There is a lot of regulatory requirement to obtain financial services from banking institutions. Although it is easy to open a bank account, it becomes difficult to obtain loans, especially for those living in poverty. To counter this Credit Cooperative Societies were formed. They are a members only organization, where the members own, run and manage by pooling resources and providing loans/credit to members. This eliminates the need for banking services, especially those living in poverty and cannot afford some of the restrictive conditions set by the bank, for example collateral (Bee, 2007). However, it is important to note that Credit and Cooperative Societies are not limited only to the marginalized or poor in the society, it cuts across all sectors of the population and can benefit anyone.
Of the 16 million people living in Zambia, around 78.4% of them are living on less than $3.10 a day. This implies that a majority of Zambians are poor. The economic landscape in Zambia is such that a majority of the population practice subsistence farming and operate small businesses, which offer small margins of profit and ultimately growth. This has been greatly attributed to the fact that most of Zambians, around 63% of them, face financial exclusion.In Zambia, there are few financial institutions where people live (UNDP, 2006). Couple this with the high costs of borrowing and difficulty in obtaining collateral, the reason for widespread poverty becomes clear.
In such a situation you would expect that SACCOs will be wide spread. In Kenya, for example, by 2015 there are over 5,729 legally operating SACCOs with $3.5 billion in savings. In Zambia, with a larger percentage of the population considered poor, there are only 11 registered SACCOs (by 2015) with only $4.8 million in savings. This informs the purpose for this study. The researcher will investigate constrains impeding the penetration of SACCOs in Zambia, with a view of formulating practical recommendations to policy makers on how to increase the presence of SACCOs. This, the researcher hopes, will alleviate poverty and empower the populace economically.
For economic development in Zambia to increase, major strategies are required to grow not only the economy, but also food security. A combination of the two will help alleviate poverty. This makes the research on SACCOs crucial as it will encourage local-based solutions for access to financial services in the community. Research by Vertrivel and Kumarmangalan (2010) indicated that community based financial institutions are effective for poverty alleviation. Low and medium income people will be able to expand their operations and improve their standards of living when given access to credit services.
This study will try to determine strategies for using SACCOs to economically empower the low to medium income bracket of the Zambian population and thereby alleviate poverty. It will achieve this by determining the links between acceptance of SACCOs and various elements such as training, peer influence, family history, peoples attitude, age, gender and knowledge of SACCO barriers.
Recipients for the researchThe main recipient of this study will be SBS Swiss Business School for the award of doctorate degree in X
Other recipients of this study are
Suitability of Researcher for the research
The researcher holds a masters degree in X from X
In addition to academic qualifications, the researcher is passionate about financial institutions and would like to use it as a tool to economically power the people of Zambia and alleviate them from poverty.
Literature reviewIn most developing countries, SACCOs are the predominant forms of external funding from micro enterprises (Oyoo, 2002). Rapid developments in this sector in most African countries are attributed to the impact of accelerated development SACCOs in Africa. In Kenya, SACCOs contribute nearly over 45% of GDP, with an estimate that one in every two Kenyans in one way or the other derive their livelihood from the cooperative movements (Mudibo, 2005). In Tanzania, SACCO sector employs nearly 94.7% of school leavers every year, contributing over 40% of the GDP. Countries in Africa that achieve the most from SACCO have their base in Agricultural sector. Both Kenya and Tanzania attribute acceptance of SACCOs to improvements in the Agricultural sector. Despite this, SACCOs cut across rural and urban settlements in equal measure. Origins of SACCOs, their operations, nature and characteristics is similar in most African countries since they all fall under the same category, developing countries. A majority of the population in sub-Saharan Africa live in poverty, contributing further to the development of SACCOs.
While the number of SACCOs in most African countries is increasing yearly, Zambia has that number stagnating. This is happening despite the fact that the country meets the common characteristics of environment that promotes the growth of SACCOs. In Kenya, the accelerated development of SACCOs has been greatly attributed to wide range of services and relatively affordable terms (Oyoo, 2002). The terms provided by SACCOs are superior to those offered by different financial institutions like banks. The concept of cooperative societies was introduced in Africa through colonial powers who were interested finding qualified personnel to serve. After independence, it became the responsibility of the newly constituted governments to promote cooperative societies and SACCOs in general.
Of importance to note is that SACCOs are not the only formal institutions that can offer financial services to small enter prices. However, the success of SACCOs in some of African countries like Kenya shows that the role played by SACCOs in development of the informal sector of the economy. The number of SACCOs in Kenya is forecasted to reach one million over the coming years, while that of Zambia has remained stagnant over the years, with little hope of exponential increase.
Services offered by SACCOs are limited compared to those of other financial institutions. In most countries in Africa, they are limited to deposit-taking, loan provision and transactional facilities such as money transfer and debit orders (Bee, 2007). The operational volume of SACCOs is determined by its type and client base. SACCOs found in urban areas have a higher number of employee-based client compared to those of rural areas, making them have a higher income. In Africa, SACCOs tend to have similar characteristics, for example, most have clients with low to middle income, services offered mainly financial, provide self-generated income, members united over common interest, members aim at improving their economic situation and most are mutual self-help groups (Ignance, 2009).
The importance of SACCOs in economic development and poverty reduction cannot be emphasized enough. In Kenya, SACCOs have a penetration rate of 29.2% covering about six million people, making it the best in Africa and 7th globally. Increasing popularity of microfinance and enthusiastic public is what drives the rate of development of SACCOs in Kenya. At a population of 16 million people, similar approach could prove instrumental to personal economic development of population in Zambia. Apart from personal economic growth, SACCOs have several contributions to the economy which include: filing the gaps in poverty reduction programs, capacity building among members, innovations to improve member income and facilitation of micro-financial services.
General constrains affecting the adoption of SACCOs in developing countries in Africa is the same. The degree of success of the sector in any country depends on how effectively they handle these limitations. Since most SACCOs are composed of local members, it may, at times be difficult to acquire personnel with the adequate managerial skills and knowledge. Other constrains that face SACCOs in developing countries include: lower productivity resulting from the use of ineffective equipment, lack of access to funding, operational environment, environment in which they operate and bureaucratic processes in administration.
Recent developments and acceptance of technology provides a unique opportunity for the development and growth SACCOs in Africa. Introduction and acceptance of new technologies in Kenya has been attributed to the increased penetration rate of SACCOs. Introduction of mobile banking, a service that reduced the reliance of banking system for money transfer, lead to increased access to financial services, impacting SACCOs in the country in a positive light. Incorporation of technology into financial services, in most cases, positively impacts the sector.
There is overwhelming evidence to show that SACCOs in Zambia have the potential to perform better than they are currently. Research from Kenya and Tanzania put the potential contribution of SACCOs to the GDP. In Zambia, most of the research done covers only the microfinance sector. As the country plans to move from low to high-developed country, improvements in this sector becomes necessary. This makes the study relevant as the findings can be used as strategy for policy development. The role of SACCOs in poverty alleviation has not been adequately researched in the country, which this study hopes to bridge the gap. With this study, the researcher hopes that the results will unearth the challenges that have impeded the penetration of SACCOs in Zambia and make recommendations that will initiate policy development at national level.
Research methodologyResearch questionsWhat are the challenges that have contributed to the non-popularity of SACCOs in Zambia?
What factors lead to effective performance and sustainability of SACCOs?
There is a relationship between acceptance of SACCOs and awareness of SACCOs.
There is a relationship between acceptance of SACCOs and knowledge of SACCOs benefits and risks.
There is a relationship between acceptance of SACCOs and knowledge of SACCOs barriers
There is a relationship between acceptance of SACCOs and peoples attitudes and perception
There is a relationship between acceptance of SACCOs and training in use of SACCOs.
There is a relationship between acceptance of SACCOs and family history
There is a relationship between acceptance of SACCOs and peer influence
There is a relationship between acceptance of SACCOs and gender
There is a relationship between acceptance of SACCOs and age.
A deductive approach will be taken for the study. Ample research exi...
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