Rural Member-Based Microfinance Institutions : A field study assessing the impacts of SACCOS and VICOBA in Babati district, Tanzania

University essay from Södertörns högskola/Institutionen för livsvetenskaper

Abstract:

Microfinance has spread rapidly since the 1970s and gained a lot of international attention. Advocates mean it is a good way to reduce poverty, but still there is no consensus within the research about the impacts of microfinance and its contribution to poverty reduction.The aim of this study is to assess the members’ perceptions about the impacts of the rural member-based microfinance institutions (MFIs), Savings and Credit Cooperative Societies (SACCOS) and Village Community Bank (VICOBA), on members’ socio-economic situation as well as their perceptions about the contribution to poverty reduction and to identify potential obstacles. The study is mainly based on individual semi-structured interviews with members of SACCOS and VICOBA conducted between February and April 2012 in Babati district Tanzania and earlier research and studies within the area of microfinance and poverty reduction make up the theoretical framework. There is a general agreement among the members interviewed that these MFIs have positive impacts on their socio-economic situation. The results show that it helps to meet consumption needs, pay school fees, run small businesses, increase and diversify the income and the majority also believes that it can be a useful tool for poverty reduction. However, it doesn’t lead to poverty reduction automatically, it depends on how the loans are used and this study identifies several obstacles for SACCOS and VICOBA to be more effective and contribute more to poverty reduction. The main obstacles found are low repayment status, lack of capital and lack of education in both entrepreneurship and how these MFIs operate.

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