Enhancing Financial Welfare in the Public Sector: The Role of Workplace SACCOS for Civil Servants in Tanzania

Enhancing Financial Welfare in the Public Sector: The Role of Workplace SACCOS for Civil Servants in Tanzania

Hamisi Miraji

University of Iringa, Iringa, Iringa Municipality, Tanzania

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000777

Received: 27 September 2025; Accepted: 03 October 2025; Published: 30 October 2025

ABSTRACT

Civil servants in many developing countries, despite formal employment, often face significant financial vulnerability. Microfinance Institutions (MFIs), particularly Savings and Credit Cooperative Societies (SACCOS), have been promoted as a tool for financial inclusion, but their role in serving public sector employees is under-researched. This study assesses the impact of SACCOS on the financial welfare of civil servants, using a mixed-methods case study of the Prisons Department SACCOS in Iringa Municipality, Tanzania. Data were collected via questionnaires and interviews with a sample of 64 prison workers and SACCOS management, analyzed using descriptive statistics and thematic analysis. The findings indicate that the SACCOS maintains strong financial stability, accessible loan practices, and effective saving mobilization, which collectively contribute positively to members’ financial welfare. The study concludes that workplace-based SACCOS present a viable model for enhancing economic empowerment among civil servants. Consequently, we recommend that Tanzanian policymakers and public sector administrators actively support the establishment and strengthening of such institutions across government departments to improve financial resilience and inclusion for low-income public employees.

Keywords: Microfinance, SACCOS, Financial Welfare, Civil Servants, Tanzania, Financial Inclusion

INTRODUCTION

The pursuit of financial inclusion has become a central tenet of development strategy across the Global South, aiming to integrate marginalized populations into the formal economic fold (Demirgüç-Kunt, Klapper, & Singer, 2017). Within this discourse, microfinance institutions (MFIs) are championed as critical vehicles for providing financial services to those traditionally excluded from mainstream banking. However, a significant portion of the literature has focused on MFIs’ impact on entrepreneurial, rural, or informally employed groups, often overlooking a segment that, despite formal employment, remains financially vulnerable: civil servants (Muyongo, 2017). In countries like Tanzania, public sector employees, including prison workers, frequently grapple with financial strain precipitated by modest salaries, limited access to affordable credit, and inadequate financial safety nets (Danga & Yusuph, 2019).

In response to these challenges, member-owned financial cooperatives, specifically Savings and Credit Cooperative Societies (SACCOS), have emerged as pivotal institutions. Operating on a principle of mutual assistance, SACCOS offer tailored financial products—including savings schemes, low-interest loans, and financial education—that are often more accessible and relevant to their members’ needs than those of commercial banks (Chambo, 2009). Their embeddedness within specific communities or workplaces, such as government departments, affords them a unique understanding of their members’ socio-economic realities, fostering trust and promoting financial discipline (Liu, 2015).

Despite their growing prevalence, there is a conspicuous gap in empirical research concerning the effectiveness of workplace-based SACCOS in addressing the financial woes of civil servants in Tanzania. While studies have examined SACCOS in general terms (Mbise & Mwakalebela, 2022) or their impact on broad civil servant categories, the unique context of specific, high-stress departments like the prison service remains largely unexamined. Prison workers operate in a demanding environment and face distinct financial pressures, making them a critical group for understanding the nuanced role of institutional microfinance.

Therefore, this study seeks to fill this gap by conducting an empirical investigation of the Prisons Department SACCOS in Iringa Municipality. The research is guided by three specific objectives: to examine the effects of the SACCOS’s financial stability on members’ financial welfare; to determine the impact of its loan accessibility practices; and to examine the influence of its saving mobilization efforts. By focusing on this specific case, the study aims to provide a granular understanding of how these cooperative institutions function and the tangible benefits they confer upon their members.

The significance of this study is twofold. Practically, it offers evidence-based insights for Tanzanian policymakers and public sector administrators on the potential of institutional SACCOS as a tool for improving financial inclusion and resilience among civil servants. Academically, it contributes to the literature on financial inclusion by shifting the focus to a previously under-researched population—public sector employees within a specific, challenging institutional setting. The remainder of this paper is structured as follows: a review of relevant literature, a detailed explanation of the methodological approach, a presentation and discussion of the findings, and a conclusion outlining the implications and avenues for future research.

LITERATURE REVIEW

Financial Inclusion and the Role of SACCOS

The concept of financial inclusion has evolved from simply providing access to bank accounts to ensuring the availability and usage of a wide range of affordable financial services that meet the needs of individuals and businesses (World Bank, 2018). In developing economies, a significant portion of the population remains excluded from formal financial systems, perpetuating cycles of poverty and economic vulnerability (Karlan & Zinman, 2011). Microfinance has emerged as a key strategy to bridge this gap, with SACCOS representing a particularly successful member-owned model. SACCOS are autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise (International Co-operative Alliance, 2020). Their core principle is to pool members’ savings and provide credit at reasonable interest rates, thus promoting thrift and self-reliance (Wanyama, 2016).

In Tanzania, the microfinance landscape has expanded significantly since the financial sector reforms of the 1990s, with SACCOS playing a prominent role, especially in rural and semi-urban areas (Bank of Tanzania, 2021). Their relevance is underscored by their ability to design products aligned with the cash flows of their members, such as civil servants whose salaries are predictable. As noted by Magali (2018), SACCOS in Tanzania have been instrumental in offering not just credit but also training in financial management, which empowers members to make informed decisions. The effectiveness of SACCOS, however, is contingent upon their institutional robustness, particularly their financial stability, the accessibility of their loan products, and their capacity to mobilize savings effectively.

Financial Stability of MFIs and Member Welfare

Financial stability is a cornerstone of any financial institution’s ability to deliver reliable services. For MFIs and SACCOS, stability implies the capacity to remain operational and meet members’ demands without interruption, even in the face of economic shocks (Ledgerwood, 2013). Empirical studies consistently link institutional stability to positive member outcomes. For instance, Armstrong and Honig (2021), in a study in Bangladesh, found that the financial stability of MFIs significantly influenced the savings behavior and debt management capacity of public sector employees, fostering greater financial confidence.

Similarly, research in Kenya by Mwangi and Muturi (2023) revealed a strong positive correlation between the financial soundness of SACCOS and the financial security of county government employees, particularly regarding reliable access to loans and emergency funds. Closer to the context of this study, Mbise and Mwakalebela (2022) examined SACCOS in the Dodoma region of Tanzania and concluded that strong financial management practices directly led to improved financial outcomes for civil servant members. Conversely, instability, characterized by service delays or liquidity shortages, can erode member trust and discourage long-term engagement, as observed by Nguyen and Tran (2022) in Vietnam. This body of literature establishes that financial stability is not merely an operational goal but a fundamental prerequisite for enhancing member welfare.

Loan Accessibility as a Pathway to Financial Empowerment

Access to credit is often considered the most visible function of microfinance. Loan accessibility refers to the ease with which members can obtain credit, influenced by factors such as application procedures, interest rates, collateral requirements, and repayment flexibility (Ledgerwood, 2013). Accessible loans enable individuals to smooth consumption, manage unexpected expenses, and invest in income-generating activities, thereby breaking cycles of poverty (Banerjee, Karlan, & Zinman, 2015).

Studies across various contexts affirm this link. In Malaysia, Ahmad and Ismail (2021) found a direct correlation between access to soft loans from cooperative banks and improved financial planning and household welfare among civil servants. In Brazil, Souza and Pereira (2022) highlighted those loans with low interest rates and flexible terms positively influenced housing conditions and business investments for public employees. Within Tanzania, Kwayu and Mlay (2022) demonstrated that simplifying loan processes and reducing collateral demands in Morogoro region SACCOS significantly enhanced civil servants’ ability to meet family obligations and plan for the future. A critical caveat, however, is that accessibility must be coupled with responsible lending to prevent over-indebtedness, a risk highlighted by Karlan and Zinman (2011).

Saving Mobilization and Financial Resilience

While microcredit often receives more attention, the savings mobilization function of institutions like SACCOS is equally, if not more, important for building long-term financial resilience (Rutherford, 2000). Saving mobilization involves the strategies and mechanisms used by financial institutions to encourage and collect savings from members, promoting a culture of regular thrift (Robinson, 2001). Effective saving allows individuals to build assets, plan for future expenses, and create a buffer against economic shocks, reducing their vulnerability.

Research by Srisai and Phongpreecha (2021) in Thailand showed that saving schemes through government cooperatives significantly improved public employees’ ability to manage household budgets and reduce debt. In South Africa, Moyo and Dube (2022) found that regular saving practices among municipal employees enhanced their financial preparedness and reduced reliance on credit. In the Tanzanian context, Mushi and Komba (2022) reported that saving mobilization through SACCOS in the Kilimanjaro region significantly improved members’ financial stability and capacity to acquire assets. These studies underscore that promoting savings is a crucial mechanism for empowering low-income earners.

Knowledge Gap and Conceptual Framework

Despite the wealth of literature on microfinance, a clear gap exists regarding the specific impact of workplace-based SACCOS on civil servants in specialized government departments like the prison service. Most studies aggregate civil servants or focus on teachers and health workers. The prison environment, with its unique stresses and often remote postings, presents distinct financial challenges that may shape how SACCOS services are utilized and perceived. This study, therefore, positions itself to address this gap by examining the interplay between financial stability, loan accessibility, and saving mobilization within the Prisons Department SACCOS of Iringa Municipality and their collective effect on the financial welfare of prison workers. The conceptual framework guiding this inquiry posits that these three independent variables are critical determinants of the dependent variable, financial welfare, which encompasses income stability, reduced financial stress, and an improved standard of living.

METHODOLOGY

Research Design and Area of Study

This study adopted a pragmatic research philosophy, utilizing a concurrent mixed-methods case study design. This approach was deemed most appropriate as it allows for the collection and integration of both quantitative and qualitative data to provide a comprehensive understanding of the research problem (Creswell & Plano Clark, 2018). The quantitative component facilitated the measurement of the prevalence and extent of the phenomena under study, while the qualitative component provided depth and context, exploring the lived experiences and perceptions of the participants.

The research was conducted in Iringa Municipality, focusing specifically on the Prisons Department SACCOS. This site was selected purposively because it represents a typical example of a workplace-based SACCOS serving a distinct group of civil servants who face known financial constraints. The SACCOS is well-established, providing a relevant context for investigating the research objectives.

Population, Sampling, and Data Collection

The target population for this study consisted of 176 individuals: 164 prison workers who are registered members of the SACCOS and 12 SACCOS leaders and management staff. A sample size of 64 respondents was determined using Kothari’s (2004) formula to ensure a 90% confidence level. A stratified random sampling technique was employed to select 60 prison worker members, ensuring representation across different ranks and years of service. Additionally, a purposive sampling technique was used to select four key informants from the SACCOS leadership and management, as they possessed specialized knowledge crucial to the study.

Primary data were collected over a one-month period using two main instruments. First, a structured questionnaire with closed-ended questions based on a five-point Likert scale (1=Strongly Disagree to 5=Strongly Agree) was administered to the 60 prison workers to gather quantitative data on financial stability, loan accessibility, and saving mobilization. Second, unstructured interviews were conducted with the four key informants to obtain rich, qualitative insights into the operations, challenges, and perceived impact of the SACCOS. Each interview lasted approximately 15-20 minutes, was recorded with permission, and later transcribed for analysis.

Data Analysis and Ethical Considerations

The quantitative data from the questionnaires were coded and analyzed using the Statistical Package for the Social Sciences (SPSS) version 26. Descriptive statistics, including frequencies, means, and percentages, were generated to summarize the data and address the research objectives. The qualitative data from the interviews were analyzed using thematic analysis, following the steps outlined by Braun and Clarke (2006): familiarization with the data, generating initial codes, searching for themes, reviewing themes, and defining and naming themes. This process allowed for the identification of recurring patterns and salient issues related to the SACCOS’s functioning.

To ensure reliability, the questionnaire was pre-tested with 15 respondents not included in the final sample. The internal consistency of the Likert-scale items was assessed using Cronbach’s Alpha, which yielded a coefficient of 0.87, indicating excellent reliability (George & Mallery, 2003). Ethical considerations were strictly adhered to throughout the research process. Informed consent was obtained from all participants, who were assured of confidentiality and anonymity. They were also informed of their right to withdraw from the study at any time without penalty.

RESULTS AND DISCUSSION

Demographic Characteristics of Respondents

The study achieved a 100% response rate from the 60 questionnaires distributed. Analysis of the demographic data revealed that the majority of respondents were male (68.3%), reflecting the gender distribution within the prison service. In terms of education, most respondents held a Certificate of Secondary Education (63.9%), while a smaller proportion had diplomas (4.9%) or bachelor’s degrees (11.5%). The age distribution showed that the largest group was between 20-30 years old (41.7%), and most had job experience of between 6-10 years (26.7%). This profile suggests a workforce with sufficient maturity and experience to provide reliable insights into their financial experiences with the SACCOS.

Financial Stability of the SACCOS

The quantitative findings revealed a strong consensus among members regarding the financial stability of their SACCOS. As shown in Table 1, respondents expressed high levels of agreement with statements affirming the institution’s reliability. For instance, the statement “I am confident in the long-term sustainability of the SACCOS” received a mean score of 3.43 (85.8% agreement), and “I have not experienced any major disruption in services due to financial instability” scored a mean of 3.40 (85.0% agreement).

Table 1: Perceptions of Financial Stability (N=60)

This perception of stability was strongly echoed in the qualitative interviews. A key informant from the SACCOS management stated, “Our SACCOS has been stable since it started operating. The management is effective because it educates members on sustainable fund usage… The capital is growing, and members are saving on time” (Key Informant #2, 2025). This suggests that prudent management and member education are key pillars of this stability.

However, one area of concern was the timeliness of service delivery. The statement regarding the non-delay of loans and savings received the lowest mean score (2.42) under this theme, indicating that while the institution is fundamentally sound, operational inefficiencies exist.

Discussion: The high perceived stability of the SACCOS is a critical finding that aligns with the literature. Mbise and Mwakalebela (2022) similarly found that financial stability in Tanzanian SACCOS builds member trust, which is essential for long-term engagement and financial planning. This stability creates a sense of security, encouraging members to commit their savings and rely on the institution for credit, as opposed to unstable or predatory informal lenders (Mwangi & Muturi, 2023). The issue of delays, however, resonates with challenges identified by Nguyen and Tran (2022), highlighting that even stable institutions must continuously work on operational efficiency to fully meet member expectations, especially for time-sensitive needs like emergency loans.

Loan Accessibility Practices

The assessment of loan accessibility yielded overwhelmingly positive results, as summarized in Table 2. Members found the loan application process to be simple and transparent (Mean=3.75, 93.8% agreement) and the interest rates affordable (Mean=3.67, 91.7% agreement). Furthermore, a significant majority agreed that loans from the SACCOS had helped them improve their living standards (Mean=3.63, 90.8% agreement) and reduce their reliance on informal lenders (Mean=3.23, 80.8% agreement).

Table 2: Perceptions of Loan Accessibility (N=60)

The transformative impact of accessible loans was vividly captured in the interviews. One member shared, “Through loans, I managed to build a house and educate my children. I could not have done this with my salary alone” (Key Informant #3, 2025). This narrative underscores the role of credit in enabling significant life investments. A challenge noted was in the realm of communication, where members reported less satisfaction with the timeliness of feedback on their applications (Mean=2.48).

Discussion: The high accessibility of loans is a cornerstone of the SACCOS’s positive impact. These findings corroborate studies by Kwayu and Mlay (2022) in Tanzania and Ahmad and Ismail (2021) in Malaysia, which found that simple, affordable credit is a powerful tool for empowering low-income earners. The reduction in reliance on informal lenders is particularly crucial, as it shields members from exorbitant interest rates and exploitative practices, thereby contributing directly to their financial welfare (Nsubuga & Kato, 2021). The communication gap points to an area for improvement, suggesting that enhancing feedback mechanisms could further strengthen the borrower’s experience and trust in the system.

Saving Mobilization

The SACCOS demonstrated notable success in promoting a culture of saving among its members. As shown in Table 3, respondents strongly agreed that saving with the SACCOS is safe and secure (Mean=3.55, 88.8% agreement) and that it has helped them manage emergencies better (Mean=3.55, 88.8% agreement). A large majority also felt encouraged to save regularly (Mean=3.40, 85.0% agreement).

Table 3: Perceptions of Saving Mobilization (N=60)

The qualitative data revealed a profound behavioral change attributed to the SACCOS. One member testified, “Before joining, I was not saving; now I save monthly without fail. It has given me peace of mind” (Key Informant #1, 2025). This highlights the institution’s role in fostering financial discipline. The main area of dissatisfaction was with the returns on savings (Mean=2.32), indicating that members perceive the dividends or interest earned as relatively low.

Discussion: The effectiveness of the SACCOS in mobilizing savings is a key strength. The sense of security promotes consistent saving, which is fundamental to building financial resilience, as emphasized by Rutherford (2000). The ability to manage emergencies without resorting to high-cost debt is a critical aspect of improved welfare (Srisai & Phongpreecha, 2021). The lower satisfaction with returns, however, suggests a potential area of risk for the SACCOS. If members feel their savings are not growing sufficiently, they may be tempted to seek alternative investment avenues. As recommended by Amin et al. (2014), linking saving products with financial literacy education could help members understand how their savings contribute to the loan pool and the overall health of the cooperative, potentially increasing their satisfaction even with modest returns.

CONCLUSION AND IMPLICATIONS

This study set out to investigate the effects of microfinance institutions on the financial welfare of civil servants, using the Prisons Department SACCOS in Iringa Municipality as a case study. The findings provide compelling evidence that this workplace-based cooperative plays an indispensable role in enhancing the economic well-being of its members. The tripartite analysis of financial stability, loan accessibility, and saving mobilization reveals a robust institution that has successfully engendered trust, provided critical financial services, and fostered a culture of saving among prison workers. The SACCOS is perceived as a stable and reliable institution, which forms the bedrock of member confidence. Its loan products are accessible and have directly contributed to improving living standards and reducing dependence on informal credit. Furthermore, its success in mobilizing savings has equipped members with a vital tool for managing financial shocks and planning for the future.

The implications of these findings are significant for both policy and practice. For policymakers in Tanzania, particularly within the Ministry of Home Affairs and other government departments, this study offers a strong rationale for actively promoting and supporting the establishment of similar workplace-based SACCOS. The model presented here is a viable, sustainable, and effective mechanism for improving financial inclusion and resilience among public sector employees. For the management of SACCOS, the findings highlight the importance of maintaining financial discipline and transparency to sustain member trust. Additionally, they point to specific areas for improvement, such as streamlining loan disbursement processes to eliminate delays, enhancing communication channels with members, and exploring ways to improve the returns on savings to maintain member loyalty and motivation.

The study also opens several productive avenues for future research. Scholars could build upon this work by conducting a comparative analysis of SACCOS across different public sector departments, such as education and health, to identify sector-specific challenges and best practices. A longitudinal study tracking the financial trajectory of SACCOS members over time would provide deeper insights into the long-term impact on poverty reduction and asset accumulation. Finally, research could investigate the potential of integrating digital financial technologies into the SACCOS model to enhance service efficiency, particularly in the areas of loan applications, disbursements, and savings tracking.

In conclusion, this research underscores the transformative potential of member-owned, workplace-based financial cooperatives. The Prisons Department SACCOS in Iringa stands as a testament to how localized, member-centric financial institutions can effectively address the financial vulnerabilities of civil servants. By providing a stable platform for saving and accessible credit, such institutions are not merely financial intermediaries but are powerful catalysts for economic empowerment and improved welfare within the public sector.

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