SACCOs transform lives of low income earners

FOR seven years of its existence in a turbulent and challenging environment, Usaca Savings and Credit Co-operatives has grown from small groups of women making batik clothes to well respected and sought after micro finance institution in Dar es Salaam.

In 2002, 30 women of Ukonga suburb were brought together for a three months training on how to locally make batik garments and given business education on how to run and manage small projects at individual levels. These women were divided into six groups of five each. A religious organisation volunteered to provide them with experts who provided the relevant training.

When the training was over, these women had the skills and knowledge they needed. Now the issue was where and how to utilize these mental resources they had acquired, in order to take off; they needed some funds. The organisation called World Conference Religion and Peace gave them an initial amount of 1.2m/- (they call it marching fund) under conditions that they should raise among themselves the equivalent to the amount given.

The idea behind this was to have a seed fund where members could borrow from and inject into their small projects, and refund with a small interest. From this amount members could get a loan of between 50,000/- and 100,000/- which had a return interest of two per cent a month.

By 2003, the basket had improved its contents and members could get loans from 200,000/- to 300,000/-. Members had also increased from 30 in 2001 to 120, who are regarded as shareholders.

When it was registered as a SACCOs in 2005, it had a capital of 28m/-, which guaranteed them a loan from Cooperative and Rural Development Bank (CRDB) of 30m/-. The rate of repaying the money in time assured them of another loan amounting to 100m/- in 2006.

The prosperity of Usaca SACCOs was like a bush fire, nobody could stop them. Currently, with 80 groups of 30 people each, the SACCOs has about 2400 members plus another lot of 200 individual borrowers which make the total number of customers served by the SACCOs to 2600.

“We have borrowed about 1.7bn/- from CRDB this year. The rate of returning is good and we still owe the bank 700m/-,” says Ms Violet Mbele, the SACCOs Manager.

She adds that today members can borrow from a million to 30m/- depending on the need and capacity to repay the loan.

When the SACCOs started it was purely a women related business, but today it is almost a full bank incorporating people from all walks of life. There is room for people to open accounts at the headquarters in Ukonga or either of the two branches in Kimara and Kinondoni. Anybody over 18 years can become a member provided he or she is mentally fit.

The SACCOs has been a relief to many people particularly women, who through dozens of self-administered groups have been able to develop their own income generating activities in such areas as petty trading, sewing and textiles, catering, animal rearing, poultry production and small manufacturing enterprise.

From these micro loans they have been able to buy houses, plots of land, cars and taking children to school. The service has extended to as far as students of higher learning who pay fees through these loans and in turn pay small amount every month from the small activities they conduct.

“But the most important thing is that with the kind of collaterals that these people provide it wont be easy for them to get loans from the established banks that we know,” adds Ms Mbele.

“Lack of enough knowledge in running and managing these small ventures by members has been a challenge to us. We have to take a long time educating a customer and this causes delay to others,” says a cashier who wanted to remain anonymous.

Keeping records is also a challenge as the institution still uses the old filing system. But a good thing is that the SACCOs plans to go digital with assistance from the CRDB bank.

Currently, the SACCOs records a profit of 20m/- every month. It has bought a piece of land near its present headquarters for further expansion.

Principal providers of financial services to the poor and low income households in the rural and urban areas of Tanzania consist of licensed commercial banks, regional and rural unit banks, savings and credit cooperative societies, and a number of Non-governmental organisations.

Tanzania has two categories of institutional providers of microfinance which are not subject to prudential regulations- the savings and credit cooperatives or SACCOs and the financial Non-governmental organisations or NGOs.

As of 2001, available data on SACCOs indicate a total number of about 646 registered societies, of which some 60 per cent or 395 can be classified as rural SACCOs and 40 per cent or 251 as urban-based SACCOs.

Total membership base is 130,000 with urban SACCOs accounting for 47,000 and rural SACCOs having some 83,000 members. The savings and credit scheme operates along principals similar to those of the Credit Union movement, with applicant loan approval based on the ability to save funds over the preceding months.

A significant number of NGOs provide microfinance services to the poor and none of them are yet subjected to Bank of Tanzania (BoT) regulations. However, at least three Micro Finance Institution NGOs have already expressed interest in getting a BoT license to do deposit-taking.

The biggest MFI, in terms of client outreach, which include PRIDE Tanzania, FINCA, and Small Enterprises Development Agency (SEDA) collectively hold at least 80 per cent of the total borrowers of NGO MFIs.

“SACCOs perform a critical and unique function as financial intermediaries. They mobilise significant volumes of personal savings and channel them into small loans for productive and provident purposes at the community level. They also maintain internal economic shocks,” explains Mr Godfrey Kikwesha, economist for Morogoro Regional secretariat.

About 77 per cent of the country’s 38 million people live in rural areas and are largely dependent on small holder farming. The remaining percentage lives in urban areas, where very few have formal jobs or activities. Many of them engage in unofficial enterprises. The country has a large and growing informal sector that supports more than 62 per cent of the population

The integrated Labour survey showed that one in every three households had an informal sector activity in 2000/2001 as compared to one in every four households in 1990/1991. All these data indicate that a significant portion of the population has micro enterprise activities

“Microfinance activities can strengthen existing formal financial institutions, such as savings and loan cooperatives, credit union networks, commercial banks, and even state-run financial institutions, by expanding their markets for both savings, credit and potentially, their profitability,” sums up Mr Thadeo Mushera, Executive Director of SEDA.

SOURCE: DAILY NEWS