Abstract:
There is continuous and increasing flow of funds from commercial banks and other formal financial institutions to the Savings and Credits Cooperative Societies (SACCoS) in Tanzania. This experience causes contradiction of whether it is a blessing or a threat to the SACCoS existence. This paper examines the linkage between sources of funds
and level of outreach as a performance indicator in SACCoS. We employ panel data which are obtained from the Ministry of Agriculture Food and Cooperatives for the period 2005-2012 and analysis is based on a panel data regression model. Findings indicate that both external and internal sources of funds are positive and significantly
related to outreach. However, the results indicate that external sources funds are becoming a central part of the SACCoS loan portfolio as compared to internal sources of funds. This is a threat to saving practices in SACCoS. We recommend that policy and rules governing SACCoS indicate clearly the model and level of linkage to maintain the
principles, structure and objectives of member-based microfinance.
