This paper examined the pro…tability and …nancial sustainability of Saving and Credit Cooperatives (SACCOs) in Tanzania. The data set used in this study came from SACCOs' audited …nancial reports for the year 2011. Pro…tability was estimated using return on assets and …nan-cial sustainability was estimated using the ratio of total expenses to total revenue. Linear regression was used to investigate the determinants of …nancial sustainability. The results show that about 61% of our sample SACCOs are operationally sustainable and 51% of the total sample is both operationally and …nancially sustainable. The average sustainability score was 127%. On average, our results for pro…tability (measured by return on assets) are higher than some of the results reported for standard micro…-nance both in the region and globally. In terms of sustainability our results suggest a promising future for the …nancial cooperative business model as an alternative form of …nancing the poor. This study contributes in two ways. First it contributes towards the scanty empirical literature on the performance of saving and credit cooperatives in developing countries and Tanzania in particular. Second, it provides provocative evidences which appear to contradict earlier and more pessimistic accounts on members based micro…nance. It challenges the existing ontology about the potential of extending member-based micro…nance. We acknowledge that only SACCOs with audited …nancial statements were included in our study, thus the conclusion is limited to SACCOs with similar characteristics. Future work might consider extending the analysis to include SACCOs with non-audited …nancial statements.

The financial sector plays a critical role in economic growth and economic development (Beck & Levine 2004; Levine 1998). However, the impact of the financial sector on economic growth is realized if the sector is efficiently managed and well monitored. The corollary to this is that if the financial sector is not effectively monitored and regulated it may lead to economic crisis. As argued by Sufian (2011) the health of the financial sector is critical for the health of the economy at large. Given the relationship between the financial sector development and economic growth, knowledge about the efficiency of financial institutions and the underlying factors that influence efficiency is crucial. Such knowledge is necessary to provide insights for managers, regulators, policy makers and other stakeholders to formulate policies to improve the efficiency of the financial sector. Despite the importance of knowledge on health industry as articulated above, there is paucity of empirical literature on the performance of financial cooperatives in developing countries and Tanzania in particular. Thus, the objective of this paper is to empirically analyze the efficiency of Tanzanian Saving and Credit Cooperatives. Efficiency analysis was decomposed into three dimensions to explore possible sources of inefficiency. The first dimension was technical efficiency, which explored the overall effectiveness of transforming the productive inputs into desired outputs compared to the data-driven frontier of best practice. The second dimension was pure technical efficiency, which captured managerial efficiency in the intermediation process. The third dimension was scale efficiency, which explored whether firms were operating in an optimal scale of operation. The study used a sample of 103 audited financial statements during 2011. Data envelopment analysis was employed to explore the efficiency scores. The results show that average scores are 42%, 52% and 76% for technical, pure technical and scale efficiencies respectively. Since most of the inefficiencies are either technical or scale in nature, the study recommends increasing the operating scale for smaller firms. Firms operating beyond the optimal scale may need to downsize. Also the managers from technically inefficient firms should reduce the wastage of the productive resources by utilizing their inputs more efficiently.

The objective of this paper is to evaluate and benchmark the performance of Tanzanian Saving and Credit Cooperatives (SACCOs). Measuring the performance of these organizations is useful in helping them to monitor and control their performance and business processes and improve productivity and profitability. The study used secondary data from audited financial statements from 103 SACCOs. Technical efficiency was estimated using the data envelopment analysis approach and profitability was measured using return on assets. Then an efficiency-profitability matrix was employed to distinguish best performers from struggling SACCOs. This particular approach has been selected to account for multiple dimensions of performance measures. Using the top 25% as a cut-off for profitability and efficiency we found that only 12% of the firms were diagnosed as best performers (stars). The majority of the firms (61%) were classified under the low efficiency low profitability category. Fourteen SACCOs were highly profitable but had low efficiency scores, which demonstrate a potential for performance improvement by increasing their efficiency. Another group of 14 SACCOs were classified as potential candidates for divestiture because they had high efficiency scores but low profitability. Conclusively the performance of the industry in Tanzania needs a well-thought turnaround strategy to make it commercially viable. For the majority of the SACCO both profit-increasing and efficiencyincreasing strategies are required.

Abstract-Micro, Small and Medium Enterprises (MSMEs) play a significant role in income generation, job creation, poverty reduction and reducing income inequality. However, MSMEs from developing countries are exposed to several challenges in their business operations. Among others, access to external financing has been cited to be the most pressing challenge for MSMEs in developing economies and Tanzania in particular. Using a desk review methodology, this paper explores in detail the causes of the problem and mechanisms currently put in place to address these. Briefly, the paper delineates how the structural mismatch between mainstream funding requirements and unique characteristics of MSMEs has led to market failure. It further provides insights on innovative financing strategy, which may be a better alternative to circumvent the problem.

After independence, Tanzania adopted a unique language of instruction model (LoI)