Financial Performance of Rural Saving and Credit Cooperatives in Tigray, Ethiopia

Abstract

Saving and Credit Co-operatives are financial institutions that are owned, controlled and capitalized by their members. The overall objective of this study was to examine development and financial performance of Rural Saving and Credit cooperative Societies (RUSACOs) in Tigray, Ethiopia using PEARLS model. In this study both primary and secondary data was collected. Primary data was collected from the purposively selected 13 saving and credit cooperatives using structured questionnaire. The writer analyzed the data using ratios and tables in light of the PEARLS monitoring tool. The cooperatives were found successful in maintaining 100 percent protection against loan losses. Regardless of their weakness in terms of financial structure and profitability indicators, taking 2005 as base year, the RUSACCOs covered in this study registered substantial growth rates in terms of amounts of loan disbursement and saving deposits, members’ share capital, number of membership, total assets, and profitability. However, they are weak in terms of their financial structure and profit generating capacity.  They invested much of their financial resources in less productive/profitable asses (E1), and financed their asses using much capital from members’ share capital (E7) which cannot be used for loan disbursement, instead of saving deposits (E5). The capacity of the RUSACCOs to generate adequate amount of profit was also found substantially below the standard (10 percent). Thus, as RUSCCOS in Tigray are not generating enough amounts of income to cover their operating and financial costs, their sustainability is in question.

Keywords: Financial Performance,  PEARLS , Rural Saving and Credit Cooperatives (RUSACOs), Tigray-Ethiopia.