these SACCOS at workplaces include to receive shares savings and deposits from

These saccos at workplaces include to receive shares

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these SACCOS at workplaces include to receive shares, savings and deposits from members and issue loans to their members at low interest rates enough to cover for operational and financial costs. The main source of funding is savings through members’ monthly contribution from their salari es. Loans obtained by members from SACCOS are used for various purposes such as building houses, starting or expanding businesses, paying school fees and meeting medical expenses things which have led to high demand of loans as compared to the available source of funding to SACCOS. In recent years most of SACCOS have emerged to depend on loans from commercial banks and other financial institutions to give out loans to their members, the situation which indicates that members of SACCOS have not saved enough to enable
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3 SACCOS give out loans to members from their savings. This research intends to substantiate the existence of the problem of inadequate savings in relation to loan delivery to SACCOS members at workplaces. 1.2 Statement of the Problem Savings in a credit cooperative society play an important role of granting loans to members. In the context of SACCOS at workplaces in Shinyanga it appears that members’ savings are not suff icient enough to finance the available demand for members’ loans. Majority of SACCOS are characterized by limited source of funds and they are forced to rely heavily on savings from members to build their lending capacity. It is shortage of savings that is one of the most critical constraints on the issuing of loans to members. As a result SACCOS are necessitated to obtain loans from other financial institutions for the purpose of lending their members. High savings is likely to stimulate capacity of credit society to grant loans to its members for up to three times of the amount of his/her own savings (URT, 2004). For the SACCOS to be viable and sustainable, they must build their lending capacity through perpetual members’ savings . This is possible if there are suitable savings policy and proper credit management and good risk assessment. However, in most cases SACCOS are poorly managed, many decision made by SACCOS lack timely information (Maleko et al, 2010). SACCOS in Shinyanga region have been dependent on financial loans from commercial banks to build lending capacity and be able to issue loans to their members. But such dependence will not prove helpful in a sustainable manner due to the fact that such loans are charged with higher interest rates which in turn become
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4 burden to members of SACCOS to obtaining loans at higher interest rates which cover interest charged by commercial banks and that of the SACCOS itself. All these emanate from the fact that members have not been able to contribute enough to SACCOS through savings which is a basis of granting loans to members.
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