DECLARATION I Jean d’Amour NKAKA hereby declare that the work presented in this dissertation entitled Impacts of Umurenge SACCO programme on socioeconomic development of Rwanda is my original work and has never been presented elsewhere for any academic qualifications. Any reference in terms of books or any other written materials are indicated in the bibliography. Student’s signature …………………………………………….. Date: ……/ …………../………….. Jean d’Amour NKAKA i
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DECLARATION
I Jean d’Amour NKAKA hereby declare that the work presented in this dissertation entitled
Impacts of Umurenge SACCO programme on socioeconomic development of Rwanda is my
original work and has never been presented elsewhere for any academic qualifications.
Any reference in terms of books or any other written materials are indicated in the bibliography.
Student’s signature
……………………………………………..
Date: ……/ …………../…………..
Jean d’Amour NKAKA
i
CERTIFICATION
This is to certify that this work entitled “Impacts of Umurenge SACCO programme on socioeconomic development of Rwanda”. A case study: RP Rurenge People SACCO is carried out by Jean d ‘Amour NKAKA under my guidance and supervision.
Supervisor’s signature: ………………………………
Supervisor: Mr. Aristide MANIRIHO
Date: ………./ …………/……….
ii
DEDICATION
To the almighty GOD
To my Mammy
To my brothers, sister, relatives and friends
To my classmates and roommates
I dedicate this work.
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ACKNOWLEDGEMENT
I am greatly indebted to Mr. Aristide MANIRIHO for undertaking the task of supervising this
work, her willingness, guidance and assistance to identify in this research. I gained a tremendous
amount of knowledge under his supervision.
I am deeply indebted to the Government of Rwanda for providing funds for my studies.
A special word of appreciation goes out to the University of Rwanda through the school of
Economics. I admire your advices, knowledge provided, favorable learning environment and
cooperation during my studies at University.
Special thanks go to the entire administration of RP SACCO for providing the required
information without the cooperation and involvement of members of this Sacco, this work would
have gone nowhere. Thank you also for embracing new things, your patience in answering my
numerous questions and willingness to work with me on the field is well appreciated.
I express again my gratitude and thanks to my father Jean baptiste KAGINA and my mother
Clemence MUKAGATARE. They did a hard work to make me growing and looking after me
during my school life and they are the one who makes me what I am now. Mammy, Daddy
I love you. Special recognition also goes to my brothers HAHIRWABASENGA J. Marie Louis,
IRAKIZA Gilbert, KAGINA Schadrak, MUGABO Jean Pierre and my sister UMUGENI
Denyse I appreciate their encouragement and support.
Finally, I am grateful to all my colleagues, all students of school of Economics and my
roommates for their moral support during the four years of my studies at University of Rwanda.
May God bless you all!!!
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ABBREVIATIONS AND ACRONYMS
SACCO: Saving and Credit Cooperative
SACCOs: Saving and Credit Cooperatives
RP SACCO: Rurenge people saving and Credit Cooperative
MFI: Micro-finance
BNR: Bank National du Rwanda (National Bank of Rwanda)
NGOs: Nongovernmental organizational
ICA: International Cooperatives Alliance
WOCCU: World Council of Credit Unions
UR: University of Rwanda
UBPR: Union de banque populaire du Rwanda
FSDP: Financial sector Development Programme
SED: Socioeconomic development
FAO: Food agriculture organization
AFI: Alliance for Financial Inclusion
RCA: Rwanda cooperative Agency
DFID: Department for international development
ACCOSCA: African Confederation of Cooperative Saving and Credit Associations
USA: United state of America
UNDP: United Nations Development program
WWII: Second World War
GDP: Gross domestic product
HDI: Human development index
MDGS: Millennium Development Goals
EDPRS: Economic Development and Poverty Reduction Strategy
SPSS: Statistical Package for the Social Scientists
ANOVA: Analysis of Variance
URAC: Union Regional de Apoyo Campesino
MINECOFIN: Ministry of finance and economic planning
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Table of ContentsDECLARATION..............................................................................................................................iCERTIFICATION...........................................................................................................................iiDEDICATION...............................................................................................................................iiiACKNOWLEDGEMENT..............................................................................................................ivABBREVIATIONS AND ACRONYMS........................................................................................vLIST OF TABLES AND FIGURES..............................................................................................ixABSTRACT....................................................................................................................................xCHAPTER ONE: GENERAL INTRODUCTION..........................................................................1
1.1 Background to the study........................................................................................................11.2 The conceptual framework....................................................................................................4Figure 1.2.1: The conceptual framework of the study.................................................................51.3 Problem statement.................................................................................................................61.4 Research objectives...............................................................................................................6
1.4.1 Main objective................................................................................................................61.4.2 The Specific Objectives..................................................................................................7
1.5 The research questions...........................................................................................................71.6 The Research Hypothesis......................................................................................................71.7 The Scope of the Study..........................................................................................................81.8 Justification of study..............................................................................................................8
CHAPTER TWO: LITERATURE REVIEW..................................................................................92.1 Definition of key word...........................................................................................................92.1.1 The concept of savings.......................................................................................................92.1.2 Determinants of personal savings.......................................................................................92.1.3 Credit................................................................................................................................102.1.4 Cooperatives.....................................................................................................................112.1.5 Saving and credit cooperatives societies..........................................................................112.1.6 Social................................................................................................................................112.1.7 Socio-economics...............................................................................................................122.1.8 Economic development....................................................................................................122.2 Theoretical foundation of SACCO and Socioeconomic development................................12
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2.2.1 Socio-economic development...........................................................................................132. 2.2 socioeconomic development inductors............................................................................142.3 Evolution of Umurenge SACCOs in Rwanda.....................................................................162.3.1 Services provided by SACCOs.........................................................................................162.4 Importance of FMI / SACCOs in Socioeconomic development.........................................17
2.4.1 SACCOs increasing member’s income........................................................................172.4.2 SACCOs in employment creation and production capacity.........................................182.4.3 Asset ownership, education and health care.................................................................18
2.5 Status of MFIs /SACCOs in Rwanda..................................................................................19CHAPTER THREE: METHODOLOGY......................................................................................21
3.1 Introduction..........................................................................................................................213.1.1 Study area.........................................................................................................................213.1.2 Population of study and sample size determination.........................................................213.1.3 Sampling techniques.........................................................................................................213.2 PROCEDURES TO BE ADOPTED IN THE COLLECTION OF DATA.........................22
3.2.1 Sources of Data.............................................................................................................223.2.2 Primary Data.................................................................................................................223.2.3 Secondary data..............................................................................................................223.2.4 Data collection techniques............................................................................................233.2.6Questionnaire.................................................................................................................233.2.7 Observation technique..................................................................................................233.2.8 Interview.......................................................................................................................233.2.9 Documentation..............................................................................................................233.2.10 Data analysis method..................................................................................................233.2.11 Processing and interpretation of data..........................................................................243.2.12 Data processing...........................................................................................................243.2.13 Editing.........................................................................................................................243.2.14 Tabulation...................................................................................................................243.2.15 Quality control............................................................................................................24
CHAPTER FOUR: DATA ANALYSIS, PRESENTATION AND INTERPRETATION OF THE FINDINGS...................................................................................25
4.1. Introduction.........................................................................................................................254.1.1 PRESENTATION AND INTERPRETATION OF THE RESULTS...............................25
4.1.2. Distribution of respondents..........................................................................................254.2. DESCRIPTIVE STATISTICS OF VARIABLES..............................................................27
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4.3 Evolution of savings in Rurenge People SACCO from 2011 to 2015............................284.4 Socioeconomic status of Rurenge People SACCO members before and after joining SACCO..................................................................................................................................29Table 4.4.2: Paired Samples Test of monthly income before and after.................................30
4.5 The contribution of Rurenge People SACCO to the improvement of life conditions of its members.....................................................................................................................................31Table 4.5.1. Contribution of Rurenge People SACCO to improvement of life condition of its members.....................................................................................................................................314.6. Challenges facing Rurenge People SACCO members.......................................................32Table 4.6.1 Challenges facing Rurenge People SACCO members...........................................324.7 Interpretation of the results..................................................................................................32
CHAPTER FIVE: DISCUSSION OF THE RESULTS................................................................335.1 The findings on evolution of savings in Rurenge People SACCO from 2011 to 2015.......335.2 The findings on socioeconomic status of Rurenge People SACCO members after and before joining Umurenge SACCO.............................................................................................335.3 The Findings on the contribution of Rurenge People SACCO to the improvement of life condition of its members...........................................................................................................335.4 The Finding on Various challenges facing Rurenge People SACCO members..................345.2 Conclusion...........................................................................................................................345.3 Limitations of the study.......................................................................................................345.4 Recommendations................................................................................................................35
5.4.1 To the management of UMURENGE SACCOs...........................................................355.4.2 Members Savings Development...................................................................................365.4.3 Credits administration...................................................................................................365.4.4 Mortgage of Savings Vis – a – Vis – Micro credits.....................................................365.4.5 Marketing of Financial Services...................................................................................375.4.2 To the government of Rwanda.....................................................................................375.4.3 Suggestion for further Researchers...............................................................................37
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LIST OF TABLES AND FIGURES Figure 1.2.1: The conceptual frame work of the study....................................................................5Table 3.1.4: Distribution of the population of the study and the sample size per cell..................22Table 4.1.3: Characteristics of Rurenge People SACCO members in Ngoma district..................26Table 4.2.1: Descriptive Statistics.................................................................................................28Table 4.4: Paired Samples Correlations table................................................................................30Table 4.4.2: Paired Samples Test of monthly income before and after.........................................30Table 4.5.1:Contribution of R P SACCO to the improvement of life condition of its members..32Table 4.6.1 Challenges facing Rurenge People SACCO members ..............................................33
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ABSTRACT
The study work entitled impacts of Umurenge SACCO programme on socioeconomic
development of Rwanda case study of Rurenge People SACCO in Ngoma district was
conducted with an aim of to analyze the impacts of Umurenge SACCO programme on
socioeconomic development of Rwanda
1. Assess the evolution of the savings of Rurenge People SACCO from 2011 to 2015
2. To establish the difference between mean monthly income of Rurenge People SACCO
members before and after joining SACCO
3. The contribution of Rurenge People SACCO to socioeconomic life conditions/status of
its members
4. To identify challenges faced by Rurenge People SACCO members
The researcher reviewed the related literature to come up with the full idea of the study, both
primary data and secondary data were obtained and analyzed, the researcher used questionnaire
on random sampled, for secondary data as well as existing literature in the text of Umurenge
SACCO, Rurenge people SACCO annual reports were used, the collected data were present
in statistical tables, analyzed and interpreted in line with the objectives to have meaningful
information. The research also revealed that Umurenge SACCO member welfare goes hand
in hand with socioeconomic development of the country at large, this was revealed
by the respondents who highlighted that Rurenge people SACCO services play an important role
in development of the country, by helping poor people to expand their economic activities
and increase their income and assets, building their self confidence grows simultaneously,
the government of Rwanda has established Umurenge SACCO in all sectors s of Rwanda, with
aim of filling the gap in the finance market in Rwanda by providing poor people with access
of financial service as means of help to increase their productivity and help low- income earners
people to reduce risks, improve management, raise productivity or obtain higher returns
on investments, improve their welfare.
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CHAPTER ONE: GENERAL INTRODUCTION
This chapter presents the background to the study, statement of the problem, research objective,
research question, and research hypotheses, Justification of the study and the scope of study
1.1 Background to the study
SACCOs is one of microfinance which can play significant role to develop Economic situation
of the developing countries like Rwanda
“ A cooperative is an association of person usually of limited means who have voluntarily joined
together to achieve a common economic end through the information of democratically
controlled business organization, making equitable contribution to the capital required
and accepting a fair share of risk and benefit of undertaking” (Sharma, 2004).
The history of micro financing can be traced back as far as the middle of the 1800s, when the
theorist Lysander Spooner was writing about the benefits of small credits to entrepreneurs
and farmers as a way of getting the people out of poverty, as the microfinance market has
matured in recent years, competition has increased among major MFIs against this backdrop
of intense competition, overlapping loan problems among major MFIs and borrowers has
emerged as a problem in Bangladesh while poor people have more choices from which MFIs
to borrow money, the number of people who use multiple loans from various MFIs has been
increasing as a result, there are ever more heavily indebted people in Bangladesh, and this is
beginning to pose a threat to MFIs and the microfinance industry (Yasuhiko, 2011).
Overall MFIs in Africa are dynamic and growing; the 163 MFIs that provided information for
study, 57 percent were created in the past eight years and 45 percent of those in the past four
years African MFIs appear to serve the broad financial needs of their clients. Unlike trends in
most regions around the globe, more than 70 percent of the reporting African MFIs offer savings
as a core financial service for clients and use it as an important source of funds for lending.
MFIs in Africa tend to report lower levels of profitability, as measured by return on assets, than
MFIs in other global regions (Asmelash, 2003).
1
African MFIs face many challenges, operating and financial expenses are high, and on average,
revenues remain lower than in other global regions, efficiency in terms of cost per borrower is
lowest for African MFIs. Technological innovations, product refinements, and ongoing efforts
to strengthen the capacity of African MFIs are needed to reduce costs, increase outreach,
and boost overall profitability. Overall, African MFIs are important actors in the financial sector,
and they are well positioned to grow and reach the millions of potential clients who currently
do not have access to mainstream financial services. MFIs in sub-Saharan Africa include a broad
range of diverse and geographically dispersed institutions that offer financial services to low-
income clients: non-governmental organizations (NGOs), non-bank financial institutions,
cooperatives, rural banks, savings and postal financial institutions, and an increasing number
of commercial banks (Meehan, 1996).
In East Africa, Microfinance providers such as commercial banks, micro deposit taking
institutions, microfinance institutions generally serve urban areas and are biased towards
financing commercial activities. The professionalization of the microfinance sector, increased
competition in urban areas (also from commercial banks offering microfinance) and the adoption
of new technology are driving the outreach of savings and credit services into rural areas.
However, the very remoteness of certain areas, the high costs of services, financial illiteracy, and
the unsuitability of financial products for agriculture restrict the reach of microfinance
(Irma, 2012).
Uganda is generally seen as the country with the most vibrant and successful microfinance industry
in Africa. Some MFIs have experienced strong growth and are now reaching a considerable number
of clients, with three serving between 25.000 and 45.000 clients. A number of microfinance
providers are close to financial sustainability or have already surpassed it. A series of impact studies
conducted in Uganda in the past years have demonstrated that the provision of microfinance services
contributes to reduce client vulnerability to economic risks, results in strengthening linkages of
clients and their households to the agricultural sector, and enables clients to acquire valued skills.
Moreover, all observers agree that the success of microfinance in Uganda is closely linked
to a number of enabling contextual factors specific to the country (Kafle, 2012).
Micro-finance is an important part of the financial sector in Rwanda, led by the Union des Banques
Populaires du Rwanda, a network of micro-finance institutions that served as micro-lenders
2
and micro-banks for nearly two-thirds of all depositors in the country. This institution controlled over
97% of the micro-finance sector in Rwanda, where the development of microfinance programs
gained a worldwide acceptance and popularity since 1980s in providing financial services to the
poor (UBPR, 2005).
Rwanda’s development policy is guided by Vision 2020. This vision statement, issued by the Min-
istry of Finance and Economic Planning in 2000, describes the Government’s aim to transform
Rwanda into a middle income country and an economic trade and communications hub by the year
2020. It also sets the stage for the financial sector reform process that led to the development of the
Financial sector Development Programme (FSDP) which was launched in 2006. The aim of the
FSDP is to develop a stable and sound financial sector for Rwanda. Its objectives include enhancing
access to, and affordability of, financial services and the development of financial institutions and
market incentives that would facilitate the entrenchment of a savings and long term investment cul-
ture amongst Rwandans (Irma, 2012).
National Dialogue meeting held in December 2008 recommended the creation of SACCO at the
level of each administrative sector, thus 416 SACCOs created in the line of Umurenge SACCOs
is a Government initiative aimed at increasing the accessibility of financial services to Rwandan
citizens. The concept of Umurenge saving and credit cooperatives (Umurenge SACCOs) was
based on an understanding that banks and other financial institution were more concentrate in ur-
ban areas while the majority of the Rwandan population lives in rural areas. Banks and financial
institution were also not able to provide financial service to the poor people. Establishing a
SACCO in every Umurenge was aimed as a result of bridging this gap it was to encourage the
Rwandan citizen to use financial institution to enable them to save and access loans (Irma, 2012).
3
1.2 The conceptual framework
The conceptual framework interlinks Independent variable and dependent variable and intervening
variable as depicted below: Independent variable: in this case independent variable represents the op-
portunities, services offered by SACCOs mainly credit and saving, the services and opportunities of-
fered by SACCOs include: saving product, loan/credit product, investment opportunities in form of
shares, and others and these services have impact on the members‟ social economic development.
The dependent variable this attempt to depict the likely impact on the members‟ SED, as result
of activities of the SACCOs highlighted above. It is expected that the availability of SACCOs, help
members of SACCOs in improving their standard of living and it is assumed that at household
level, SACCOs help individuals to increase their income, assets owned, investment, take children
to schools, buy health insurance, and improve housing, access to hygienic water. The intervening
Variables in the model Attempt to portray that other factors such as government policy (fiscal policy
and monetary policy), Global financial system, family size, geographical location and climate change
may also impact on the members‟ SED
4
Figure 1.2.1: The conceptual framework of the study.
Impact of Umurenge SACCOs service SED of Rwanda
(Explanatory variable) (Explained variable)
Disturbance term
SOURCE: Adapted from Abebe ( 2006).
During this study some aspects will be left out due to limited data available, therefore, the re-
searcher will adopt some elements of the above model, model above clearly identifies the three
types of variables that were focused on in the study. Independent variables (Umurenge SACCO
opment Indicator measured in terms of members’ level of income, living standard indicator
wealthy/assets owned; members’ health insurance, food) and; the disturbance term (intervening
variables such as family size, government programs, fiscal policy and the disturbance term can
have an effect on the dependent/independent variables as elucidated above.
5
SERVICES OFFERED BY Umurenge SACCOs
-CREDIT
-SAVING
SED OF HOUSEHOLDS
-Income, asset ownership, investments
-Basic need and services (health, education, food, water)
Family size, Government policy, fiscal policy and) global financial system; Geographical location and climate change membership durationNB: The disturbance term may well represent all those factors that affect SED but are not taken into account explicitly.
Microfinance are assumed to have positive impact on socioeconomic development of its
members however, this will be achieved only when members patronize the Microfinance
by effectively saving with, and borrowing from them as this leads to capital accumulation,
increased investment, employment, high incomes, in developing their standard of living and
hence improved quality of life of micro finances’ membership.
1.3 Problem statement
According to World bank (2012), Rwanda is one of developing country in the world with major-
ity of people have a middle income earns and poor this implies that they cannot afford financial
service offered by formal commercial institution, lack of financial services like credits and sav-
ings is the barrier to social economic development of individual in particular and the country in
general, to help the people who are not able to access commercial institutions services SACCOs
were created. In Rwanda,
However, there is an increasing institutional gap in the provision and fulfilling long-term
financial service demand in both, rural and urban areas. The operational experiences suggest that
different factors influence the efficiency of SACCOs in providing services to meet the members’
demand of improving their socio-economic well-being. Unfortunately these factors have not yet
been validated (Mwakagire, 2011).
This study, therefore, intends to examine what impact SACCOs have on members’ social
economic development? Therefore, this study is intended to evaluate whether USACCOs
contribute in changing standard of living of their members.
1.4 Research objectives
The objectives of the current study are divided into general objectives and specific objectives.
1.4.1 Main objective
The purpose of this study id to assess the impacts of Umurenge SACCO programme on
socioeconomic development in Rwanda
6
1.4.2 The Specific Objectives
This study aims specifically to:
1. Assess the evolution of the savings of Rurenge People SACCO from 2011 to 2015
2. To establish the difference between mean monthly income of Rurenge People SACCO
members before and after joining Sacco
3. The contribution of Rurenge People SACCO to socioeconomic life conditions/status of
its members
4. To identify challenges faced by Rurenge People SACCO members
1.5 The research questions
1. How have savings evolved in Rurenge People SACCO from 2011 to 2016?
2. Is there any difference between mean monthly income of Rurenge People SACCO mem-
bers before and after joining Sacco?
3. What are contributions of Rurenge People SACCO to socioeconomic life condition of it’s
of its Members
4. What are challenges faced by Rurenge People SACCO members?
1.6 The Research Hypothesis
In order to conduct impact assessment and to address the main objective of the study, this
particular study has four alternative hypotheses:
1. The saving in Rurenge People SACCO have been increasing from 2011 to 2015
2. The mean of monthly income of members after joining Rurenge People SACCO
is greater than the mean of monthly income before members joining Rurenge People
SACCO
3. USACCOs‟ services such as credit and saving may contribute to their members by helping
them to increase their standard of living.
4. A number of challenges arose as the Umurenge SACCO Program was implemented and
Researcher had to find out those challenges
7
1.7 The Scope of the Study
Geographically the study looked at Umurenge SACCO operating in NGOMA District, Rurenge
Sector, this study was also limited in terms of period since it will cover the period from 2011 to
2015. The researcher started with the year 2011 as SACCO in Rurenge have started operations
in 2011. On the other hand the researcher was limited to 2015 based on the availability of data
included in the SACCOs financial reports for the period ended the 31st December, 2015.
This study is quantitative and qualitative research where descriptive, correlation and linear
regression research design were used. Population of the study was composed by the beneficiaries
of Rurenge People SACCO operating in NGOMA District.
1.8 Justification of study
Normally, also the people of Rurenge sector in Rwanda have shown their ability to utilize financial
services through their participation in SACCO. The government of Rwanda is convinced that if
SACCOs are given adequate attention, they have potential impact to contribute considerably to SED
of country. Despite all these well-designed interventions to ensure SACCOs are fully and easily
accessible to the underserved areas of the country, it is apparent that there is still a lower level
of socio-economic development in urban and rural communities to an extent that they have not
managed to meet all the basic requirements. This study helped the researcher to improve the
knowledge and skills acquired in economics and the findings of this study showed the effect
of SACCOs on members‟ socio-economic development, further ways to mobilize saving and
improve members‟ economic status, and thereby the management will refer to this research in
making decisions for superior performance, final the study showed the importance of SACCOs
to members‟ economic wellbeing and this may motivate members to have positive attitudes
towards SACCOs. This study will also have benefits for academicians as it will add new
knowledge on existing literature, and will serve as a reference to other researchers who will be
interested in the same area.
8
CHAPTER TWO: LITERATURE REVIEW
This Chapter contains the existing literature on: saving and credit cooperative, Umurenge
SACCO program in Rwanda, impact of SACCOs on socioeconomic development of Rwanda
2.1 Definition of key word
This Chapter contains the existing literature on: saving and credit cooperative, Umurenge SACCO
program in Rwanda, socioeconomic development, the impact of SACCOs on socioeconomic
development and related past studies about the impact of SACCOs on members socioeconomic
development.
2.1.1 The concept of savings
According to FAO (1995), savings are resources which one decides to put aside for investment
purposes and not for luxury. What people save, avoiding consuming all their income, is called
"personal savings". These savings can remain on the bank accounts for future use or be actively
invested in houses, real estate, bonds, shares and other financial instruments.
A study by Efina (2011), found both savers and non-savers agreeing that personal savings plays
an important role in people‘s lives. Savings ensures the continuity of a business as it provides
fresh funds to grow the business. It helps in the attainment of set goals, and at the same time
encourages financial discipline. Savings also act as a means of insurance, so that emergencies
can be dealt with as they arise.
2.1.2 Determinants of personal savings
Piana (2003), has stated that a tri-lateral relationship among savings, consumption, and income is
the key determinant of the amount of personal savings. On the first side, given a certain income,
the decision to buy goods and services (consumption) negatively affects savings. Savings
passively adjust to consumption and income. They represent a resource slack, buffering shocks
in income and consumption desires. On a second side, savings can be actively planned in binding
agreements, like many pension schemes, with consumption passively adjusting to changes in
income. In other terms, savings can arise from a compulsory tendency of renouncing and
postponing even banal consumption (greediness) or, instead, they can be the result of sharply
rising income, with higher consumption taking place meanwhile.
9
By contrast, savings can be also the outcome of negative expectations about future income (as
when one is afraid of being dismissed) (Hey, family, hardships are coming - we need to reduce
our absolute level of consumption). Still another different case is the situation when a family,
after having spent a lot in a consumption boom, try to brake its tendencies before (or after!) they
become unsustainable (Piana, 2003).
According FAO (1995), notes the following as factors influencing personal savings in groups
such:
I. Savings depend on income. Theoretically, more income means more capacity to save.
But without a decision this may not be so.
ii. Saving consciousness/willingness is decided not by income, but by decision and forming a
habit. A person can have a little income, but if she has decided to save and form the habit, she
will have more savings than the person with a higher income who has not decided to save.
iii. · Savings depend on the determination/persistence of a person to get out of poverty.
iv. · Savings depend on factors such as family size, slack period in the agricultural season.
v. · By saving as a group, it is easier to make savings a habit. We seem to be helped by the fact
that there are others who are doing the same thing we do and that together we are able to do
things better.
2.1.3 Credit
Credit (from Latin credere translation. "to believe") is the trust which allows one party to pro-
vide money or resources to another party where that second party does not reimburse the first
party immediately (thereby generating a debt), but instead arranges either to repay or return those
resources (or other materials of equal value) at a later date The resources provided may be finan-
cial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit
encompasses any form of deferred payment (Caroline, 1999).
Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower;
credit does not necessarily require money. The credit concept can be applied in barter economies
10
as well, based on the direct exchange of goods and services. However, in modern societies,
credit is usually denominated by a union of account. Unlike money, credit itself cannot act as a
unit of account (AFI, 2004).
2.1.4 Cooperatives
A co-operative is an autonomous association of persons united voluntarily to meet their common
economic, social, and cultural needs and aspirations through a jointly owned and democratically
controlled enterprise, the equal members in rights and duties take part democratically in the man-
agement and the administration of the company of which they share the duties and the advan-
tages proportionally with the transactions of each member. All active members from the general
body and it elect the Board of Directors (RCA, 2013).
According to Herman (2012), the concept cooperative takes a quite several definitions depending
on schools of thought (cooperative enterprise, Commonwealth School and the Socialist Coopera-
tive School). Alike, underlines that there a proliferation of definitions of cooperatives and sug-
gests to maintain the most common provided by the International Cooperative Alliance (ICA) in
1998.
2.1.5 Saving and credit cooperatives societies
Saving and credit cooperative society is group of people who have a common bond live in the
same community or society save money together and lend it to one another at agreed interest
rate, time and condition. It is a democratic, unique member driven and self union (Beth, 1999).
2.1.6 Social
The term social refers to a characteristic of living organisms as applied to population's humans
and other animals. It always refers to the interaction of organisms with other organisms and to
their collective co-existence, irrespective of whether they are aware of it or not, and irrespective
of whether the interaction is voluntary or involuntary. The word "Social" derives from the Latin
word socii ("allies"), it is particularly derived from the Italian Socii states that historically allied
with the Roman Republic, though they famously rebelled against Rome in the Social War In the
absence of agreement about its meaning, the term "social" is used in many different senses and
regarded as a fuzzy concept, referring among other things (Mwelukilwa, 2001).
11
The Attitudes, orientations, or behaviors which take the interests, intentions, or needs of other
people into account (in contrast to anti-social behavior) have played some role in defining the
idea or the principle. For instance terms like social realism, social justice, social constructivism,
social psychology and social capital imply that there is some social process involved or consid-
ered a process that is not there in regular, "non-social" realism, justice, constructivism, psychol-
ogy, or capita (Scoones, 2009).
In contemporary society, "social" often refers to the redistributive policies of the government
which aim to apply resources in the public interest, for example, social security. Policy concerns
then include the problems of social exclusion and social cohesion. Here, "social" contrasts with
"private" and to the distinction between the public and the private (or privatized) spheres, where
ownership relations define access to resources and attention (DFID, 2001).
2.1.7 Socio-economics
According to Cassel (1932), Socioeconomic or social economics is an umbrella term with differ-
ent usages. 'Social economics' may refer broadly to the "use of economics in the study of society.
More narrowly, contemporary practice considers behavioral interactions of individuals and
groups through social capital and social "markets" (not excluding for example, sorting by mar-
riage) and the formation of social norms. In the latter, it studies the relation of economics to so-
cial values
2.1.8 Economic development
According Assimwe (2006), economic development is a sustained improvement in people's stan-
dard of living and welfare. It is a measure of quality of life of people. Economic development in-
volves an improvement in the availability in the basic needs, an increase in the per capita in-
come, an improvement in the variety of socio-economic indicators such as an increase in literacy
rate, higher life expectancy, and reduction in poverty level, improved health, more education and
others.
2.2 Theoretical foundation of SACCO and Socioeconomic development
The idea of savings and credit as it is known to day originated in German where Fredric W. Reif-
feisen, mayor of flamer’s field, organized a rural savings and credit in 1846. This was a year of
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economic crisis and famine. His aim was to assist the poor in an attempt to alleviate their finan-
cial problems. He asked them to cooperate by pooling together their meager savings and lending
to each other at a low rate of interest. The idea worked like magic, people worked hard and the
savings and credit society proved success (ACCOSCA, 1980).
In 1885, the idea was introduced to Australia and other countries of Europe where the institu-
tions were called people’s Bank. In 1892, France picked up the idea and was known as mutual
credit mutual.The idea was introduced In US the idea was known as credit union. Then, the idea
spread to Latin America and Asia (ibid). Credit unions idea was introduced to Africa, particu-
larly Ghana in 1955 by a White Fathers missionary called Rev. Fr. Macunttly. It was the first
credit union in Africa (ibid). In Rwanda, Savings and credit co- operatives started during the
early days of the colonial period, mainly by religious leaders (Dilenes, 1909).
SACCOS in Rwanda are ones of the institutions in the emerging micro-finance industry
dedicated to serve the financial needs of the marginalized poor people who cannot have access to
financial services of main stream existing commercial banks and other financial institutions.
They are regarded as the way of making the disadvantaged poor households participate in
sharing the national cake through involving them into productive activities which can be
properly devised using other financial services (Shafi, 2001).
2.2.1 Socio-economic development
Socioeconomic development theories can provide a context for understanding the dialectic
changes in the international institutions’ approaches to poverty alleviation. They are four eras of
development theory at the United Nations and its subsidiary organizations. First, what they term
“national state capitalism,” is characterized by a Keynesian approach, initiated by the Bretton
Woods organizations (IMF, World Bank), the goal of which was to create infrastructures for eco-
nomic growth. As post- policies, these began to change with a shift away from U.S. economy
hegemony in the 1960s. At this time the UNDP encouraged technical support to low-income
countries to further facilitate growth after it was realized that socioeconomic contribution alone
was not sufficient for human-capital impoverished communities to grow. International organiza-
tions began seeing the north-south economic divide, as well as becoming concerned about long-
term impacts of capitalism on the environment (Forsythe, 2007).
13
According to Forsythe (2007), more specific review is in order of these eras of development the-
ory one of the first models used to understand how states and regions started on the path to eco-
nomic growth was Rostow’s modernization theory. Analyses of European growth after WWII in-
dicated a fairly rapid and linear trajectory of economic growth that was built on a simplistic
model of saving and investment. According to Rostow’s analysis, modernization takes place in a
series of five stages:
1) Traditional societies eventually start to develop
2) Preconditions for growth, such as increased education, manufacturing, and other forms of
capital development.
3) Take-off stage occurs when the economic norms become established at micro, mezzo and
macro levels, which lead to
4) A drive to maturity characterized by economic diversification and increased standards of
living. The final stage,
5) Is characterized by mass consumption, which drives continued production, technological de-
velopment, and job growth.
Rostow assumed the validity of the primary economic model of growth at the time, (which was
the basis for the savings + investment = growth formula. While intuitively attractive (to the capi-
talist worldview) and empirically supported at the time, it assumed a linear growth based on the
two isolated variables of savings and investment. While such seemed to be the case in Europe af-
ter the world wars, Europe’s advantage over other regions (like Southeast Asia and Africa), is
that it already had a pre-existing infrastructure, and a population already educated in the skills
and norms necessary for technologized life. Among other factors, it ignores hegemonic conse-
quences of having military, political and economic power at a state/region’s disposal to procure
capital external to itself (Todaro, 2006).
2. 2.2 Socioeconomic development inductors
According to the Center for Sustainable Systems (2015), standards of living are difficult to
measure, but indicators of socioeconomic development are available. A basic measure, Gross
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Domestic Product (GDP) per capita, is the value of all goods and services produced within a
region over a given time period, averaged per person. A more advanced metric, the Human
Development Index (HDI), considers life expectancy, education, and GDP. The three highest
HDI-ranked countries in the world are Norway, Australia, and Switzerland.1 Many of the
indicators discussed below are used to measure progress towards the Millennium Development
Goals (MDGs), a set of targets agreed upon by United Nations member states as crucial for
global human progress
Well-being
Well-being should be considered one of the ultimate aims of society – alongside social justice
and ecological sustainability. By ‘well-being’ we mean people’s experience of their quality of
life. In this section, we aim to break this concept down into component parts; showing how even
‘soft’ outcomes like a change in a person’s well-being can be measured by a social enterprise
Skills Development
Many social enterprises seek to help people to increase their skills in specific areas, especially
those that are needed in the workplace – such as ‘hard’ skills (learning how to do a particular
job) or ‘soft’ skills ( those related to being part of a workplace, communicating with others, and
personal effectiveness). The end result may be increased attractiveness to an employer and an in-
crease in self-confidence and well-being. It can therefore be useful to try to capture both aspects
when you decide upon your indicators
Health
Social enterprises can have both direct and indirect effects on physical and mental health, as well
as on an individual’s private and social behaviors (e.g. substance abuse and preventive measure)
that affect their health
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2.3 Evolution of Umurenge SACCOs in Rwanda
The ultimate objective of Rwanda’s long term development plan is to transform the country into
a middle-income country and an economic trade, communication and financial hub by the year 2020.
Towards the achievement of this the Government of Rwanda has recently adopted an Economic
Development and Poverty Reduction Strategy (EDPRS), with Financial Sector Development as one
of its key components. (Irma, 2012).
Fin Scope is a research tool which was developed by Fin Mark Trust in an effort to address the need
for credible financial sector information to provide guidance in terms of how to respond to some of
the challenges policy makers, regulators and financial service providers are faced with. It provides a
holistic understanding of how individuals generate an income and how they manage their financial
lives. It also identifies the factors that drive financial behavior and those that prevent individuals
from using financial products and services. The first Fin Scope Rwanda survey was implemented in
2008. This survey showed that 79% of Rwandans, 18 years or older, were not using formal financial
institutions. This meant that a large amount of money remained in people‟s pockets, which not only
limited Rwandans‟ ability to build financial security, but also financial institutions‟ capacity to
distribute credit because of a lack of liquidity (Meehan, 1999).
2.3.1 Services provided by SACCOs
According to Ndangizi (2006), SACCOs offer various products to their members including
shares, savings, emergency loans, loans, life and loan insurance, fixed deposits, educational
savings, housing loans, funeral insurance benefits of SACCOs to members
SACCOs provide services to small and medium entrepreneurs.
Saving is a financial decision or action of an individual or legal entity to keep part of this of her
surplus funds for the future usage or for interest gains. In their endeavors to offer services to
small and medium entrepreneurs, SACCOs have established suitable and strategic saving facili-
ties and or micro insurance programs which can provide small and medium entrepreneurs the
means to reduce their vulnerability to risks associated with loans given to them.
Credit in financial terms means a loan.
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It is given to an individual or a legal entity, usually after some savings have been made. Loan re -
payment installments will include the principle amount and the Interest gained in an agreed pe-
riod of time. SACCOs can be used to overcome lack of productive capacity, low self confidence
among small and medium low income earners and hence enabling them to upgrade themselves.
There however some small problems associated with small loans or small enterprises funded by
loans. For example loans are at times not used efficiently such that borrowers fail to generate
profits from the loans, or even fail to break-even. They thus remain with the burden of repaying
the principle and interest part of the loan even if it did not generate profits. In this case, the
money to repay the loan must come from reduced consumption or it must be borrowed from
other sources usually on worse terms.
A major obstacle to generating profits from loans obtained from SACCOs is that as more people
are given loans to start new businesses most this leads to declining demand, and increases
competition increasing treats to profits.
2.4 Importance of FMI / SACCOs in Socioeconomic development
2.4.1 SACCOs increasing member’s income
SACCO‟s play an important role in lower income groups through increasing their assets via
establishing a credit relationship, establishing an enterprise, accessing working capital,
increasing income through business expansion, meeting housing credit needs and increasing
wealth through savings , among many advantages, there are four primary strengths of SACCO‟s
institutions i.e. savings mobilization, services for lifetime asset growth, mixed outreach, and full
services array of loan products. What distinguishes cooperatives from other non-bank financial
entities involved in SACCO‟s is the ability of mass number mobilization of small, voluntary,
savings account. These deposits can then be invested in rural production, housing, small scale
enterprises and small business loans (Branch, 1999).
According to Cora (1999), SACCOs today emphasizes scale and depth of outreach of financial
services to large numbers of the working poor through financially sustainable organizations.
They offer a saving-first, self-sustainable approach to SACCO‟s that has already successfully
met the needs of millions of low-income members around the world. Savings and credit
17
cooperative organizations encourage savings mobilization especially for the urban poor women.
It is known that savings are key to investment, without them, investments are very hard to be
realized.
The above is confirmed by Magil (1994), that Savings and Credit Cooperative institutions play a
great role in the provision of loan products. Members financing needs determine their credit
union loan products. The borrowers usually access these loans for such purposes like housing
construction, housing improvement, home purchase, small manufacturing, transportation
This entails that loan portfolios in RP SACCOS that can produce high yield on interest from
those loans. Savings and Credit Co-operative Societies (SACCOS) do mainly advances financial
services loans to their members for various economic and business enterprises. It is therefore
recommended that Rurenge people SACCOS should design a qualitative tailor- made loans or
credits products with special repayment terms, for more or successful performance financial
services provided is of different purposes and this may include the following areas.
Emergences (short-term) liquidity i.e. Personal loans, not affected existing long term loans.
Students’ education loans.
Home improvement loans.
Loans for raw material and stock purchases for small – scale business men:
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5.4.4 Mortgage of Savings Vis – a – Vis – Micro credits.
The recommended conditions for micro credits within RP SACCO are rigid and restrictive.
Generally it involves physical possession of collateral as among the main criteria for their
prospective members to qualify for loans, but individual members do not have security since
their family plots and buildings cannot be encumbered.
5.4.5 Marketing of Financial Services
In order for Rurenge People Savings and credit cooperatives (SACCO) to succeed in their
missions, members need timely and correct information because it is only on the basis of this
enlightenment that they can trust the management organs and in turn use the information to make
sound decisions as well as assisting in marketing their SACCO services to members and other
non members. To achieve this, Rurenge People SACCO is respectively need to look for a
concerted publicity efforts (marketing campaigns), which may include marketing new products
or re- launching old ones as to capture savings and protect them as well, this will encourage
many members to join and participate more and contribute to the growth of the Cooperatives
Societies, hence secure more financial services.
5.4.2 To the government of Rwanda
The study has found that UMURENGE SACCO has positively impacted their social economic
development. The government should therefore, subsidize loans for poor people to make the
loans more affordable for clients, assist SACCOS in saving mobilization to increase loanable
fund, assist SACCO in training members on loan utilization, saving culture and business
management, create more jobs to empower members through government expenditure in public
works, and subsidize SMEs and other small income generating activities.
5.4.3 Suggestion for further Researchers
During the study, the researcher did not investigated all relevant questions, therefore, the
researcher suggest relevant questions that could involve further research that surpasses the scope
of the current investigation. The following are areas that need further investigation: The access to
finance and performance of Small and Medium Enterprises, the Information Communication and
Technology and the performance of Umurenge SACCO.
37
REFERENCES
Abebe T (2006). Impact of microfinance on poverty Reduction in Ethiopia .Addis Ababa: Addis Ababa University press.
Asmelash K (2003).The Impact of Microfinance on the performance of Small and Medium Enterprises in Ethiopia. Addis Ababa: Addis Ababa University press.
Sharma S (2004). Strategic management of cooperative. Burlington: Universty of Vermont
Bailey T (2001). Applying international best practices to South Africa's SACCOs. Pretoria: De Mont fort University press.
Kafle T (2012). The impact of SACCO in Ofla Wered Tigray Region of Ethiopia: Kampala: Makelle University press.
Yasuhiko Y (2011). The Current Situation of Microfinance in Bangladesh .Dhaka. University of Bangladesh.press.
Nwobi T (2006). Service Co-operative and Management in Readings in Co-operative Economics and Management. Lagos: Computer Edge Publishers Enugu.
Tayebwa B (2007). Basic Economics, 4thed. Kampala: Makelele University press.
Hulme D and Mosley P (1996). Finance against Poverty on Effective Institutions for Lending to
Small Farmers and Micro-enterprises in Developing Countries. London: Rutledge press,
MINECOFIN (2006). National Policy of Microfinance in Rwanda. Kigali. MINECOFIN report.
Meehan F 1999.The Impact of Credit Provision by the Dedebit Savings and Credit Institution on
Economic Activity and Household Income in Tigray. Kampala: Makelele press.
Robinsons S (2001). The Microfinance Revolution Sustainable Finance for the Poor. Washington
D.C: World Bank report.
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APPENDIX 1: QUESTIONNAIRE
Dear respondent, my name is Jean d’Amour NKAKA; I am conducting a research on the impact
of SACCOs to the socio-economic development in Rurenge sector as a partial fulfillment of the
requirement for the award of a Bachelor’s Degree in science of economics at University of
Rwanda -College of Business and Economics.
The questionnaire items are about the study and I kindly request you to participate in responding
to the questions below to help me getting the information needed in my research. The
information given will be treated as confidential and the results of the study will be used for
academic research purposes only
SECTION ONE: BACKGROUND OF THE RESPONDENT
Please tick your personal information in the gaps below
Judge the services and role of Umurenge SACCOs to members (tick in one case only)
Excellent……… ………..Good………………….Poor……………….
b) If poor, explain briefly why? …………………………………………
SECTION THREE: CHALLENGES FACED BY RURENGE PEOPLE SACCO
MEMBER
Tick among of this challenges faced challenges faced by Rurenge People SACCO members?
Challenges Yes NO
Inadequate financial productGovernance weakness
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Outdated payment systemLimited menu of productHigh Interest rateLack of adequate infrastructure
APPENDIX 2
Interview guide with managers and chairman of the board of directors
1. What services does your Umurenge SACCO offers 2. What are requirements for a member to open an account in your SACCO? 3. How many clients have been registered in Rurenge People SACCO from 2011 to 2015? 4. How is evolution of saving in Rurenge from its creation till to 2015? 5. In your own observation how do you see the contribution of your SACCO to the members‟ welfare? 6. What are the challenges does your SACCO face that prevents you from satisfying your members?