An investigation into the financial sustainability of Islamic Saving, Credit Cooperative Society (SACCOS) in Tanzania

Abstract

Purpose: The purpose of this paper is to assess the financial sustainability of Islamic Saving Credit Corporative Society (SACCOS) and the factor(s) affecting their financial sustainability in the Tanzanian context. Design/methodology/approach: The data set used in this study comes from four SACCOS audited financial reports from the year 2010 to 2014 and from interviews with SACCOS's management. Findings: The study found that the IMFIs in Tanzania are not financially sustainable. Additionally, having responsible staff members, regular review of financial guidelines, education to members, cooperation between employees and management and staff training are found to be highly contributing factors towards SACCOS's financial sustainability. Moreover, the findings reveal that depending on the single source of income, i.e., charges on members contributed much in these SACCOS's not being financially sustainable. Research limitations/implications: Only two available registered Islamic SACCOS was used. Additionally, conventional SACCOS have been in service provision for a long time as compared to Islamic ones; hence, caution must be taken for comparison purposes. Practical implications: Based on these findings, the Islamic SACCOS needs to initiate productive projects that can enable them to have other income sources apart from charges on members. Originality/value: This study traces the financial trend of Islamic SACCOS in Tanzania since its establishment in 2010. Such trace enables Islamic SACCOS and other stakeholders to be aware on the financial progress of Islamic SACCOS and act accordingly to ensure sustainability.

A review on literature of Islamic microfinance from 2010-2020: lesson for practitioners and future directions

“… Said et al. (2019) examine the factors that contribute to sustainability (sustainability) IMFI in Tanzania , namely staff in charge, regular reviews of financial guidelines, member coaching, employee-management collaboration, and staff training.…”

“…In addition, accountability and collection processes affect the sustainability of IMFI's ( Bakar et al., 2019 ). However, the source of funds also affects the sustainability of IMFI's ( Said et al., 2019 ; Sukmana et al., 2020 ). It means that IMFI must find a strategy in obtaining new sources of funding for its sustainability.…”

“…The results also reveal Arab MFIs combine their social and financial performance and their solidarity in times of crisis. Said et al. (2019) Factors contributing to IMFI's sustainability in Tanzania include responsible staff members, regular reviews of financial guidelines, education of members, a collaboration between employees and management, and staff training.…”

Factors Influence Financial Sustainability Banking In Indonesia

“…Source: OJK 2019 Financial sustainability is a practice of measurement, disclosure, and accountability efforts of an organization's performance in achieving sustainable development goals to stakeholders both internal and external (Nasfi et al, 2019). The other said that financial sustainability is maintained or expand services within the organization, while developing resilience to occasional economic shocks in the short term (Zabolotnyy & Wasilewski, 2019); (Said et al, 2019); (Fauziah et al, 2020). One of the benefits of financial sustainability is control over the achievement of the work of a company so that it can be used as a tool for decision-making for investors and stakeholders.…”

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“…SACCOS have emerged to encourage financial inclusion through the provision of small loans, low-balance share accounts, and financial advice and counselling to low-income individuals who cannot access mainstream financial institutions (McKillop and Wilson, 2015). Government and development institutions use them to reach small entrepreneurs and marginalized households (Said et al, 2019). Their major role includes the mobilisation of funds in the form of equity and savings from their members.…”