L ow partic ipation of small holder farmers in rural finance services. The case of Magugu paddy growers in Babati , Tanzania

Abstract

This study investigated the factors behind the low participation in rural finance by smallholder farmers at Magugu Village, with Mshikamano Savings and Credit Cooperative Society (SACCOS) being the central focus. The aim was to describe the modus operandi of the SACCOS; to establish its strengths and weaknesses, to assess the existing products and services provided with regard to the specific financial needs of the members and, to analyze the growth capacity of the SACCOS. The results showed that a lack of knowledge on the rules, regulations, policies and services and products offered by the SACCOS contributed to the low participation of farmers in rural finance in Magugu. Mshikamano SACCOS showed the ability to grow, and its products and services were found to be adequate to cater for the needs of Magugu paddy farmers. However, the institution does not have enough own resources to deliver its products and services without donor support. The SACCOS has a good loan recovery performance, good governance and strong partnership with other related organizations as measured against the USAID’s diligent tool assessment. Poor marketing of the products and services, inadequate technology, and poor structuring of the services provided are the major weaknesses of the SACCOS. Recommendations for a future sustainable SACCOS include the creation of a ‘saving culture’ among the members and, investment in modern financial operation technologies.