A Study on Loan Recovery Performance of Rural Saving and Credit Cooperatives in Laygaint worda, Amhara Regional State, Ethiopia

Abstract

In recent years, the growth and expansion of rural saving and credit cooperatives is playing its significant contribution to poverty reduction strategy of developing countries including Ethiopia in solving the financial problem of rural dwellers. The main objective of the study was to assess loan recovery performance of rural saving and credit cooperatives in Lay Gaint Woreda .The study area was selected purposively, due the presence of long established rural saving and credit cooperatives. Using simple random sampling method, from four case rural saving and credit cooperatives, selected for this study, 112 members were selected at probability proportionate to size. Both primary and secondary data were collected for this study. Semi-structured interview schedule was used to generate primary data from sample respondents. Secondary data were collected from loan portfolio report and audit report of the case rural saving and credit cooperatives. Sample cooperatives have extended credit for their members for production purposes such, as purchasing of agricultural inputs, and animal fattening purpose. Moreover, they extend credit for petty trade and social purposes such as medical care and school fee. Between the year 2002 and 2011, the cooperatives extended a total of Birr 2,560,563 for their members for production, petty trade and social purposes.  Result of the study indicates that Sampled rural saving and credit cooperatives’ members still not fully repaid the loan that they took from their rural saving and credit cooperatives. The loan policy of the sample cooperatives have clearly stated that the loan committee should conduct a continuous follow up of money utilization of the borrower. But both the focus group discussion and key informant interview results revealed that the loan committee of the cooperatives was not strictly monitoring the loan utilization of the borrower as per the loan policy of the cooperatives. As the loan policy of the cooperatives described, the loan guarantee systems were strict and designed as to have a zero default. But due to lack of strict adherence to the loan policy of the cooperatives, there were defaults. The study recommended in improving the timely loan recovery performance of rural saving and credit cooperatives, and woreda cooperative promotion office should have to take strict measures.

Keywords: Loan recovery performance, Cooperatives, Rural saving and credit cooperatives.