The Impact of Savings and Credit Cooperatives on Household Welfare: Evidence from Uganda

Abstract

Savings and Credit Cooperatives (SACCOs) help in reducing the financial exclusion gap. This study examines whether SACCOs improve the welfare of households. Data used are from 2009/2010 and 2010/2011 World Bank’s Living Standards Measurement Surveys (LSMS) done in Uganda by the Bureau of Statistics. Treatment cases are households that saved in SACCOs only while control cases are those that did not use the services nor save in SACCOs, banks or microfinance institutions. Propensity Score Matching and a two-step Treatment Effects’ model are used. Findings show that SACCOs have a positive and significant impact on household dietary diversity score, food consumption score, household clothing/footwear expenditure, and school enrollment rates in Uganda. The results are robust to hidden selection bias. The results show that SACCOs play a key role in improving household food security, non-food expenditure, and human capital development for the poor facing financial exclusion from banks and traditional microfinance institutions.