An Assessment of Savings and Credit Groups on Poverty Reduction: A Case of Rural Households in North Unguja”,

Shauri, Yahya Mohammed (2014) An Assessment of Savings and Credit Groups on Poverty Reduction: A Case of Rural Households in North Unguja”,. Masters thesis, The Open University of Tanzania.

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Abstract

The study was conducted in North Unguja, Zanzibar focussing on informal rural groups, formed by the community members to reduce poverty at the household level. The study used a sample of 204 respondents, and used a cross sectional research design. The specific objectives of the study were to determine the uses of financial services provided by the groups, the impact of shares on total household income and challenges faced by the group members in the fight against poverty. Using two regression models, multiple linear and logistic regressions, the research found out that Saving and Credits Groups (SACGs) benefit the community in terms of increase in the levels of income. A larger number of households who got loans from informal institutions were able to competently manage their businesses. For instance, SACGs funds used for paying children fees, solving household expenses and replenishing other loans among other uses. Challenges faced by the households were types of investment to operate shortage of funds experienced by SACGs, poor infrastructure (road, network, and commercial activities) affecting communication. Others were the increased formal micro credit institutions, posing competitions to informal institutions. Taken into one, this proves that informal financial institutions play an important role in poverty reduction in the rural areas. Developing and improving, these groups can be an effective alternative to formal commercial banks. All in all, if run properly with structured coordination and seriousness these groups can act as good mechanisms for poverty reduction in the rural communities in Zanzibar.

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