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Role of Financial Development in Economic Growth: Evidence from Savings and Credits Cooperative Societies in Tanzania

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  • Xuezhi Qin
  • Benson Otieno Ndiege

Abstract

In this paper we examine the role of Savings and Credits Cooperative Societies (SACCoS) in the economic growth of Tanzania by answering two main questions. First, are financial services in SACCoS significant factors for economic growth? Second, are financial services in SACCoS Granger causing economic growth? We use credits-real GDP per capita ratio and savings-real GDP per capita ratio as proxy measures for financial services and real GDP per capita for economic growth. We employ Newey-West standard errors regression model and Wald Granger causality tests in analysis. The sample period is 1990-2012. Data are from the Ministry of Agriculture, Food and Cooperatives, World Economic Outlook (WEO) database, International Monetary Fund (IMF). The findings show that, there is a strong positive association between the financial services and the economic growth, also there istwo-ways Granger causality between them. However, we find out that savings are much important in fostering economic growth as compared to credits/loans. These criteria make SACCoS the distinct microfinance institutions in the economic development in Tanzania and therefore should be promoted with more emphasis on the savings objective.

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  • Xuezhi Qin & Benson Otieno Ndiege, 2013. "Role of Financial Development in Economic Growth: Evidence from Savings and Credits Cooperative Societies in Tanzania," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 4(2), pages 115-125, April.
    • Handle: RePEc:jfr:ijfr11:v:4:y:2013:i:2:p:115-125
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    Cited by:

    1. Ramesh C. Paudel & Chakra Pani Acharya, 2022. "Cooperatives and economic growth in a developing country: The case of Nepal," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(3), pages 797-815, September.
    2. Md. Nur Alam Siddik & Sajal Kabiraj & Md. Emran Hosen & Md. Firoze Miah, 2021. "Blockchain Technology and Facilitation of International Trade: An Empirical Analysis," FIIB Business Review, , vol. 10(3), pages 232-241, September.
    3. Joseph John Magali, 2014. "Effectiveness of Loan Portfolio Management in Rural SACCOS: Evidence from Tanzania," Business and Economic Research, Macrothink Institute, vol. 4(1), pages 299-318, June.
    4. Gulshan Kumar & Shallu Batra, 2023. "Interrelationship Between Human Development, Financial Development and Economic Growth: Empirical Evidences from Indian Economy," Indian Journal of Human Development, , vol. 17(1), pages 60-81, April.

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