

3.1 Empowerment of SACCOS Members
In Tanzania the concept member empowerment in Cooperatives was introduces in the late of 1980’s and early 1990’s with an objective to facilitate participation and involvement in decision making pertaining to their own social and economic development using cooperative organization as a tool with the ultimate goal of creating wealth and reducing poverty.

It is revealed that, with members’ empowerment, knowledge skills and experience is shared in the process of problem identification, planning, implementation, monitoring and evaluation of the cooperative activities in a participatory manner (MCM, 2001).

However, to date the involvement and participation of members in SACCOS affairs is still weak. This was observes in Kimara Ward during participatory assessment where by many SACCOS are experiencing deterioration of membership due to inadequate skill, knowledge and experience.
3.2 Sustainability of SACCOS
SACCOS as a grass root based financial aimed to be an effective financial intermediaries. In Tanzanian context it has been established through some studies that, the SACCOS potentiality of SACCOS as a financial intermediaries has not been optimized due to lack of innovation of production, law capital formation (depending much in equity financing which is not a permanent capital) and financing methodologies. This has been among the factors that contribute to hinder members / customers needs and expectation as a result of unsustainable SACCOS.

Other factors that contribute to poor sustainability of SACCOS include weak internal control system; inadequate Human resources, unsustainable interest rates, inadequate knowledge on microfinance best practices just to mention few.

One of the best practices of SACCOC
Chambasho SACCOS is among the example of well performing SACCOS in Kongwa district-Dodoma Region. However many other SACCOS formed through DUNDULIZA[2] /DID[3] model, in Tanzania. Chambasho is an example from the field, in Hogoro ward, and was formed in 2001 and legally registered in 2003. it is one of the more successful SACCOS in regards to rural finance schemes. By August 2004, the SACCOS had 312 members and 33% of them are Women and mobilized capital of Tsh. 12 Million. Chambasho received a first loan from CRDB[4] of Tsh. 10 million (10months, 1% per month). In February 2004, the outstanding loan portfolio was Tsh. 20 million to 266 members (62% Women), the majority for agricultural investments (8months bullet loan, interest 2.5% per month). So far repayment has been 100%. Deposits earn 4% per year. The SACCOS is located in the ‘maize belt’ of Dodoma Region, and only 40km from the region maize market. It is making a substantial contribution in providing access to financial resources for Maize Farmers and hence underlines the link with AMCOS in the area.

In addition, Chambasho SACCOS is helping her members in the way that allow them to access soft loans, e.g. in 2003 was recorded as poor season due to drought, hence the small contribution members had made, helped them to invest again (through borrowing) at reasonable rates. Before they have to resort to the moneylender, where one bag of maize borrowed had to be repaid with two bags. Finally factors behind the Chambasho SACCOS success story are as follows;
· Identification of problem is the starting point. The bank services seem not to be a goal in itself, but just a means to solve problems in the community. This brought people together- concept of solidarity affected.
· The concept of self-help and aspect of voluntarism are well understood in the community. Every one needs a development spirit and long-term vision, without expecting short-term (personal) gains. The elected leaders are committed to this principle.
· Involvement of different groups: farmers, business people and livestock keepers.
· Transparency from the beginning: about meetings, progress and performance reports.
· Lessons learnt from a nearby ward a successful SACCO that had been operating for some time and provided an inspiring.
4. Challenges
Policy changes over time have been a challenge to many people to join or formulate SACCOS. For instance in 1976, the cooperative society were dissolved and replaced Ujamaa Villages. Again in 1982 -1990 the government replaces the Ujamaaa Village by mixing coops and politics. This was followed by introduction of Rochdale Model of cooperatives in the period of 1991-97.

Another challenge is the weak leadership, limited member participation and domination of political rather than business considerations. In order to get out of the current situation it is recommended to focus on the development of capability of cooperative members to take the lead in the operations of SACCOS. Empowered members must show the qualities of full participation and involvement in cooperative activities such as decision making, planning and control; changed behavior and altitude (mind set); commercial minded or business oriented as well as self initiative, innovativeness and transparency.

5. Lesson learnt and Conclusion
Empowerment of members and SACCOS promotes sharing knowledge skills and experience in the process of problem identification, planning, implementation, monitoring and evaluation of the cooperative activities in a participatory manner. This will enable power sharing with the ordinary members in order to build confidence and ability to manage economic activities and cooperatives.

The importance of SACCOS in Tanzania is crucial. The emerging of SACCOS in rural area has been seen as ‘Mkombozi’[5] to community. SACCOA promotes community ownership and empowerment. It is contributing to give voices to community in accessing financial resources needed. Also provides security framework to qualify for bank loans to improve community’s efforts in income generating activities.

Sustainability of SACCOS is underlined to improve the operational performance of SACCOS to meet customer needs.
[1] Mkombozi as Swahili ward that refers to a server or a solution to financial barriers to farmers.
[2] DUNDULIZA is a company limited by shares registered in 2004. Currently, 60% of shares are owned by Financial Services and Development Association (FISEDA) and $)% DID. It works with 28 SACCOS in Songea, Mwanza and Dar es Salaam.
[3] DID refer to Desjardins International Development, which own 40% of DUNDULIZA Company LTD Shares.
[4] Cooperatives and Rural Development Bank, Tanzania LTD.
[5] Mkombozi as Swahili ward that refers to a server or a solution to financial barriers to farmers.

1 comment:

  1. who regulates saccos in tanzania and who is registrar?