| Expert tell of Saccos slide from dream to nightmare | Send to a friend |
| Monday, 15 March 2010 13:08 |
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Once touted as part of the solution to the endemic poverty, especially in the rural areas, savings and credit cooperative societies (Saccos) have miserably failed in Tanzania, experts say. The experts say they are not surprised at the failure of the Saccos to deliver, citing among the obstacles, the lack of basic infrastructure, especially roads, in most of the country. Though established many years ago and vigorously promoted by the government as a means to assist the rural poor, who form about 80 per cent of the population, by providing access to affordable loans, their impact has been minimal. Commercial banks and other mainstream financial institutions often shun this group, as they lack collateral and, therefore, can’t secure loans. The executive secretary of the Savings and Credit Cooperative Union League of Tanzania (Scult), Mr Abdul Mshaweji, said the problem was serious and urged the authorities to quickly intervene and redress the situation. Official statistics indicate that by May last year, there were 5,042 registered Saccos, with a membership of 822,685. Only about half of the Saccos (53.76 per cent) are based in the rural areas, where they serve about one per cent of more than three quarters of the poorest Tanzanians. But Scult disputes these figures, arguing that many Saccos have, in fact, collapsed though they have not been struck out of the Registrar of Cooperatives’ directory because it is not often updated. “Our estimates show that there are only about 2,500 active Saccos countrywide, which is half the number in the government registry,” Mr Mshaweji told The Citizen in an interview. He added that many savings and credit cooperatives had collapsed for various reasons, including poor financial management, coupled with a poor working environment and lack of capital. In most rural areas, for example, Saccos have been “in briefcases”, without physical offices, furniture or money safes and are run by leaders who have practically no basic knowledge in basic finance management. He said the Saccos started by employees in some of the big hotels that collapsed in Dar es Salaam some time ago, had also gone under but were still in the Cooperatives Registrar. Some of the hotels have since been re-established but not the Saccos. He said rural Saccos were the most poorly managed, but the real problem was the little saving capacity of members and poor loan repayment rate, which at times is below 30 per cent against the acceptable rate of 70 per cent. But contacted for comment, the Registrar of Cooperatives, Dr Anacleti Kashuliza, disputed Mr Mshaweji’s claims on the Saccos registry. He said the official statistics indicated that there were more than 5,000 Saccos in the country. “Claiming that the Cooperatives Registry is not continuously updated is being economical with the truth. If the point of Scult is that some of the registered Saccos are performing poorly, I would agree with him. But efforts are continuously being taken to enhance the capacities of these Saccos,” he told the Sunday Citizen. Dr Kashuliza said that despite the shortcomings, Saccos had generally done a good job in boosting earnings and transforming people’s lives. “We have seen much progress in the development of Saccos in the country in recent years compared to 10 or 15 years ago. And the future of Saccos is very bright despite the challenges,” he said. Some of the challenges, he said, were mismanagement, slow adoption of modern technology and failure to adhere to rules and regulations in the operations of savings and credit societies. But Dr Kashuliza conceded that most of the Saccos doing well were those based in the urban areas, especially among the salaried employees of banks, pension funds, and the Tanzania Revenue Authority’s offices. For his part, Mr Mshaweji said Scult’s estimate on the number of Saccos was based on “experience rather than some hypothetical analysis”. He added: “In fact, it is not the number of Saccos that matters. Rather, it is the quality and the capacity to reach as many people as possible. You can have five or six Saccos with millions of members.” He added that by global standards, Tanzania had “too many Saccos, but too few members”. Currently there are less than a million Saccos members in a population of 40 million. “In Kenya a single Saccos can have more than 300,000 members, 300 staff and a network of more than 50 branches. That is how Tanzanian Saccos should seek to operate. Having a Saccos at every village or work place is sometimes useless,” Mr Mshaweji said. But he also pledged his organisation’s continued assistance to the Saccos build their capacities. Dr Kashuliza dismissed the claim that Saccos had “failed miserably” in the rural areas. He said that even the idea that Saccos were established for the rural areas only was false. These semi-official savings and credit societies were intended to enable low-income earners, whether in the rural or urban areas, to access credit. The intention of setting up the Saccos was to nurture the culture of saving among the people, the official added. An expert on Saccos operations, Mr Jones Kaleshu, from Moshi University College for Cooperatives and Business Studies, told a recent workshop those operating in the rural areas faced a myriad of problems. “The Saccos are beset by a series problems such as poor governance, low capacity to manage and operate prudentially, increased political interference, especially in the initiation and directing of their resources, low corporate reputation and a mismatch between assets and liabilities,” he said. He was presenting a paper entitled, The Challenges and Strategies of Expanding Financial Services in Rural Areas in Tanzania at a microfinance workshop in Dar es Salaam. Mr Kaleshu said enhancing linkages between Saccos and formal financial institutions, including banks, would boost the liquidity of the savings and credit societies. Currently, only about five per cent of Saccos are linked to formal financial institutions. A leading economist, Prof Samuel Wangwe, agreed that linking Saccos to formal financial institutions would help strengthen them. “Saying that the government should take over the running of Saccos in the rural areas is not wise because such attempts were made in the past and failed. The most important thing is for the government to facilitate the operations of Saccos,” Prof Wangwe said. Mr Kaleshu said that whereas in Tanzania, Saccos had been mainly used as a source of credit, in several other countries, it had been established “that satisfying demand for a safe and liquid savings instrument is more crucial in the rural areas than even meeting the quest for credit.” Add this page to your favorite Social Bookmarking websites           |
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I do not see failure, i see growing pains. The author ,correctly, pointed a few things that are stagnating growth of SACCOS in the rural Tanzania. Lets rectify these problems so as to give this nascent sector a chance to prosper. Terming the sector a failure is to infer giving up which to me, is missing the point.
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