THE ROLE OF SAVING AND CREDIT COOPERATIVES IN IMPROVING

HOUSEHOLD INCOME: THE CASE FOR TEACHERS IN MUKONO DISTRICT.

BY

William Nnyanja

REG. NO. JAN16/MME/040U

NAME OF SUPERVISOR

MR BENJAMIN BYARUGABA.

A RESEARCH PROPOSAL SUBMITTED TO THE SCHOOL OF BUSINESS AND

MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

AWARD OF THE DEGREE OF MASTERS IN MONITORING AND EVALUATION OF

UGANDA TECHNOLOGY AND MANAGEMENT UNIVERSITY (UTAMU)

MAY 2017
 APPROVAL
This research proposal titled “THE ROLE OF SAVING AND CREDIT COOPERATIVES IN

IMPROVING HOUSEHOLD INCOME: THE CASE FOR TEACHERS IN MUKONO

DISTRICT” is being submitted to Uganda Technology and Management University(UTAMU)

school of business and management for examination with the approval of my university

supervisor

Submitted by:

Nnyanja William (student)

Signature: ………………………………………………..

Date: ……………………………………………………..

Approved by:

[Link] Benjamin (Supervisor)

Signature: ………………………………………………..

Date: ……………………………………………………..

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 TABLE OF CONTENTS

APPROVAL ................................................................................................................................... ii
TABLE OF CONTENTS................................................................................................................ 3
CHAPTER ONE ............................................................................................................................. 5
INTRODUCTION .......................................................................................................................... 5
1.1 INTRODUCTION ........................................................................................................................ 5
1.2 BACKGROUND TO THE STUDY. ............................................................................................ 6
1.2.1 HISTORICAL BACKGROUND .........................................................................................................6
1.2.2 THEORETICAL BACKGROUND ....................................................................................................6
1.2.3 CONCEPTUAL BACKGROUND .....................................................................................................7
1.2.4 CONTEXTUAL BACKGROUND .........................................................................................................7

1.3 STATEMENT OF THE PROBLEM ............................................................................................ 8

1.4 GENERAL OBJECTIVES OF THE STUDY .............................................................................. 9
1.5 SPECIFIC OBJECTIVES ............................................................................................................. 9
1.6 RESEARCH QUESTIONS........................................................................................................... 9
1.7 HYPOTHESES OF THE STUDY ................................................................................................ 9
1.8 SIGNIFICANCE OF THE STUDY ............................................................................................ 10
1.9 JUSTIFICATION OF THE STUDY .......................................................................................... 11
1.20 SCOPE OF THE STUDY ........................................................................................................... 11
1.20.1 Geographical scope ................................................................................................................. 11
1.20.2 Content scope .......................................................................................................................... 11
1.20.3 Time scope .............................................................................................................................. 12
1.21 OPERATIONAL DEFINATIONS ............................................................................................. 12
1.22 CONCEPTUAL FRAMWORK .................................................................................................. 13
CHAPTER TWO .......................................................................................................................... 14
LITERATURE REVIEW ............................................................................................................. 14
2.1 INTRODUCTION ...................................................................................................................... 14
2.2 THEORETICAL REVIEW ......................................................................................................... 14
2.3 CONCEPTUAL REVIEW .......................................................................................................... 15
2.4 CONTEXTUAL REVIEW ......................................................................................................... 18
2.5 EMPIRICAL STUDIES .............................................................................................................. 19
2.6 SYNTHESIS OF THE LITERATURE REVIEW ...................................................................... 20

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 2.7 CONCLUSION ........................................................................................................................... 24

CHAPTER THREE ...................................................................................................................... 25

METHODOLOGY ....................................................................................................................... 25
3.0 INTRODUCTION ...................................................................................................................... 25
3.1 RESEARCH DESIGN ................................................................................................................ 25
3.2 STUDY POPULATION ............................................................................................................. 26
3.3 DETERMINATION OF THE SAMPLE SIZE .......................................................................... 26
3.3 SAMPLING TECHNIQUES AND PROCEDURE .................................................................... 27
3.4 DATA COLLECTION METHODS ........................................................................................... 27
3.5 DATA COLLECTION INSTRUMENTS .................................................................................. 27
3.6 PRE-TESTING (Validity and reliability) ................................................................................... 27
3.7 PROCEDURE OF DATA COLLECTION................................................................................. 28
3.8 DATA ANALYSIS ..................................................................................................................... 28
3.9 DESCRIPTION OF VARRIABLES AND THEIR MEASUREMENTS ................................. 28
3.10 ETHICAL CONSIDERATIONS ................................................................................................ 29
REFERENCES ............................................................................................................................. 31
APPENDICES .............................................................................................................................. 34
Appendix 1: Questionnaire to evaluate the role of SACCOS in improving household income of
teachers in Mukono district ........................................................................................................... 34
Appendix 2: Work plan and Timeframe ....................................................................................... 37
Appendix 3: Budget ...................................................................................................................... 38

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 CHAPTER ONE
INTRODUCTION
1.1 INTRODUCTION

Mukono district is found in central Uganda and is one of the districts that make up the Buganda

region. Despite the fact that it is located in proposed metropolitan area, many people residing in

this district are faced with low income (Mukono, 2010). According to World Bank income is

pronounced as money that individuals earn for their well-being, and comprises many dimensions.

It includes having high purchasing power and the ability to acquire the basic goods and services

necessary for survival with dignity. Low household incomes also encompasses low levels of

health and education, poor access to clean water and sanitation, inadequate physical security,

lack of voice, and insufficient capacity and opportunity to better one’s life, and one of the

proposed interventions in reducing this challenge is the establishment of savings and credit

cooperatives (SACCOS). While many organisations and also the government of Uganda are

investing in these SACCOS, there is justification that SACCOS actually improve teacher’s

household incomes in particular in Mukono district. However an analysis was conducted to

examine the role played by cooperatives societies in improving household incomes in Uganda

using the case of the teachers in Mukono district different stake holders in improving incomes

such that government agencies like ministry of trade and commerce, local government and

agriculture will use as references. The research tends to determine the role of SACCOS in

improving household incomes using the case study for the teachers in Mukono district.

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1.2 BACKGROUND TO THE STUDY.

1.2.1 HISTORICAL BACKGROUND

The history of SACCOS in the world can be traced based on two origins of modern cooperation.

The first modern cooperation emerged in certain working class environments in European

industrial cities in 1840s, particularly in Great Britain and France. These pioneers invented

models of the consumer and labor cooperative that defend and promote the interest of working

class in the face of the social disasters endangered by the Industrial Revolution (Assenga, 2008).

In Uganda, savings and credit cooperatives (SACCOS) are financial intermediaries, channeling

savings into loans, provide saving opportunities for the teachers, especially in the rural areas.

Evidence shows that teachers are looking for opportunities to save their income in case of

emergencies or to be able to undertake larger investments in the future (CGAP, 2006). There is a

high potential to mobilize savings among low income people in Uganda.

1.2.2 THEORETICAL BACKGROUND

Two theories advanced by scholars regarding Microfinance include economic and psychological

theories. The economic theory treats microfinance institutions (MFIs) as infant industries, while

the psychological theory differentiates microfinance entrepreneurs from traditional money

lenders by portraying them as social consciousness driven people (Khandakar, Q., E. Danopoulos

and P. Constantine, 2004). Many societies have embraced microfinance based on economic

theory as a major strategic tool to combat the severe poverty, particularly in rural areas. This

stems mainly from the belief that providing small loans, savings facilities, insurance products,

money transfer services and skills training to poor people, and more especially women, could be

a way of providing opportunities to be self-reliant and play active roles in their households and

communities and the economy as a whole (Yunus, 2001). Also the SACCOS enabled them to no

longer depend on money lenders (usurers) and to find the credit necessary to modernize their
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agricultural operations. In African countries, the first experiences of savings and credit co-

operatives were to a large degree the work of foreign missionaries (Mwelukilwa J. S, 2001).

Many of the first savings and credit cooperatives emerged in the English- speaking countries,

primarily in Ghana 1955, Uganda 1946 and in Nigeria dates back to 1951-1953 (Mbwana, K.,

and J. Mwakujonga,, 2013). In Tanzania SACCOS emerged in 1954, Kenya in 1964 and Liberia

1965.

1.2.3 CONCEPTUAL BACKGROUND

SACCOs are among the financial services strategies to be implemented in this exercise. Services

provided by savings and credit cooperative organizations (SACCOs) and other major financial

institutions play a crucial role in improving the reach and access of financial services. It is

notable that the financial services and its assets contribute to GDP.

Provision of small loans, regular saving deposits which teachers will deposit in their SACCOs

and later SACCOs provide investment advisory services which in the long run will lead to

improved household income thereby enabling teachers to invest in both liquid assets and non-

liquid assets to enable them pay school fees, pay medical bills and improve on food security.

1.2.4 CONTEXTUAL BACKGROUND

In Uganda, savings and credit cooperatives (SACCOS) as financial intermediaries, channeling

savings into loans, provide saving opportunities for the people, especially in the rural areas, but

further improvements are necessary to make their services more efficient and sustainable.

The government of Uganda has subsidized the founding of new SACCOS all over the country.

Newly established SACCOS can apply for a start-up grant from the government owned apex-

institution Microfinance Support Centre (MSC). MSC also gives out interest free loans to the

SACCOS or other subsidized loans. In addition to grants and loans SACCOS can also receive

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operational support from the government. The government pays salaries and rent for the first two

years after the start-up. These support schemes are important elements of the government’s “One

SACCO per sub-county” initiative, which is a part of the wider program “Prosperity for All”

(StateHouse, 2007).

1.3 STATEMENT OF THE PROBLEM

Although many organisations and also the government of Uganda are investing in these

SACCOS initiatives like “One SACCO per sub-county” (StateHouse, 2007), there is justification

that SACCOS actually improve household income.

The role of SACCOS in improving household income is still poorly understood by natives of

Mukono and all other stakeholders in Uganda.

In order to improve household income, the ability of SACCOS in increasing households income

needed to be assessed.

Even if SACCOS are one of the interventions for relieving household income in rural areas like

Mukono, there is still inadequate information with regards to relationship between the

availability of SACCOS and household incomes in Mukono district. More so, to accelerate the

effectiveness and efficiency of SACCOS in Mukono district, there’s need to establish the role

and relationships between availability of SACCOS and improvement of household incomes in

Mukono district.

The study aims at providing information on the role played by SACCOS in improving house

hold income and on how they can be sustained in Mukono district.

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1.4 GENERAL OBJECTIVES OF THE STUDY

The objective of the study is to evaluate the role of selected Sacco’s in improving household

income in Mukono district. The research was explanatory because it tended to study the

relationship between SACCOS and improving house hold income for teachers in Mukono.

1.5 SPECIFIC OBJECTIVES

The specific objectives of the study were;

1. To examine how small loans provided by Sacco’s contribute to improved house hold

income for teachers in Mukono district.

2. To assess how regular small saving deposits accepted by Sacco’s contribute to house hold

income.

3. To determine if advisory services provided by Sacco’s contribute to improved house hold

income.

1.6 RESEARCH QUESTIONS

The research questions of the study were;

1. How do small loans provided by Sacco’s contribute to improved house hold income for

teachers in Mukono district?

2. How do regular small saving deposits accepted by Sacco’s contribute to increase house hold

income for teachers in Mukono?

3. Do advisory services provided by Sacco’s contribute to improved house hold income for

teachers in Mukono district?

1.7 HYPOTHESES OF THE STUDY

The hypotheses of the study is;

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 1. There is a direct positive contribution of small loans provided by Sacco’s and improve

house hold income for teachers in Mukono district.

2. There is a direct benefit for teachers who save their deposits in Sacco’s and this have

contributed to improved income for teachers.

3. Advisory services that Sacco’s provide to teachers have helped them to improve their

house hold income in Mukono district.

1.8 SIGNIFICANCE OF THE STUDY

This study is of importance both at local and national levels. Locally the study is of importance

for the practitioners in SACCOS and local governments to understand the relevance of SACCOS

in improving household income and whether they are attaining the anticipated objective. This is

to enable them to refocus in case the intended objectives are not being met.

The study also offered an opportunity for the practitioners to get feedback from teachers who are

participating and those not participating in SACCOS and this feedback includes suggestions on

what can be done better which can be used to create a positive change income levels.

At the national level, the study is of importance in assessing the relevance of SACCOS in

increasing and improving house hold income for teachers. This brings out practically what it

takes to establish and manage a successful SACCO and this can be integrated in national policies

and programmes for teachers in other areas in Uganda.

Participating in SACCOS can only be successful when the possible challenges and how to

overcome them are known. In determining the role of SACCOs in increasing household income

for teachers, circumstances can also provide useful information for improving and promoting the

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development of SACCOS in rural areas such as Mukono district. Although the examples of

SACCOS identified around Mukono serve as a starting point for replication, it was deemed

necessary to launch a study to examine the role of SACCOS in improving house hold income for

teachers.

Further more information and recommendations that will be been generated from the study can

be used by recognized NGOs and lower local governments to promote the participation of

SACCOS for improved incomes of the communities in rural areas.

1.9 JUSTIFICATION OF THE STUDY

SACCOS are expected to increase as more teachers become aware of their benefits. The study

provides information on the role played by SACCOS in improving house hold income and on

how they can be sustained in Mukono district and in Uganda at large. Since promoting

appropriate savings and credit cooperatives is a strategy to improve house hold income for

teachers in Mukono district.

1.20 SCOPE OF THE STUDY

1.20.1 Geographical scope

The study will cover the whole of Mukono district focusing on the teachers participating in

SACCOS and those who are not participating in the last one year. Effort will be made to locate

them wherever they are operating within the district.

1.20.2 Content scope

In this study technical competence of the respondents will be investigated to find out whether

participation in and presence of SACCOS in their areas has helped teachers in improving

household income. In addition, the current engagements will be explored to find out whether

they are opportunities and challenges and if they have managed to set up their own solutions

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locally. Lastly, inquiries will be made on what is thought to be the missing link and what

corrective measures should be taken to ensure that better SACCO methodologies are applied in

improving household income for teachers and how they can be sustained .

1.20.3 Time scope

The study will consider a period of the last 12 months. That is to say from February 2016 to

February 2017. This is the time the researcher deems suitable for collecting data with the regards

to the objectives of the study and also finishing the research on time with regards to the

University timeline and convenient for the researcher to achieve the award in time.

1.21 OPERATIONAL DEFINATIONS

SACCOS: These are savings and credit cooperative organizations which are initiated by both

governments and private individuals or firms in order to improve the welfare and income of the

general public in which they are located.

TEACHERS; these are skilled individuals who impart knowledge from nursery, primary, to

secondary education giving instruction to the young generation.

HOUSEHOLD INCOME: This is the amount of wealth valid in both assets and non-asset of a

given homestead.

SACCO PARTICIPANTS: These are the members who are registered within a given saving and

credit scheme.

CHALLENGES AND OPPORTUNITES: These are the hindrances and benefits of SACCOS

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1.22 CONCEPTUAL FRAMWORK

INDEPENDENT VARIABLE

Provision of small
loans to teachers

DEPENDENT VARIABLE
Regular saving
deposit to SACCOs Improved house hold income
§ Investment in assets

§ Paying school fees
§ Paying medical bills
§ Food security

Provision of
investment advisory
services to teachers

Source: (Nassazi, 2013) and modified by the researcher.

In the conceptual framework as displayed in Figure above, Provision of small loans to teachers,

regular savings deposits to SACCOs and provision of investments advisory services to teachers ,

are the independent variables which are hypothesized to influence improvement of teachers’

household incomes, the dependent variable.

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 CHAPTER TWO
LITERATURE REVIEW

2.1 INTRODUCTION

This chapter focused on the relevant literature related to the role of savings and credit

cooperatives in improving household incomes. Under this chapter various write ups are reviewed

and analyzed to establish the contributions therein as well as getting backup literature related to

the of SACCOs in improving household incomes. The review based on the outline below:

- Theoretical review

- Conceptual review

- Empirical studies

- Synthesis of the literature review

2.2 THEORETICAL REVIEW

The theoretical relationship between access to financial services and growth is not

straightforward. According to related literature, there are several mechanisms through which the

two may be related – and this also varies depending on which financial services we are talking

about. According to growth theory (e.g. (Solow, 1956), and (Romer, 1990)), growth depends on

the stock of human and physical capital in the economy, as well as technological progress.

Investment at the level of the firm or the individual can contribute to all of these things, and thus

plays an important role in facilitating long run economic growth.

According to the classical Ricardian theory of production and growth, increasing either of the

factors of production in this case capital (Small loans), while holding the other constant and

assuming no technological change, will increase output, but at a diminishing rate (Bjork, 1999).

The theory relates to the effect of access to credit on savings (the capital in this case) in which

14 | P a g e
the level of savings is an important determinant of the overall level of investment in an economy,

and thus is directly linked to growth both at household level and national level.

Given that savings may be considered less of a necessity when credit is available, (Japelli T and

Pagano M, 1994) argue that alleviating credit constraints on households reduces the savings rate,

with negative repercussions for economic growth, and they provide empirical evidence to

support this argument, based on a sample of middle and high income countries. (Beck, 2008)

also provide empirical evidence showing that while access to credit for enterprises does increase

growth in GDP per capita, increasing access to credit for households does not have a positive

impact on growth.

The main hypothesis, upon which this study is based, is the idea that access to financial services

facilitates greater household level investment in productivity-enhancing assets, and that this

increases household income in future. Hence the study will be based on the classical Ricardian

theory of production and growth.

2.3 CONCEPTUAL REVIEW

SACCOS are member-based institutions, that intermediate savings into loans. SACCOS are

usually rather small, independent financial institutions. The business model of most SACCOS is

to collect savings from their members and to intermediate them into loans. This enables the rural

and poor population to deposit savings as well as to take loans. Only members can use the

services of SACCOS as the Ugandan law prohibits SACCOS to take savings or lent out money

to the public. The members can participate in annual general meetings and elect a board of

directors.

Small loans are believed to bring significant improvement in the lives of the active poor by

increasing their productive capacity. Credit enables the poor to boost their businesses, agriculture

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production and able to meet the household daily needs. In developing world like Uganda,

millions of people are suffering from poverty and its crippling effects (Lotter, 1998). One of the

major barriers to escaping poverty is the lack of sufficient access to credit by the poor

(Ledgerwood, 2002). As a result, the poor especially in rural areas adopt mitigation and survival

strategies as a way of coping with the hemorrhage of poverty (Songsore, 1992). He further

argues that generally credit plays a crucial role in the expansion and development of productive

forces. It provides adequate savings and credit facilities to individual households. In this case,

efficient financial system is consequently assumed to have a considerable positive effect; on

increasing welfare and stimulating household economic activities. Credit enables peasants to

expand and develop income generating activities, and supporting payment of other necessities

like food security, education, and water and health charges. In addition, (Johnson, 1997) have

demonstrated that availability of credit for micro enterprises can have positive effects on the

individual income and that of the household. Thus, access to financial services play an important

role in the fight against poverty.

Worth noting is that, although micro-credit is useful in poverty alleviation, it is only useful in

certain situations. Some poor people since they are voiceless and property less exclude

themselves from borrowing small loans, as they do not have stable income, and view access to

credit as further pushing them into debts and poverty since they cannot sufficiently service the

loan. This presents a paradox where the poor are in dire need for credit to exit poverty, but at the

same time have a fear of not being able to repay in time, and this drawn the poor in more poverty

as they have to sell off some few assets they possess (if any) to service the loan. For example, a

study of the impact of microfinance on rural household in the Philippines indicated that the

impact is regressive, that it is negative or insignificant for the poorer households and positive for

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the richer households (Kondo, 1992). This indicates that among the poorer borrowers, the cost of

and availability of program loans appear to be insufficient to stimulate the poor to select more

productive activities, which will not only cover the cost of borrowing but also earn them some

profit.

Evidence shows that people are looking for opportunities to save their surplus income in case of

emergencies or to be able to undertake larger investments in the future without having to take a

loan (CGAP, 2006). There is a high potential to mobilize savings among low income people in

Uganda. However, people used to mostly rely on informal – often insecure – ways of saving,

such as saving circles or hiding money under the mattress (Wright, 2011). Providing people with

secure opportunities to save can minimize the losses, which arise from the insecure ways of

savings, and therefore empower them financially. Furthermore, savings can help to access loans

from financial institutions. Financial institutions are more likely to give loans to customers that

have a history of saving within their institution. However, small savings have been neglected by

the MFIs in the past, as other funding sources were preferred (CGAP, 2010b)

According to (Mwelukilwa J. S, 2001) Microfinance has been centered on providing loans to

financially excluded people in the past, while savings have been neglected. In the last years this

approach has been criticized, fostered by a microfinance crisis in India and other low-income

countries (CGAP, 2010a). Many experts argue that it would be advisable for the people to save

first and then invest the money (CGAP, 2006). The provision of save and reliable saving

opportunities is of central importance for both the poor and the microfinance institutions (MFIs).

In Uganda, savings and credit cooperatives (SACCOS) as financial intermediaries, channeling

savings into loans, provide saving opportunities for the people, especially in the rural areas, but

further improvements are necessary to make their services more efficient and sustainable.

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The government of Uganda has subsidized the founding of new SACCOS all over the country.

Newly established SACCOS can apply for a start-up grant from the government owned apex-

institution Microfinance Support Centre (MSC). MSC also gives out interest free loans to the

SACCOS or other subsidized loans. In addition to grants and loans SACCOS can also receive

operational support from the government. The government pays salaries and rent for the first two

years after the start-up. These support schemes are important elements of the government’s “One

SACCO per sub-county” initiative, which is a part of the wider program “Prosperity for All”

(StateHouse, 2007). Without sufficient savings available for emergencies such as an illness or

injury, or to fund major purchases and investments, people often resort to borrowing from

moneylenders charging high interest rates or they may simply go without.

2.4 CONTEXTUAL REVIEW

In Uganda, savings and credit cooperatives (SACCOS) as financial intermediaries, channeling

savings into loans, provide saving opportunities for the people, especially in the rural areas, but

further improvements are necessary to make their services more efficient and sustainable.

The government of Uganda has subsidized the founding of new SACCOS all over the country.

Newly established SACCOS can apply for a start-up grant from the government owned apex-

institution Microfinance Support Centre (MSC). MSC also gives out interest free loans to the

SACCOS or other subsidized loans. In addition to grants and loans SACCOS can also receive

operational support from the government. The government pays salaries and rent for the first two

years after the start-up. These support schemes are important elements of the government’s “One

SACCO per sub-county” initiative, which is a part of the wider program “Prosperity for All”

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2.5 EMPIRICAL STUDIES

Saving and credit was invented in Bangladesh during the famine of 1974, when Professor Yunus

studied the lives of the poor entrepreneurs in Bangladesh. Yunus began by loaning to groups of

women an equivalent of $30 to forty two basket weavers to help them purchase bamboo. Upon

the advice of banks and government, he carried on giving out micro-loans and in 1983 formed

the Grameen Bank. The program proved that small loans could not only quickly improve lives of

poor people, but were paid back with interest and on time. By 1997, there were 1.8 million poor

borrowers in 22,000 out of 68,000 villages in Bangladesh with 830 million credits worth every

month (Yunus M. B., 2004).

A study carried out by the World Bank’s sustainable banking for the poor with the title of the

project “Worldwide Inventory of Microfinance Institutions” found that female programs are

group based with the characteristic of having small loan size and short loan term (Paxton, 1996).

(Gine, 2004) show that, based on a general equilibrium model of the economy, the expansion of

access to the financial sector has significantly raised Thailand's growth rate. Conversely, (Micro,

(2009).) Emphasize the efficiency and productivity losses associated with preferential access to

finance by the better off, and suggest a potential first-order effect of access on investment and

growth. Finally, (Burgess, 2005) find a strong positive effect on rural poverty, using a "natural

experiment" of new branching regulations in India that incentivized banks to expand into

underserved areas. However, the high cost of this expansion policy outweighed the aggregate

benefits. This result suggests large potential benefits from technology-enabled, lower-cost branch

expansion.

Income improvement involves the strategic use of tools such as education, economic

development, health and income redistribution to improve the livelihoods of by governments and

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internationally approved organizations. They also aim at removing social and legal barriers to

income growth among the people.

There has been limited research on the impact of savings on the lives of the poor, but what is

there finds evidence that savings accounts help the poor save up and invest in their future as well

as withstand emergency needs for cash without depleting their other assets, such as business

inventory. One randomized field study found that women given access to savings accounts were

investing 45 percent more in their businesses (mostly in inventory) than were women who were

not given accounts, had 27 percent to 40 percent higher daily expenditures, and were less prone

to sell business assets to deal with health emergencies (Jake Kendall, 2010).

2.6 SYNTHESIS OF THE LITERATURE REVIEW

According to the classical Ricardian theory of production and growth that relates to the effect

of access to credit on savings (the capital in this case) , the level of savings is an important

determinant of the overall level of investment in an economy, and thus is directly linked to

growth both at household level and national level.

SACCOS offer only one type of loan a 3:1 or 5:1 multiple of a member’s savings balance, with

no variations to risk levels (borrower repayment capacity, type of activity financed etc.). These

types of loans are not flexible enough to meet member’s diverse credit needs, including short-

term working capital for micro entrepreneurs and agricultural inputs for small-holder farmers.

Investment is the active redirection of resources by an economic entity (e.g. an individual or a

firm) from being consumed today, to creating benefits in the future. The hope is that the

investment will yield greater benefits in future than would be yielded by consuming those

resources today. The investment may take the form of savings, of a financial instrument (e.g. an

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equity investment), of physical capital (e.g. a new tool or piece of equipment that improves

productivity such as agricultural machinery), or of human capital (e.g. education).

(Micro, (2009).) identifies that the government of Uganda has set aside the equivalent of USD

133.7 million for subsidized loans to individuals and small businesses through the government-

owned Microfinance Support Center (MSC) to Savings and Credit Cooperative Societies

(SACCOS).

In Uganda the position of SACCOS has been heightened by the launch of the government

“Bonna Bagaggawale” (“Prosperity for All”) program intended among other interventions to

address inadequate access to financial services. This program is designed to use a SACCO-per

sub-county strategy to channel both agricultural and commercial loans at below market rates to

borrowers.

In Kenya, 44% of those surveyed had at some point used savings to undertake productivity-

enhancing investment, and 24% had used a loan for this purpose. Education was the most

common form of investment undertaken in Kenya, whereas in Tanzania it was starting a business

(Karen Ellis, 2010).

The demographic breakdown showed that people borrow and save for a range of investment

purposes in both countries, even in the poorest groups. As expected, rural inhabitants save and

borrow more for agricultural investments, while urban inhabitants tend to save and borrow more

for other purposes, such as starting a business. Individuals with a better education are more likely

to borrow, save and invest than those with less education. In Kenya men and women exhibit very

similar patterns of behavior in terms of saving and borrowing for investment purposes, while in

Tanzania men are more likely to save or borrow to invest than women (Karen Ellis, 2010)

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Despite the recognition of SACCOS in the microfinance sector, their biggest challenge remains

their governance mechanisms. (Labie, 2008) highlight the major challenges to corporate

governance in SACCOS as existence of volunteer board of directors, Limited individual

influence despite the “one person, one vote” decision-making system and Volunteer staff

Although the financial results of most of the SACCOS surveyed do not seem very alarming,

several issues might put their financial sustainability at risk in the future. Many SACCOS,

especially smaller ones, are over-dependent on subsidization. The quality of the SACCOS‟ loan

portfolio, a main indicator for the capability of lending institutions, seems to be another critical

point that threatens the viability of many SACCOS. Due to the enormous demand for financial

products in rural areas (in particular loan products), the SACCO sector as a whole is growing

considerably. However, the growth pattern of many smaller SACCOS seems uneven since they

have difficulties to attract savings deposits from their members.

Loans are insured, so if a member dies, the outstanding balance is settled. However, it is not the

practice across board.

Besides; other MFIs also do insure loans for their clients. Savings are mobilized. It also

encourages regular social interaction between members (Kabuga, 1995).

Some banks are unwilling to lend to the women because their access to property is limited and

they also have fewer sources of collateral security. Based on experience, women generally are

very responsible and are affected by social forces. When the income of women is increased, the

effect is noticed throughout the household and to the community than when that same amount is

increased to a man. They also have a high repayment loan and savings rate than their male

counterparts (Ledgerwood J. , 1999).

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While SACCOs and credit unions have distinct advantages to banks regarding access, they face

challenges which banks would not normally encounter.

SACCOS are usually governed by a volunteer board of directors elected by the membership;

small, young SACCOS are also often staffed entirely by volunteers. As they grow and perform

more risky operations they require more professional managers, it is at this point problems occur

when volunteer board members continue to make operational decisions after professional

managers have been recruited when they should be focusing on the monitoring of operations.

Competent external regulation and supervision can identify, avoid and resolve many common

problems experienced by SACCOS and credit unions. In many countries SACCOS are

supervised by the same government agency that is responsible for all kinds of non-financial

cooperatives, including agricultural and marketing; such agencies do not have the financial skills

or political independence needed to oversee financial intermediaries effectively.

In Latin America, more bank superintendence are adding supervision departments for SACCOS

and in West Africa, central banks have designated a department, such as microfinance, to

supervise SACCOS. Delegated supervision to an outside body only works if that body is not

controlled by the SACCOS being supervised, but requires an understanding of their unique risk

profile and supervision must be adapted accordingly (CGAP, 2010a)

Donors have channeled funds through SACCOS to target specific types of clients. Experience

has shown that this practice tends to harm participating SACCOS external funds decrease the

incentive to mobilize deposits, skew incentives toward net borrowers, and are not managed as

carefully as the members’ own money. External funding does have the advantage of being

resources for longer-term loans, but it should be limited in relations to members’ deposits and the

internal capacity for managing a larger loan portfolio. In Benin, FECECAM, a federation of

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cooperatives, suffered loan quality and asset deterioration when donor-driven credit increased

and was channeled through cooperatives that did not meet prudential standards.

2.7 CONCLUSION

Generally, the above literature exhibits several knowledge gaps and several questions are not

adequately answered by already existing literature and studies: These include; whether small

loans provided by Sacco’s, regular small saving deposits accepted by Sacco’s and advisory

services provided by Sacco’s contribute to improved house hold income especially for teachers

in Mukono district.

Where attempts are made, it is limited by time and geographic scope. However primary data will

be used to examine the role played by SACCOs to improve household income for teachers in

Mukono district.

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 CHAPTER THREE
METHODOLOGY
3.0 INTRODUCTION

The chapter lays out the structural that will guide the study and it included research design,

description of the population, the methods used in determining the sample size, the sampling

techniques and procedures, data collection methods and instruments, data analysis methods, a

description of the variables and their measurements.

3.1 RESEARCH DESIGN

According to (MOUTON, 1996: )research design is a plan of how the researcher plans to

execute the formulated research problem. It is a set of guidelines and instructions to be followed

in addressing the research.

The design that will be in the study was exploratory research which involved both cross sectional

survey methods and quantitative methods. A cross-sectional study is a type of observational

study that analyses data collected from a population, or a representative subset, at a specific point

in time (Schmidt & Kohlmann, 2008) and quantitative research is the systematic empirical

investigation of observable phenomena via statistical, mathematical or computational techniques,

therefore in this case a group of teachers with deposit savings and their amount saved in

SACCOs is to be investigated. The study will involve focusing on two variables that is

availability of an active SACCO and improved household income for the participating member

teachers in Mukono district. This design will be suitable because it will enable to collect the

needed information on several predetermined variables at a single point in time and from a cross-

section of a fairly uniform cohort group.

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It will also be easy to administer and its responses generalized to other members of the

population under study and other similar populations.

This design will also be timesaving and gave room to understand more of the whole research

problem.

3.2 STUDY POPULATION

The study population will include the selected SACCOs, schools and teacher members in

Mukono district. The SACCOs included; Mukono-Kayunga teachers SACCO, Seroma teachers

savings scheme, Seta parents teachers saving scheme, and Mukono teachers SACCO.

3.3 DETERMINATION OF THE SAMPLE SIZE

The number of SACCOs and population of the teacher members with savings deposits in

SACCOs will be got from the district commercial officer. And assuming that the total number of

SACCOs got from the DCO was S with a membership of N members, Therefore the total

population according the information available the target population of this study was SN

persons.

The sample in this study will include a simple random sampling and n individuals were

randomly drawn from the target population.

To arrive at the above sample size, we shall use the formula

Where; n= sample size

N=total population

a= error factor (0.05)2 (Yamane, 1967)

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3.3 SAMPLING TECHNIQUES AND PROCEDURE

The sampling technique and procedure to be used will base on simple random sampling

principles where individuals will be randomly sampled from the target population. The

respondents will be randomly selected by use of probabilistic sampling where every individual

has an equal chance of being selected

3.4 DATA COLLECTION METHODS

A survey will be carried out and the data collection techniques will include the following; face-

to-face interview, key informants interview, survey and observations. These will be carried out

using tools such as an interview guide and a questionnaire whereby a questionnaire will be

administered to the respondents with semi structured questions with regards to the subject matter

3.5 DATA COLLECTION INSTRUMENTS

The data collection instruments will include; interview guides and questionnaires, Key

informants’ guides, group discussion topics, observation checklists, and the researcher used them

for the purpose of explaining to the respondents the reason for the research and receive

appropriate and reliable information from the respondents.

3.6 PRE-TESTING (Validity and reliability)

To ensure validity and reliability of the research instrument, the researcher will ensure that the

Questions that are asked are in conformity with the research objectives of the study and a pilot

test of the research instrument will be conducted and a calculation using office Microsoft excel

will be computed for question reliability and validity assessment

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3.7 PROCEDURE OF DATA COLLECTION

The researcher will collect the data by administering a semi structured questionnaire to the

respondent and recording their responses, an interview guide was also used during the face-to-

face interview of key informants.

3.8 DATA ANALYSIS

Responses to questions in the questionnaires will first be checked for errors and coded. This will

involve allocating numerical values to the answers given by respondents for the ease of data

entry and analysis (Williams, 2003).

Descriptive data will be summarized into frequencies and histograms. A computer software

package SPSS was used for the analysis of the data concerning the relationship between Simple

savings deposits, simple loans got from SACCOs and income levels of teachers participating in

SACCOS.

3.9 DESCRIPTION OF VARRIABLES AND THEIR MEASUREMENTS

Provision of small loans to teachers: This is defined as a short-term unsecured loan, regardless

of whether repayment of loans is linked to a borrower's income. The loans are also sometimes

referred to as small loans since they attract a small interest rate. These loans rely on the teacher

having previous payroll and employment records. This is measured as the amount of money that

has been advanced to individual teacher members as loans at that time.

Regular saving deposit to SACCOs: Regular savings are the amounts of money that the

individual teacher member deposits at the SACCO. These already have accounts which offer

small interest rates. With a regular savings account, a member commits to paying in a certain

amount each month. In return, the SACCO gives him/her an interest rate higher than on the

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ordinary savings. This was measured as the amount of money that has been deposited by the

teacher member to the SACCO as per at that time.

Provision of investment advisory services to teachers: These are services offered by any

person or group/company that makes investment recommendations or conducts securities

analysis in return for a fee, whether through direct management of client assets or via written

documents or publications. This was measured as the number of teacher members who have ever

received any kind of investment advisory services.

Improved household income: Income is consumption and savings opportunity gained by an

entity within a specified timeframe, which is generally expressed in monetary terms. However,

for households and individuals, it is the sum of all the wages, salaries, profits and interests

payments received in a given period of time. Increase in this is what we refer to as improved

household incomes. This will be measured according to the amount of assets accumulated by the

teachers in a given period of time.

3.10 ETHICAL CONSIDERATIONS

The researcher will adhere to ethical norms in research because norms promote the aims of

research, such as knowledge, truth, and avoidance of error. The ethics framework is essential

focused on observing, voluntary informed consent of the participants. Participants’ informed

consent will be obtained through better introduction of the researcher to respondents/superiors

who clearly specified what the research involves, including clearly laid down procedures and

explained the ways in which their confidentiality was assured. The respondent’s names will be

withheld to ensure anonymity and confidentiality in terms of any future prospects and also

informed that data will be shared, results, ideas, tools, resources. Respect for intellectual

property will be adhered to and no use of unpublished data, methods, or results without

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permission. Proper acknowledgement or credit for all contributions to research will be prioritized

to avoid plagiarism.

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 REFERENCES

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Slowdown of U.S.. Economic Growth, 2, 67.

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[Link]

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of Economics, Vol. 109, 83-109.

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Future. Uganda Co-operative Alliance.

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household investment, . London : Overseas Development Institute ,111 Westminster
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Labie, M. (2008). Corporate Governance in Microfinance: Credit Unions, Center for European
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International Conference held at Uganda Martyr‟s University, Nkozi. Kampala: UMU
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Studies.

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Mukono, d. (2010). District status report. Mukono: Mukono District Local Government.

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APPENDICES

Appendix 1: Questionnaire to evaluate the role of SACCOS in improving household

income of teachers in Mukono district
I am a student of UGANDA TECHNOLOGY AND MANAGEMENT UNIVERSITY

(UTAMU), School of Business and Management carrying out research on the role played by

SACCOS in improving household income for teachers in Mukono district. The research is meant

for academic purposes only. The information will be treated with utmost confidentiality. May

you please kindly respond to this questionnaire designed to get information on the peoples’

views on the role of SACCOS in in improving household income of teachers in Mukono district

Parish ……………………………………………………………………………………………….
Village………………………………………………………………………………………………
Are you a member in the SACCO? (Tick one)
Yes…………………………………...

a) Background information:
Sex of the respondent ……………………………………………………………………................
Name of school …………………………………………………………………………………….
Sub-county …………………………………………………………………………………………
No…………………………………...
If yes:
When did you join the SACCO?
…………………………....................................................................................................................
If no, why didn’t you join the SACCO?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
Savings
How much money have you saved with the in the last one year?

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………………………………………………………………………………………………………
………………………………………………………………………………………………………
Has the money you saved in the last one year been of any help to you?
Yes: ………………………………………………………………………………………………...
No: ………………………………………………………………………………………………….
If yes how:
………………………………………………………………………………………………………
………………………………………………………………………………………………...........
If no, why?
………………………………………………………………………………………………………
………………………………………………………………………………………………...........
Loans
Have you received any loan from the SACCO in the last one year?
Yes ………………………………….
No …………………………………..
If yes, how much? …………………………………………………………………………………
If no, why? …………………………………………………………………………………………
How has the loan received from the SACCO been of help to you
………………………………………………………………………………………………………
………………………………………………………………………………………………………
Advisory services provided by SACCOs
Have you received any advisory services from the SACCO since you joined?
Yes ………………………………….
No …………………………………..
If yes, which advice? (Tick appropriately)
Investment
Financial management
Others (mention)….………………………………………………………………………………
Since you joined the SACCO, has there been any improvement in your lifestyle:

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Yes ………………………..
No …………………………
If yes, how? ………………………………………………………………………………………
What do you think are the benefits of participating in the SACCO?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
What problems do you think are affecting your SACCO?
..................................................................................................................................………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
What do you think can be done to overcome these problems?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
What other comments do you have concerning SACCOs in your area?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………..
THANK YOU VERY MUCH FOR THIS INFORMATION AND FOR YOUR TIME.
MAY GOD BLESS YOU.

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Appendix 2: Work plan and Timeframe

Activity Duration (days/weeks/months) Responsible

Locate Respondents Before 15th June 2017 Researcher

Designing Pretesting data Before 22nd June Researcher

collection tools

Data Collection Before 8th July Researcher

Data Coding Before 15th July Researcher

Data interpretation and Before 5th August Researcher

Reporting

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Appendix 3: Budget

Item Quantity Unit Cost Total Cost

Subsistence 3 months 50000 150000

Allowance

Travel (Vehicle Hire) 3 months 100000 300000

Data Analysis 1 50000 50000

Secretarial Services 1 50000 50000

(Processing the

research instruments

and reports)

Photocopying 1 20000 20000

Report Production 1 10000 10000

(Printing and Binding)

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