CONTRIBUTION OF EMPLOYEE-BASED SAVINGS

 CONTRIBUTION OF EMPLOYEE-BASED SAVINGS

Background to the study

 Savings and credit cooperative Societies (SACCOS) are Cooperative Societies which are owned by people with a common bond. In this regard, people voluntarily join together and agree to contribute their money to the cooperative and lend that money to one another during times of financial hardship at an agreed rate of interest for productive and provident purposes. As such it is a cooperative which operates in the financial system; it is a legal entity, which enhances pooling together finance for the benefit of members (URT, 2003). 

 

The development of SACCOS in the world started at different times in different countries. In 1849, in Germany, William Raiffesein started the first savings and credit cooperative to assist farmers to overcome economic problems. The type of SACCOS which was formed was the Raiffesein model.   Raiffesein wanted to make credit accessible to farmers based on Christian morals. In the 1890s SACCOS spread to North America, firstly to Canada where Alphoso Desjardins established the Desjardins model. He developed his project of savings and credit cooperatives that relied on values of justice and self-help. The first SACCOS was introduced in Africa in 1901 by Father John Ncnulty in Ghana. It was required to assist villagers improve their economic conditions through farm credit. In 1965, the Africa Confederation of Cooperative Society Savings and Credit Association (ACCOSCA) was formed in Nairobi, Kenya as a Pan Africa body. It was formed to promote SACCOS, provide a forum of discussion, offer insurance to SACCOS’ members on life savings and loan protection and educate affiliated members on a wide variety of credit union issues (Dublin and Dublin, 1983).

The idea of SACCOS in Tanzania came into existence after a training program by Michigan Credit Unions in the 1950s. It was initiated in Tanganyika (current Tanzania) by the help of the late Rev. Cardinal Rugambwa after his U.S visit in the 1950s. When he came back to Tanzania in 1960 he thought that the credit union format would fit into the African economic development. Thus, he visited Catholic Parishes in Bukoba, Kilimanjaro and Dar es Salaam and preached about Credit Union. His efforts were proven fruitful when a Credit Union in Dar es Salaam named Kianga Credit Union and Mawela Credit Union in Moshi were registered in the year 1961. By 1964, there were already 18 registered SACCOS which led to the establishment of the Secondary Society called Savings and Credit Cooperative Union League of Tanganyika (SCCLT) (Dublin, 1983). 

 

After six years of independence, cooperative societies began to face difficulties in their organizational structure and management, which affected members returns as was pronounced by the 1966 presidential commission of enquiring into cooperatives. In its report of 1975, the Massomo Committee recommended that some of the Cooperative unions be strengthened to enable them to function as strong economic Cooperative Unions. Meanwhile Ujamaa Village Act of 1975 was enacted and this replaced the Cooperative Act of 1968. The outcome of that Act was that in 1976 Cooperative Unions were abolished except Urban SACCOS. As a result rural SACCOS were changed into Savings and Credit Schemes while the urban SACCOS continued to operate under the 1968 Cooperative Societies Act. The Cooperative Societies Act of 1982 re-established Cooperative Societies and Unions along with the Rural SACCOS. The Savings and Credit Schemes in this cooperative act of 1982 were not automatically covered into SACCOS and had to apply for re- registration after 1991 (Cooperative Act of 1968, Ujamaa Village Act of 1975, URT, 2005).

Operation of Employee Based SACCOS  

Employee based SACCOS as independent institutions are governed by Cooperative Societies Act no. 20 of 2003 and By Laws which ensure that SACCOS are operating within the framework of the laws of Tanzania. Also they ensure that member’s funds are utilized efficiently and effectively. Most people used services offered by SACCOS to advance their well being. Employee based SACCOS, which were established under the current governing Cooperative Societies ACT No 20 of year 2003, are formal institutions and must be registered before they operate. Employee based SACCOS play both social and economic roles which make it possible for them to meet their objectives. Such objectives include:

(i)     To mobilize savings from members and advance loans to the members, and to promote thrift among its members,

(ii)  To provide an opportunity for each of their members to improve their socio-economic and welfare conditions, and

(iii)            To ensure progress of its members by educating them continuously on proper use of credit (Syed, 1991).

Together with the above objectives, employee based SACCOS offer the following products and services: savings, entrepreneur education and training, retirement savings and condolences (Bailey, 2001). All these enable the SACCOS members to generate more income to improve their households’ subjective well-being. Household subjective well-being here is used to refer to the well-being as declared by a person; it incorporates all life events, aspirations, achievements, failures, and emotions of human beings (Veenhoven, 1984). It can be achieved through acquisition of the following by the households’ members: good household income, health family life, good education to the household members, good community life, community support, social capital, culture and diversity (Martinez and Seeley, 2003). Hence this study will focus on the workers’ household subjective well-being by using the same definition which was used by Veenhoven, which regards households’ subjective well-being as the degree to which a person evaluates the overall quality of his present household life.

 

The potential indicators of subjective well-being are: demographic characteristics, income, health, and social capital (Cramm 2010). These indicators are potential to subjective well being because they influence subjective well-being. According to Hoorn (2007), social capital, marital status, health and income are strongly associated with subjective well-being.  

 

 In this concept, this study will focus on how SACCOS contributes to the worker’s household subjective well-being through acquisition of good health, economics (income and wealth), consumption of goods and services, health,  family life, social capital and education.

       

KCMC has 1400 workers, of whom 21% are SACCOS’ members. KCMC SACCOS was formed in 2007 to facilitate savings, to provide easy access to loans for the members and to provide entrepreneur education and training to the members. However, a brief discussion with SACCOS’ leaders and members showed that KCMC SACCOS is facing some challenges such as insufficient loans to its members, lack of suitable entrepreneur training to the members, lack of appropriate and adequate managerial skills, and lack of enough active SACCOS’ members.

Statement of the Problem

 The need to improve the standards of living of people in Tanzania has been mentioned many times and its foundation is to increase their income. Cooperative Societies have great potential to enable citizens to build strong economy and improve their living conditions in both rural and urban areas. Despite the assumption that cooperative Societies are useful entities that can solve social and economic problems, the present Cooperative Societies have not been able to demonstrate that ability to the maximum (URT, 2005).

In the same vein KCMC SACCOS is one among the types of the present Cooperative Societies which was resolved by KCMC workers in 2007. It was established for the purpose of improving members’ household subjective well-being.  However, despite its five years of operation, most of its members are yet to attain their expectations to the full.   It is not known to what extent KCMC SACCOS has been able to contribute to the household subjective well being of its members. Moreover, managerial aspects of KCMC SACCOS have never been assessed. It is against this background, this study was undertaken.

Objectives of the study

Main Objective

The overall objective of this study was to assess the effects of employee-based saving and credit cooperative societies on workers’ households subjective well being at Kilimanjaro Christian Medical Centre SACCOS in Kilimanjaro, Tanzania.

 

Specific Objectives

(i)     To assess how KCMC SACCOS provides credits to its members.

(ii)  To assess  how members use credit offered by KCMC SACCOS

(iii)             To examine the effects (social, economic and health) of services offered by KCMC SACCOS on the member’s household subjective well being.

(iv) To explore members’ views on how to improve SACCOS’ services for their subjective households’ well-being.

Research Questions

(i)                 How does SACCOS provide credits to its members?

(ii)              For what use do SACCO’S members apply for credits from SACCOS?

(iii)             What are the social and economic effects of SACCOS on household subjective well-being?

(iv)             What are members’ views on how to improve SACCOS’ services for their   household subjective well-being?

Significance of the Study

Many studies about SACCOS in Tanzania have been undertaken in Rural SACCOS, but less attention has been given to the Employee Based SACCOS, particularly in the health sector. Findings from this study will be of importance to SACCOS’ members’, management and non-members.  The study findings could be used in improving the management aspects of the Employee based SACCOS’ services as well as encouraging non members to join KCMC SACCOS.  It is also expected that this study will add more insight to the body of knowledge regarding effects of Employee Based SACCOS in Tanzania.

 

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