SACCOS, A TOOL FOR POVERTY ALLEVIATION

The importance of the SACCOSs in poverty alleviation and the general economic growth of Tanzania should not be under estimated; down here are the special features of the SACCOSs which make them important and special financial institutions on which the government of Tanzania should pay attention, these features are;-

1. Accessibility; - most of these microfinance institutions are established even in rural areas where banks can not be established bringing financial services closer to the people who could otherwise not be accessible to such services, this increases entrepreneurial morale to Small and Medium Enterprise (SME) operators in Tanzania.

2. The SACCOS are Microfinance institutions which are more flexible and not complicated as they are established by the people themselves, therefore the people themselves can establish by laws which are more flexible accommodating even the people who are extremely poor, also no business plans are required for the members to access loans.
3. The use of collateral substitutes; So long as these people are poor, therefore the majority does not have the formal collaterals required by the banks, in stead of this, collateral substitutes like group guarantee, deposited savings and un surveyed houses are accepted as collaterals for members to access loans in the SACCOS.

4. The SACCOs also are Microfinance institutions which encourage savings to their members, the culture which was not present in the past, these savings can be used for investment and also they receive dividends each year which is also an added income to the members.
5. SACCOSs are targeted to serve the poor, this is done through organizing groups, train them on the necessary requirements for them to access the loans and the way the loans are to be spent, this ensures a good repayment rate and in turn these microfinance institutions becomes more strong to serve the poor as they don’t loose capital out of defaults.
6. The screening of good clients is done by the members themselves as they become responsible in case of default; this reduces the screening cost which is avoided by the formal banks.
7. SACCOSs help individuals and house holds to meet their basic needs and protect against risk. When the house holds and individuals have basic needs and protected against risks, the possibility of establishing small business is great.
8. Improvement of economic welfare of the community and enterprise stability or growth of low income households is the role of microfinance institutions in Tanzania. If the community is well off and enterprises are stable the development of the latter is unquestionable.
9. SACCOS are Microfinance institutions have the role of empowering people of all kind economically, thus promoting gender equality and improve household wellbeing.
10. The availability of small loans within the community brings about the possibility of establishment of small businesses some of which can develop and result to big business establishments.