ACCESS TO CREDIT, FINANCIAL LITERACY, SAVINGS MOBILIZATION, AND SUSTAINABILITY OF SAVINGS AND CREDIT COOPERATIVE
ORGANIZATIONS (SACCOS).
ACASE STUDY OF KALIRO, UGANDA
Background
SACCOs should make it possible for the poor to obtain loans at a reasonable cost and also, transparent decision-making processes and a leadership structure (Lin et al., 2023).
SACCOs are the institutions that have been legally established under the Cooperative Laws, and have made it possible for the poor people to access credit with reasonable rates of interest and conditions that favour them, however their expansion is undermined by the lack of capital Financial intermediation this makes their work difficult when the need for money becomes more than the supply (Burlando, & Canidio, 2017).
SACCOs are credited globally for poverty alleviation however there is a scarcity of research on the direct impact of financial literacy programs on the sustainability of SACCOs, while financial literacy is widely acknowledged to influence financial behavior, its tangible effects on SACCO sustainability, like for example loan repayment rates, membership retention, and long-term financial health all remain underexplored (Li et al., 2023).
In East Africa, particularly in Kenya, SACCOS contributes 45% of the country’s GDP and the sector has effectively managed to mobilize Ksh 200 billion deposits and assets worth of Ksh 210 billion while in Tanzania there were over 3,500 registered SACCOS in the country with approximately 420,000 (Ndiege, Kazungu, & Moshi, 2014). SACCOS were introduced to alleviate intermediaries in order to make all profits gained go to members. Specifically, they were designed by people who had a common interest or goal so as to mobilize resources for all members in order to ensure financial sustainability of SACCOS (Kuntjorowati et al., 2024).).
The question of sustainability of SACCOs has been asked several times by authors globally, Many SACCOs complain about the restrictive legal requirement, limited financial capacity to handle the demands of their clients and limited knowledge about their operations by many segments of the population ((Ndiege, Kazungu, & Moshi, 2014).).
In Uganda at the end June 2023, SACCOs in Uganda had reached 33,000, the country has 10,594 registered SACCOs under the Parish Development Model (PDM), 6,700 under Emyooga, and 15,706 registered as other SACCOs (Kansiime et al., 2021).
Tier 4 encompasses microfinance institutions and money lenders that are not authorized to accept deposits from the public. These institutions primarily provide credit services to individuals, small businesses, and communities, playing a crucial role in promoting financial inclusion. The Tier 4 Microfinance Institutions and Money Lenders Act of 2016 established the Uganda Microfinance Regulatory Authority (UMRA) to oversee these entities (Ngo, 2024).
SACCOs remain important players in Uganda’s financial sector, but there is an ongoing challenge of failure by the SACCOs to meet the needs of the members including the ability of the SACCOs to mobilize enough savings and more to that members exhibit financial illiteracy needed to alleviate themselves from poverty, this makes the members to be trapped in vicious circle of poverty despite being members of SACCOs (Mtenga, Funga, & Kadigi, 2024), It is against this background that this study intends to investigate into access to credit, financial literacy, savings mobilization, and sustainability of savings and credit cooperative organizations (SACCOs), A case study of Kaliro district.
Statement of the problem
Many SACCOs in Kamuli are facing challenges related to access to credit, financial literacy, and limited savings mobilization all these threaten the sustainability success of SACCOs (Isabyre, 2019).
SACCOs play a pivotal role in fostering financial inclusion, financial literacy, and mobilizing saving from the low income earners of the community to enable them grow their portfolio this presents economic development, particularly in underserved communities and currently millions of people benefit from SACCOs, (Spitzer, & Twikirize, 2023).
In Kaliro Poverty remains a pervasive issue significantly impacting the socio-economic well-being of its inhabitants, this is despite the presence of SACCOs, due to the fact that SACCOs, do not have enough credit to disburse to its members , members also donot have enough financial knowledge on what do with the loans given to them and as result they default on their repayments leading to limited savings from the SACCOs which is born as a result of irregular loan repayments and low savings mobilization (Parlasca et al., 2021).
If the challenges facing SACCOs in kaliro are not addressed poverty levels will increase and the SACCOs will collapse, According to UDHS, (2021) the Poverty levels in Kaliro can be observed by the fact that, more than 20% of the population are living on less than a dollar a day, majority of people cannot afford two meals a day, children miss school frequently due to illness, lack of food at home, and girls often stay home during menstruation, all these factors indicate that there is poverty in kaliro (Mugabi, 2021; Robert, 2021).
Despite various governmental and non-governmental efforts to support SACCOs in kaliro by government, there are still challenges. This study therefore intends to investigate into Access to Credit, Financial Literacy, Savings Mobilization, and Sustainability of Savings and Credit Cooperative Organizations (SACCOs).
Objectives of the study
- To examine the influence of access to credit on sustainability in savings and credit cooperative organizations (SACCOS)
- To assess the impact of financial management on sustainability in savings and credit cooperative organizations (SACCOS).
- To examine the role of saving mobilization on sustainability in savings and credit cooperative organizations (SACCOS).
Research Questions
- What is the influence of access to credit on sustainability in savings and credit cooperative organizations (SACCOS)?
- What is the impact of financial management on sustainability in savings and credit cooperative organizations (SACCOS)?
- What is the role of saving mobilization on sustainability in savings and credit cooperative organizations (SACCOS)?
Conceptual frame work
Access to credit
Financial Management
Savings Mobilization
REFERENCES
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https://www.sciencedirect.com/science/article/abs/pii/S1062976915000587
Ngo, N. Q. N. (2024). Enhancing Anti-Money Laundering Effectiveness: The Crucial Roles of Monetary Policy and Corruption Control. Available at SSRN 4938342.
Mtenga, R. P., Funga, A., & Kadigi, M. (2024). Participation in village savings and lending associations and rice profitability in Tanzania: Application of propensity score matching and endogenous switching regression. Sustainable Futures, 7, 100169.
Parlasca, M. C., Johnen, C., & Qaim, M. (2021). Use of mobile financial services among farmers in Africa: Insights from Kenya. Global Food Security, 32, 100590.
Spitzer, H., & Twikirize, J. (2023). Social innovations in rural communities in Africa’s Great Lakes region. A social work perspective. Journal of Rural Studies, 99, 262-271.
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Mugabi, I. (2021). Assessing the effects of land use/cover change on the carbon stocks in Kaliro District, Eastern Uganda (Doctoral dissertation, Makerere University).
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