Expansion of rural financial services through linkage banking in Tanzania: Is joint action between savings and credit cooperative societies (SACCOS) a promising approach?
Most Tanzanians do not access financial services. Rural areas are particularly disadvantaged, as the country has one of the lowest levels of access relative to regional and international norms. Commercial banks are conspicuously absent from rural areas, while savings and credit cooperative societies (SACCOS) are much more prevalent. Even so, both commercial banks and SACCOS have limitations that inhibit their ability to extend financial services to a large part of the population. This paper argues for increased collaboration between commercial banks and SACCOS to expand outreach through linkage banking. Linkage banking leverages the superior operational systems of the banks with the outreach and relationships of the SACCOS. To succeed, however, linkage banking must be approached as a long-term partnership that involves considerable capacity development.