Role of savings and credit cooperatives to poverty eradication in Mbale District
Igelit, Patricia Mukalu
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This study examines the role of Sacco’s to poverty eradication in Mbale district. The findings show that the savings group programme helped to improve the financial performance of Sacco’s through increased household savings particularly among women who comprised a majority of the members. Members diversified into additional economic activities, and expanded some of their savings. However, they also divested away from certain activities that required larger capital. The study also revealed that savings group members increased their assets versus the baseline, as compared to control groups who were not members of these savings groups. Sacco’s encourage their members to save regularly and effectively accumulate savings for expected and unexpected demands. Saving service is effective when it allows borrowing at a rate below banks/ formal financial institutions’ lending rate; can be used as collateral for loans; earns some interest and fosters individual development. Therefore, according to Phillip (2003) and Drucker (1983), one way of improving the savings culture is by having an effective savings service. Also in the findings we managed to obtain what we used to make comparison between members and non-members life improvement. It was found that the perception of the performance of Sacco’s was good where by 49% of members and 53% of non-members the performance of Sacco’s in their areas testified. A result concerning the factors for success and failure revealed accessibility of Sacco’s services was the major factors which contributed to the success while lack of training opportunities emerged as a major factor for the failure of Sacco’s to perform better. The study recommends that, Sacco’s should consider training component in their plans and the government should strengthen the Sacco’s to be able to operate like banks and loan opportunities be channeled through them. Savings mobilization should be backed by adequate institutional capital which ensures permanency, provide cushion to absorb losses and impairment of members’ savings (Evans, 2001). The institutional capital, which comprise of the core capital and less share capital, is mainly accumulated from appropriation of the surpluses. Therefore, Sacco’s should strive to maximize on the earnings to build the institutional capital (Branch & Cifunentes, 2001; Ombado, 2010). This institutional capital ensures the permanence and growth of the Sacco’s even in turbulent economic times (Evans, 2001). In fact, it helps the Sacco’s to grow and, remain economically and financially viable (Gijselinckx & Devetere, 2007). Such growth is enhanced by effective financial practices.