TABLE OF CONTENTS

DECLARATION ................................................................................................... i

APPROVAL ........................................................................................................ ii

DEDICATION ................................................................................................... iii

ACKNOWLEDGEMENT ...................................................................................... iv

TABLE OF CONTENTS ....................................................................................... v

ABSTRACT ...................................................................................................... viii

LIST OF TABLES ............................................................................................... ix

LIST OF ABBREVIATIONS .................................................................................. x

CHAPTER ONE: INTRODUCTION ................................................................. 1

1. 1 Background of the study .............................................................................. 1

1.2 The Statement of the Problem ..................................................................... 2

1.3 Purpose of the study ................................................................................... 3

1.4 Objectives of the Research ........................................................................... 3

1.4.1 General objective of the study: .................................................................. 3

1.4.2 The Specific Objectives ............................................................................. 3

1.5 Research questions ..................................................................................... 4

1.6 Scope of the study ...................................................................................... .4

1.7 Significance of the study ............................................................................. .4

CHAPTER TWO: LITERATURE REVIEW ....................................................... 6

2.0 Introduction ................................................................................................ 6

2.1 Cooperatives Movement in Kenya: ................................................................ 6

2.2 Metropolitan Teachers Sacco: ....................................................................... 8

2.2.1 Savings .................................................................................................... 9

V

2.2.2 Loans ...................................................................................................... 9

CHAPTER THREE: METHODOLOGY ............................................................ 10

3.0 Introduction .............................................................................................. 10

3.1 Research design ........................................................................................ 10

3.2 The study population ................................................................................. 10

3.3 Sample size and sampling design ............................................................... 10

3.4 Research instruments ................................................................................ 11

3.4.1 Questionnaire ......................................................................................... 11

3.4.2 Desk review ........................................................................................... 11

3.5 Data analysis ............................................................................................ 11

CHAPTER FOUR: RESULTS AND DISCUSSIONS ........................................ 13

4.1 Introduction .............................................................................................. 13

4.2 Presentation, analysis and interpretation of results are done under the

following themes ............................................................................................. 13

4.2.1 The impact of savings on loans ............................................................... 13

4.2.2 The effectiveness of Sacco ...................................................................... 16

4.2.3 Objectives of saving for different age groups ............................................ 18

4.2.4 Reasons for not getting the loans applied for. ........................................... 19

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECCOMMENDATIONS 21

5.0 Introduction .............................................................................................. 23

5.1 Summary of findings ................................................................................. 23

5.2 Conclusion ................................................................................................ 24

5.3 Recommendation ...................................................................................... 24

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REFERENCES: .................................................................................•......... 26

APPENDICES: APPENDIX I QUESTIONNAIRE ........................................ 28

APPENDIX II: BUDGET ESTIMATE ........................................................... 32

APPENDIX III: TIME SCHEDULE ............................................................... 33

Background of the study Kenya is a country where the co-operative movement has grown strong through the last decades. In order to help members with loans and saving facilities, Union Banking Sections were formed in the early 1970s. So far there are about 4900 active SACCOs' offering savings and loans services to over 2.1 million Kenyans (Mwaniki, R. 1998). The bulk of these clients are salaried (almost three quarters) of which only a quarter reside in rural. There are now approximately 155 SACCOs in rural areas (KBD 2010). Unfortunately, while much salary based lending programmes have performed well, other SACCOs and particularly rural and informal sector societies have considerable non performing loans problems. Many people have had limited access to loans and saving facilities because the formal loans institutions tend to consider them "high risk" customers. Formal loans institutions demand collateral, which many people, cannot provide since they normally do not legally own their land or have too small land holdings. The high minimum balances also limit the possibilities for many to access formal financial services. Another reason is high transaction costs, which limit the access to financial services for the poor. There are market imperfections, like asymmetric information between lenders and borrowers in the rural financial market that result in high transaction costs. As smallholders need very small loans, the transaction costs can be burdensome in relation to the value of the loan itself. One purpose of this study is to examine how SACCOs have managed to overcome these problems.