Financial sustainability of Tanzanian saving and credit cooperatives
Abstract
Purpose
The purpose of this paper is to discuss the financial sustainability of Tanzanian saving and credit cooperatives (SACCOs).
Design/methodology/approach
The data set used in this study comes from SACCOs’ audited financial reports for the year 2011. The performance was estimated using return on asset (ROA) and financial sustainability was estimated using the ratio of total expenses to total revenue. Linear regression was used to investigate the determinants of financial sustainability.
Findings
The results show that, about 61 per cent of the sample SACCOs is operationally sustainable and 51 per cent of the total sample is both operationally and financially sustainable. The average sustainability score was 127 per cent. On average, the results for profitability (measured by ROA) is higher than some of the results reported for standard microfinance in the region and globally. In terms of sustainability the result forecasts a promising future for financial cooperative business model as an alternative form of financing the poor.
Research limitations/implications
Only SACCOs with audited financial statements were included in the study, thus the conclusion is limited to SACCOs with similar characteristics. Future work might consider extending the analysis to include SACCOs with non-audited financial statements.
Practical implications
Based on the sample SACCOs can under good management can be used as a sustainable social conduit for financial access and social economic development among the poor in Tanzania.
Originality/value
This study contributes in two ways. First, it contributes towards the scanty empirical literature on the performance of SACCOs in developing countries and in Tanzania in particular. Second, it provides provocative evidence which appears to contradict earlier and more pessimistic accounts and it challenges the ontology about extending member-based microfinance.
Keywords
Acknowledgements
JEL Classification —G21, G2, D31, D24, I30
The authors acknowledge the funding support the current Doctoral Research Project from REPOA and African Economic Research Consortium. Also the authors acknowledge the publication support services including pre-peer review and research honorarium from Economic Research South Africa. This paper is among the four other papers under this project. The authors also appreciate the comments from the editor and anonymous reviewers who helped to point out areas for improvement for the earlier version of this paper.
Citation
Marwa, N. and Aziakpono, M. (2015), "Financial sustainability of Tanzanian saving and credit cooperatives", International Journal of Social Economics, Vol. 42 No. 10, pp. 870-887. https://doi.org/10.1108/IJSE-06-2014-0127
Publisher
:Emerald Group Publishing Limited
Copyright © 2015, Emerald Group Publishing Limited