Ambaxt Sacco

In attempts to extend financial services to the poor, financial institutions tend to face a dilemma, especially due to increased operating costs, poor infrastructure and low population density. Consequently, these financial institutions hike up the interest rates, hence making their services unaffordable and less attractive to the local people. Local people, then, miss out on the benefits associated with traditional banking.

In order to increase the outreach of financial services to community members, especially in the rural areas, we implemented the Saving and Credit Cooperative groups (SACCO) approach in our region to enhance saving, economic security, business and financial management in order to improve household income.

(SACCO) attempt to overcome the difficulties of offering credit to the rural poor by creating groups of people who can pool their savings in order to have a source of lending funds.  Members make savings contributions to the pool, and can also borrow from it.  As a self-sustainable and self-replicating mechanism, SACCO’s have the potential to bring access to more remote areas, but the impact of these groups on access to credit, savings and assets, income, food security, consumption education, and empowerment is not yet known. Moreover, it is not known whether SACCO’s will be dominated by wealthier community members, simply shifting the ways in which people borrow rather than providing financial access to new populations.

Trainers present the model to villagers at meetings. Those interested in participating are invited to form groups averaging about twenty and receive training. These groups, comprised mostly of women, meet on a regular basis, as decided by members, to make savings contributions to a common pool.  At each meeting, members can request a loan from the group to be repaid with interest. This lending feature makes the SACCO a type of Accumulating Savings and Credit Association (ASCA) providing a group-based source of both credit and savings accumulation. SACCO model also introduces an emergency fund, allowing members to borrow money for urgent expenses without having to sell productive assets or cut essential expenses such as meals.

This study will assess the impact of SACCO trainings and group membership on access to credit, savings and assets, income, food security, consumption education, and empowerment.