Financial sustainability of Tanzanian saving and credit cooperatives

Purpose - The purpose of this paper is to discuss the financial sustainability of Tanzanian saving and credit cooperatives (SACCOs). Design/methodology/approach - The data set used in this study comes from SACCOs' audited financial reports for the year 2011. The performance was estimated using return on asset (ROA) and financial sustainability was estimated using the ratio of total expenses to total revenue. Linear regression was used to investigate the determinants of financial sustainability. Findings - The results show that, about 61 per cent of the sample SACCOs is operationally sustainable and 51 per cent of the total sample is both operationally and financially sustainable. The average sustainability score was 127 per cent. On average, the results for profitability (measured by ROA) is higher than some of the results reported for standard microfinance in the region and globally. In terms of sustainability the result forecasts a promising future for financial cooperative business model as an alternative form of financing the poor. Research limitations/implications - Only SACCOs with audited financial statements were included in the study, thus the conclusion is limited to SACCOs with similar characteristics. Future work might consider extending the analysis to include SACCOs with non-audited financial statements. Practical implications - Based on the sample SACCOs can under good management can be used as a sustainable social conduit for financial access and social economic development among the poor in Tanzania. Originality/value - This study contributes in two ways. First, it contributes towards the scanty empirical literature on the performance of SACCOs in developing countries and in Tanzania in particular. Second, it provides provocative evidence which appears to contradict earlier and more pessimistic accounts and it challenges the ontology about extending member-based microfinance.