Application of Capital Budgeting Practices in Savings and Credit Cooperatives Societies (S4CCOS)

Abstract

This paper explores capital budgeting processes in SACCOS. Nine SACCOS from Dar es Salaam and Kilimanjaro were studied. SACCOS in the sample had different ranging from those with less than 500 to those with more than 4,000 members. Both questionnaires and interviews were used in collecting primary and secondary data. The findings reveal that SACCOS' management and board members make capital budgeting decisions. Major capital projects undertaken by SACCOS include office building construction, acquisition office equipment and application software, purchase of furniture and safes, and to a lesser extent, purchase of long term financial assets. It was learnt that some SACCOS had committed huge sums of money to acquire tangible fixed assets such as construction of costly buildings instead of using part of those hinds to acquire profitable and liquid-generating financial securities available in financial markets. This seems to be contrary to financial speculations which would have predicted the loan portfolio size to be the most influencing factor. The supremacy of membership factor is consistent with the cooperative theory that, cooperatives member consideration takes precedence over financial consideration in cooperative decision making.