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 significantcontribution to poverty reduction strategy of developing countries including Ethiopia in solving the financialproblem of rural dwellers. The main objective of the study was to assess loan recovery performance of ruralsaving and credit cooperatives in Lay Gaint Woreda .The study area was selected purposively, due the presenceof long established rural saving and credit cooperatives. Using simple random sampling method, from fourcase rural saving and credit cooperatives, selected for this study, 112 members were selected at probabilityproportionate to size. Both primary and secondary data were collected for this study. Semi-structured interviewschedule was used to generate primary data from sample respondents. Secondary data were collected from loanportfolio report and audit report of the case rural saving and credit cooperatives. Sample cooperatives haveextended credit for their members for production purposes such, as purchasing of agricultural inputs, and animalfattening purpose. Moreover, they extend credit for petty trade and social purposes such as medical care andschool fee. Between the year 2002 and 2011, the cooperatives extended a total of Birr 2,560,563 for theirmembers for production, petty trade and social purposes. Result of the study indicates that Sampled ruralsaving and credit cooperatives’ members still not fully repaid the loan that they took from their rural savingand credit cooperatives. The loan policy of the sample cooperatives have clearly stated that the loan committeeshould conduct a continuous follow up of money utilization of the borrower. But both the focus group discussionand key informant interview results revealed that the loan committee of the cooperatives was not strictlymonitoring the loan utilization of the borrower as per the loan policy of the cooperatives. As the loan policy ofthe cooperatives described, the loan guarantee systems were strict and designed as to have a zero default. Butdue to lack of strict adherence to the loan policy of the cooperatives, there were defaults. The studyrecommended in improving the timely loan recovery performance of rural saving and credit cooperatives, andworeda cooperative promotion office should have to take strict measures.Keywords: Loan recovery performance, Cooperatives, Rural saving and credit cooperatives.