animal genetics and breeding thesis and dissertations
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Animal Genetics and Breeding Thesis and Dissertations
2021-06-17
ON-FARM PHENOTYPIC
CHARACTERIZATION OF SEKOTA
SHEEP TYPE AND BREEDING
PRACTICES OF FARMERS IN
SELECTED DISTRICTS OF
WAGHIMRA ZONE, AMHARA
REGION, ETHIOPI
Afework Tafach
http://ir.bdu.edu.et/handle/123456789/12117
Downloaded from DSpace Repository, DSpace Institution's institutional repository
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BAHIRDARUNIVERSITY
SCHOOL OF GRADUATE STUDIES
FACTORS INFLUENCING LOAN REPAYMENT OF WOMENS’ IN RURAL
MULTIPURPOSE COOPERATIVES; THE CASE OF GUBALAFTO WOREDA,
NORTH WOLLO ZONE, AMHARA REGION
M.Sc. Thesis Research
By
Mesfin Tesfay
E-mail- [email protected]
MAJOR ADVISOR; Zemen Ayalew (PhD)
CO ADVISOR; Almaz Giziew (PhD)
Bahir Dar, Ethiopia.
November, 2020
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BAHIRDAR UNIVERSITY
SCHOOL OF GRADUATE STUDIES
FACTORS INFLUENCING LOAN REPAYMENT OF WOMENS’ IN RURAL
MULTIPURPOSE COOPERATIVES; THE CASE OF GUBALAFTO WOREDA,
NORTH WOLLO ZONE, AMHARA REGION
M.Sc. Thesis Research
By
Mesfin Tesfay
E-mail- [email protected]
MAJOR ADVISOR; Zemen Ayalew (PhD)
CO ADVISOR; Almaz Giziew (PhD)
Bahir Dar, Ethiopia.
November, 2020
0
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THESIS APPROVAL SHEET
As member of the Board of Examiners of the Master of Sciences (M.Sc.) thesis open defense
examination, we have read and evaluated this thesis prepared by Mr. Mesfin Tesfay “Factors
Influencing Loan Repayment of Women’s’ Multipurpose Cooperatives, the Case of Gubalaffto
Woreda North Wollo Zone, Amahar Region” We hereby certify that, the thesis is accepted for
fulfilling the requirements for the award of the degree of Master of Sciences (M.Sc.) in Rural
Development Management.
Board of Examiners
Degsew Melak (PhD) ________
Name of External Examiner Signature Date
Azanaw Abebe__________ _ ___
Name of Internal Examiner Signature Date
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DECLARATION
This is to certify that this thesis entitled “Factors Influencing Loan Repayment of Women’s’
Multipurpose Cooperatives, the Case of Gubalaffto Woreda North Wollo Zone, Amahar Region”
submitted in partial fulfillment of the requirements of the degree of Master of Science in Rural
Development Management to the Graduate Program of College of Agriculture and Environmental
Sciences, Bahir Dar University by Mr. Mesfin Tesfay. (ID. No. BDU07021134PS) is an authentic
work carried out by him under our guidance. The matter embodied in this project work has not
been submitted earlier for award of any degree or diploma to the best of our knowledge and belief.
Name of the Student
Mr. Mesfin Tesfay, ,
Signature Date
Name of the Supervisors
1) Zemen Ayalew (PhD) -------------------------- ,-----------------------------
Major supervisor Signature Date
2) Almaz Giziew (PhD) ---------------------------------, ----------------------------------------
Co-Advisor Signature Date
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ACKNOWLEDGEMENT
I am deeply grateful and indebted to Dr. ZEMEN AYALEW, major advisor, for his
encouragement, suggestions, guidance and overall assistance. Successful accomplishment of this
research would have been very difficult without his generous time devotion from the early design
of the questionnaire to the final write-up of the thesis by adding valuable, constructive and ever
teaching comments and thus I am indebted to him for his kind and tireless efforts that enabled me
to finalize the study.
I also owe my deepest gratitude to Dr. ALMAZ GIZIEW, co-advisor, for her useful and valuable
comments which became important points of consideration in the manuscript. She has spent her
valuable time from shaping the questionnaire of the survey through the production of the draught
of the thesis.
Moreover, the 115 sample respondent’s cooperative, extension workers, cooperative Office, and
other cooperated individuals deserve special thanks for their unforgettable duty during data
collection.
Finally, I would like to express my sincere appreciation and gratitude to my wife, Workiy Kassa
for her special strength. My father, Tesfay Engda, which financial support made the study a
success.
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DEDICATION
I dedicate this thesis manuscript to my wife, W/ro Workiy Kassa, together with our kids Emanda
Mesfin, for all their continuous contribution throughout my life.
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ACRONYMS AND ABBREVIATION
ACCI Americans for Community Cooperation in Other Nations
ADB Asian Development Bank
AEMFI Association of Ethiopian micro finance institution
ARFEOB Amahar Regional Finance & Economic Offices
CFI Cooperative Financial Institutions
COOPs Cooperatives
CSA Central Statistics Authority CUs Credit Unions
EPRDFE Ethiopian People’s Revolutionary Democratic Force
FAO Food and Agricultural Organization
FCA Federal Cooperative Agency
FSAs Financial Services Associations
GDP Gross Domestic Product
GWAARUDO Gubalaffeto Woreda Agriculture and rural Development Office
GWCOPO Gubalaffeto Woreda Cooperative Promotion Office
ICA International Cooperative Alliance
ILO International Labor Organization
M.a.s.l Meters above Sea Level
MFIs Microfinance Institutions
MOA Ministry of Agriculture
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NGOs Non- Governmental Organization
NWZCOP North wollo zone cooperatives promotion office
SACCO Saving and Credit Cooperative
TLU Tropical Live Stock Unit
UN United Nations
UNCDF United Nations Capital Development Fund
UNDP United Nations Development Program
UNICEF United Nations Children's Fund
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Contents DECLARATION ............................................................................................................................ II
ACKNOWLEDGEMENT ............................................................................................................ III
DEDICATION .............................................................................................................................. IV
ABSTRACT ....................................................................................................................................V
CHAPTER ONE ............................................................................................................................. 1
1. INTRODUCTION ...................................................................................................................... 1
1.1 Background of the Study ....................................................................................................... 1
1.2 Statement of the Problem ...................................................................................................... 3
1.4 Objectives of the Study ......................................................................................................... 4
1.5 Scope and Limitations ........................................................................................................... 4
1.6 Significance of the Study ...................................................................................................... 5
1.7. Organization of the Thesis ................................................................................................... 5
CHAPTER TWO ............................................................................................................................ 5
2. LITERATURE REVIEW ........................................................................................................... 5
2.1 Definitions and Concepts ...................................................................................................... 5
2.2. Loan Repayment Performance of borrowers ....................................................................... 8
2.3 SACCOs ................................................................................................................................ 9
2.4. History of Savings and Credit Cooperatives in Ethiopia ................................................... 10
2.4.1 RUSACCOs in the Amhara Region ......................................................................... 11
2.5. Organization and Management of SACCOs ...................................................................... 11
2.6. Empirical Studies on Loan Repayment Performance ........................................................ 12
2.6.1. Empirical studies in Ethiopia ...................................................................................... 12
CHAPTER THREE ....................................................................................................................... 15
3. RESEARCH METHDOLOGY ................................................................................................. 15
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3.1 Description of the study area .............................................................................................. 15
3.1.2Farming system ............................................................................................................. 15
3.1.3 Farmer’s cooperatives .................................................................................................. 16
3.2 Sample size determination .................................................................................................. 17
3.3 Sampling technique ............................................................................................................. 17
3.4 Methods of data collection .................................................................................................. 18
3.6 Descriptive statistics ........................................................................................................... 19
3.7 Econometric model ............................................................................................................. 19
3.7.1 Specification of the Logit Model ................................................................................. 20
3.8 Hypothesis and Definition of Variables .............................................................................. 21
CHAPTER FOUR ......................................................................................................................... 27
4. RESULTS AND DISCUSSION ............................................................................................... 27
4.1. Demographic and Socio-economic Characteristics ........................................................... 27
4.1.1 Age of the borrowers .................................................................................................... 27
4.1.2 Family structure ........................................................................................................... 28
4.1.3 Educational status ........................................................................................................ 28
4.1.4 Celebrate on social holidays ........................................................................................ 29
4.1.1.5 Participation on saving & Loan amount ................................................................... 31
4.1.6 Agro ecologic differentials ........................................................................................... 31
4.1.7 Loan diversion .............................................................................................................. 33
4.1.8 Timeliness of credit. ..................................................................................................... 34
4.1.9. Livestock ownership of sample households ................................................................ 35
4.2.2 Results of Econometric Analysis ................................................................................. 37
4.2.3 Focus Groups Discussion ............................................................................................. 42
4.2.4 Key Informants Interview ............................................................................................ 42
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5. Women rural saving and credit cooperatives loan status .......................................................... 45
CHPTER FIVE ............................................................................................................................. 46
5. CONCLUSION AND RECOMMENDATION ........................................................................ 46
5.1. Conclusion ......................................................................................................................... 46
5.2. Recommendation .......................................................................................................... 47
6. REFERNCES .......................................................................................................................... 48
7. Appendixes ................................................................................................................................ 53
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LIST OF TABLES
Table x Summary for independent variables, measurement scales and the hypothesized
Relationships ................................................................................................................................. 25
Table 1 Age structure of the borrowers by saving and credit cooperative.................................... 27
Table 2 Family size of the respondents by borrower group .......................................................... 28
Table 3 Education level of respondents by borrower ---------------------------------------------------29
Table 4: Amount of money spent to celebrate holidays ................................................................ 30
Table 5 Participation on saving & Loan amount --------------------------------------------------------31
Table 6: Borrowers’ responses on of agro ecologic differentials problems ................................. 32
Table 7 Loan diversion & others ................................................................................................... 33
Table 8: Borrowers’ responses on Timeliness of credit ................................................................ 35
Table 9 Average size of livestock (TLU/household) for sample respondents .............................. 36
Table 11: Contingency coefficient for discrete variables ............................................................. 38
Table 12 the logit model ............................................................................................................. 39
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ABSTRACT Saving & credit cooperative have vital contribution to the economic development and creation of
asset opportunity in developing countries with large number of rural area. The objective of his
study was to examine the main factors influencing loan repayment among rural women based on
multipurpose cooperatives’ members in Guba-Lafto Woreda. In the course of this study primary
data were collected from 115 respondents. 38 Saving & credit cooperative have Guba-Lafto
Woreda 3 multipurpose cooperative was selected stratified. In addition, secondary data were
collected from relevant organizations and relatable documents. Descriptive and Econometric
analytical techniques that was used in this study. Descriptive statistics including mean, standard
deviations, frequency, percentages, etc. econometric analysis binary logistic regression was used
in this study. Location of borrowers, Level of education of the household, Age of the household,
family size of the household, celebration of social ceremonies, amount of credit borrowed by the
household and loan amount were highly important in influencing loan repayment performance as
evidenced by the model result. Therefore, consideration of factors affecting loan repayment
performance because it provides information that would enable to undertake effective measures
with the goal of improving loan repayment performance and hence help achieve success in rural
women. It would also enable lenders such and policy makers to have knowledge as to where and
how to channel efforts in order to minimize loan defaults.
Key words: multipurpose, loan repayment, binary logit
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CHAPTER ONE
1. INTRODUCTION 1.1 Background of the Study
Women represent 50% of the world population, and play a vital role in food production and food
security. The world’s experiences show that food security encompassed a broad range of issues.
All these issues are central to women. Agricultural development is a complex process and a
challenging one as well (Trinh T. and Ha T., 2009). Women account for 70% of agricultural
workers, 80% of food producers, and 100% of those who process basic foodstuffs and they
undertake from 60% to 90% of the marketing (Fresco, 1998). It is often stated that women are
responsible for more than half the world’s food production. They are said to be “feeding the world”.
The role women play in agriculture and the rural society is fundamental to agricultural and rural
development in sub-Saharan Africa.
In Ethiopia agriculture is the mainstay of the economy accounts for about 40 percent of national
GDP, 90 percent of exports, 85 percent of employment, and 90 percent of the poor (David J., 2008).
Women are the backbone of the agricultural sector and the food production system (MOPED and
UNICEF, 1994). The agricultural sector contributes to overall economic growth as well as
providing the poor with opportunities for socio-economic development activities. Agriculture
activities heavily relied on family labour and women played a key important role in farming and
improving the quality of life in rural areas (World Bank, 2004 cited in Berhan, 2010). Out of the
total subsistence agricultural production, they are responsible for about 50%. As some reports
indicate women contribute around 65% of the labour-force in agriculture (TGE and UNICEF,
1993).
Agricultural Cooperatives contribute to poverty reduction by providing economic opportunities
for their members; employment, livelihoods, wide variety of services, empower the disadvantaged
to defend their interests; provide security to the poor by allowing them to convert individual risks
into collective risks; and mediate member access to assets to earn a living (ATA, 2012).
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Agricultural cooperatives in particular help farmers access the inputs required to cultivate crops
and keep livestock. In addition to making accessible agricultural inputs, they help process of
agricultural products, transport and market their produce. These services help pull members of
cooperatives out of poverty.
According to USAID (2005), in Ethiopia farm production is almost totally in the hands of small
farmers; private commercial farms are of negligible importance. The origin of cooperatives dates
from Hailesilassies‟ regime, but they became the dominant form of organizing farmers under state
control during the Derg regime. Proclamation No. 138/78 made membership in cooperatives
obligatory; cooperatives were used as a means of state control over the rural population and to
extract food and other farm products from farmers and channel them to urban consumers and the
elite at subsidized prices..
Projection population size unpublished document Amahar regional finance and economy biro
(2016), in Guballfto Woreda is estimated to be total population 154,323 male 79,490 /51.51%/
female 74,833/48.49%/lives rural areas. Mass of the rural women is involved in mixed farming.
Cereals are the predominant agriculture produce accounting for 36.59% of the total cultivated land
and 18% of the grain production (Gwrdao, 2016).
According to 2016 Gubalfftto Woreda cooperative promotion office’s loan upturn report, mainly
Gubalfftto Woreda cooperative promotion office, saving and credit cooperatives have been
engaged both directly and indirectly in providing loan to the farmers. For the last decade, a total
of 5,263,248birr has been disbursed for farmers but only 10% of it is collected back. Obviously,
the data shows as the loan repayment performance is so poor, this implies investigative repayment
is very vital agenda.
Thus, for securing high loan repayment rate it is vital to thoroughly investigate various aspects of
credit defaults and factors influencing loan repayment so that it can help financial institutions,
policy makers and other stake holders to have information on the issue and help them as a basis
for intervention moves. Therefore, this study will be undertaken to investigate how loan repayment
is going on among members of rural women based on saving and credit cooperatives in the rural
parts of Gubalffto Woreda cooperative office and evaluate its factors
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1.2 Statement of the Problem
The agricultural cooperatives in Ethiopia are considered to be the most important organizations
that pay attention and try to support the rural development in general and the agricultural
development in special through the activities and services achieved for the sake of farmers.
Agricultural cooperatives in Ethiopia play a great role for the development of agricultural sector in
the country. However, agricultural cooperatives in Ethiopia have faced several challenges. Among
these problems, women repayment loan on time is the most challenging one.
In Guba-Lafto Woreda, there are multipurpose agricultural cooperatives. These cooperatives give
various functions for the members and the society as a whole. The cooperative provide agricultural
inputs such as fertilizer, seeds and chemicals, and distributes these inputs at reasonable price. In
addition to this, the cooperatives provide consumer goods with a reasonable price and also the
cooperatives purchase different agricultural products from the farmers at a competitive price and
the farmer’s gate profit from the cooperatives based on the amount of their supply.
Multi-purpose agricultural cooperatives provide different agricultural inputs through loan to its
members and others. However, cooperatives have faced serious problems of loan recovery. The
cooperatives get loan through unions and the union‟s access loan from Commercial Bank of
Ethiopia through the guarantee of the regional government.
Multi-purpose Agricultural cooperatives expected to support the agricultural sector for the
achievement of growth and transformations desired form this sector. But to contribute its part and
to give better service for the members and for the society as a whole, the cooperatives are expected
to improve their loan recovery performances.
The North Wollo Zone, the Regional Government and non-governmental organizations extend
loan facilities to narrow the gap between the required and the owned capital which help to use
improved agricultural technologies that would increase production and productivity.
However, there is a series loan repayment problem in the rural parts of Guba-Lafto Woreda. For
instance, according to North Wollo cooperative promotion accountable office official fourth
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quarter report (2019) about 24 million birr loan was not repaid. Moreover, out of the total loan
finance distributed by different organizations for the last decade, almost 90% of has not been
returned. The review of literature has shown that there are theoretical and empirical gaps. The
direct link between the causes of poor loan repayment and the level of loan repayment performance
has not been shown. Therefore there is a need to close the gap and this is exactly what this study
aims at.
1.3 Research Questions
1. What are the status financial performances of multipurpose agricultural cooperative?
2. What are the main demographic socio-economic and institutional factors influencing loan
repayment of rural women in the study area?
3. What are strengths & weakness of multipurpose agricultural cooperatives compare to other
financial institutions?
1.4 Objectives of the Study
The general objective of his study was to examine the main factors influencing loan repayment
among rural women based on cooperatives’ multipurpose agricultural cooperatives members in
Guba-Lafto Woreda.
1.4.1 The specific objectives
To assess the financial performances of multipurpose agricultural cooperatives with
respect to loan provision and repayment
To identify the demographic, socio-economic and institutional factors influencing loan
repayment of rural women;
To examine the strength & weakness of rural multipurpose agricultural cooperatives with
respect to credit provision.
1.5 Scope and Limitations
The study is delimited to rural parts of Guba-Lafto woreda. It focused on performance of rural
women in loan repayment from saving and credit cooperatives’ and concentrated on evaluating the
socio-economic and institutional factors that were associated with loan repayment. The restrictions
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of this study were mainly attributed to time, money, cross sectional data and trustworthiness of
interviewees’ data on their personal.
1.6 Significance of the Study
This study attempted to assess the factors affecting loan repayment among rural women in the
Guba-Lafto woreda. The result of this study will provides information that will enable effective
measures to be undertaken to increase loan repayment and for rural women credit packages to be
effective. It will also enable lenders such as non-governmental organizations and policy makers to
have information as to where and how to channel efforts in order to minimize loan defaults. The
study is also expected to contribute towards better credit management with possible pay-off in
improved loan repayment.
1.7. Organization of the Thesis
The remaining parts of the thesis are organized as follows. Chapter two presents review of literature
that includes definitions of concepts, the need for credit, overview of the financial system in
Ethiopia and empirical studies on loan repayment performance. Chapter three presents the research
methodologies employed in the study. Results obtained are presented and discussed in detail in
chapter four. Finally, chapter five presents’ policy implications of the research.
CHAPTER TWO
2. LITERATURE REVIEW 2.1 Definitions and Concepts
2.1.1The Definition of Savings and credit Cooperative
Savings and credit cooperative societies (SACCOs), sometimes referred to as financial
cooperatives, are an autonomous association of persons united voluntarily to meet their common
economic, social and cultural needs and aspirations through a jointly owned, democratically
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controlled enterprise (International Cooperative Alliance, 1995; International Labour
Organization, 2002; Cheruiyot et al., 2012). Financial cooperatives are member-owned
cooperatives with the mandate to mobilizes savings and provide access to affordable credit to
members as a way to assist their socioeconomic well-being. In financial cooperatives, the members
are simultaneously owners and clients (ICA, 2013; USAID, 2005), and the cooperatives are formed
on common bonds, either community bonds or occupational/association bonds. The common
bonds are used as security because they ensure that members have a sense of identity, mutual
concern, cooperation, loyalty and trust
The theorist Lysander Spooner was stated that the historical initiation of Micro financing service
was traced back in the middle of 1800‟s. Consequently he wrote the impact of the credit schemes
on the target entrepreneurs and farmers while targeting the poor peoples to get out of the poverty.
Meanwhile, the modern industry of microfinance service has been initiated since 1970 by Grameen
Bank of Bangladish and pioneer Mohammed Yunus. Shore bank was the first microfinance and
community development bank founded 1974 in Chicago. According to Prof. Mohammed Yunus
and Grameen Banks phrases, an improvement in the economy and social welfare could partly
realized through delivering micro-credits to the poor people (Microfinance and Micro-credit,
2016).
The first credit and saving cooperatives were established in the mid - 19th century, mainly in
Germany. Two men are considered as the founding fathers of the credit cooperative movement:
Herman Schultz- Delitsche, who formation credit cooperative for minor artisans and the urban
middle classes, and Freidrich Reifeisen, the founder of the rural credit cooperative. In Italy, Luigi
Luzzatti established credit cooperatives which combined the principles well-known by his two
German predecessors. After the consumer cooperative, the credit cooperative is the most common
type of cooperative to be found in the modern world, including the Third World. This form of
cooperative has been established in both rural and urban areas by labor unions and other
organizations, including government bodies. Because of its very abundance, it provides an answer
to the most pressing need of large groups of people: the necessity of obtaining monetary credit for
various purposes (Gallo Z, 1989).
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Hor Kimsay (2011) reported that microfinance institutions were established originally as a nonfor-
profit making financial schemes that had particularly serves the poor (low-income groups of the
society) at rural areas. As it was reported on this module, through time it was believed by some
peoples in Cambodia that serving those poor peoples as non-profit making institute has its own
impact on the financial sustainability of these MFIs to realize that the services would address a
wide range of poor peoples in the country. As a result MFIs in the Cambodia has reviewed their
credit scheme and tried to marginalize the services by commercializing their credit schemes at
lower interest rates than commercial banks. The reason for transforming the MFIs service into
commercial is to bring the transparency of the financial services, increasing the confidence of
donors and investors and to ensure that MFIs are financially sustainable to serve wide range of
poor societies which demands financial services.
Moreover, the author stated that the average loan sizes of MFIs were steadily increased from time
to time based on the repayment experience of borrowers. However through periods an increase in
number of clients served and average loan sizes experiences some defaulted loans over couple of
few years that leads the microfinance practitioners to review their implementation mechanisms
and needs of new credit assessment methodologies that emphasizes on the micro and small scale
Enterprises (MSE). The assessment was focused on the cash flow assessment of borrowers rather
than the collateral requirements which may fulfill the needs of MSE‟s. An increase in the average
loan size and change of loan approach to MSEs was the result of the increased capacity of lending
larger loan size by MFIs (Hor Kimsay, 2011).
Microfinance institutions in developing countries have a great contribution in reducing poverty. It
has been proved that microfinance service can be viewed as a developmental strategy implementer
that intended to empower poor women entrepreneurs, to initiate their businesses and providing
them awareness on how to manage their assets and its related risks (Abdulfettah,
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2013). Furthermore, the availability of these micro-credits schemes and other financial schemes
increases the number of enabled young poor groups which have been organized in the form of
micro & small scale enterprises. This in turn will creates a great employment opportunities for the
poor young societies which have been lacked with financial sources at national level (Abdul Fattah,
2013).
A cooperative society is defined by the Cooperative Societies Act, (Birchall, J.2003) as an
association of persons who have voluntarily joined together for the purpose of achieving a common
need through the formation of a democratically controlled organization and who make equitable
contributions to the capital required for the formation of such an organization, and who accept the
risks and the benefits of the undertaking in which they actively participate.
In contrast, all microfinance institutions are intended to provide financial services in the absence
of any collateral values unlike the formal commercial banks by delivering various microfinance
schemes such as; micro credits, saving mobilization and provision of insurance schemes to the
poor. The major objectives of these microfinance services are to strengthening the economic bases
of the low-income generating activities of the poor peoples who are living in the rural and urban
areas of the country (Fikirte, 2011).
Repayment performance of borrowers can be affected due to various factors. An economic theory
suggests that a flexible repayment schedule set by the lending institutes can benefits borrowers and
potentially enhances their capacity of repaying their debts. On the contrary, MFIs practitioners
believed that high repayment recovery rate can be realized through maintaining the regular
repayment time schedules (Abdulfettah, 2013)
2.2. Loan Repayment Performance of borrowers
According to various researchers, microfinance institutions loan repayment performances can be
influenced by a number of factors identified as borrower’s characteristics and lender’s lending
characteristics. The lending approaches of microfinances can be classified as group-based
approach and individual-based approach. A common characteristic of group lending approach is
that the group obtains the loan under joint liability, where each member in a group is responsible
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for repayment of loans of his or her peers. Screening of the viable loan applicants, monitoring the
individual borrower’s efforts and enforcing repayment of their peers‟ loan among the members
are listed as the major characteristics of group-based lending approaches (Zeller, 1996 as cited in
Abafita, 2003)
Individuals are supposed to select those whom they trust to form a group with; that is they are more
interested to form group with those whom can make regular repayments and have a good concern
about the possible loss they face in case of non-repayments (Abafita, 2003). In most of the cases,
in group-lending approaches the functions of screening, monitoring and enforcement of
repayments are mainly endorsed to the group members than the lending institutes (Abafita, 2003).
Furthermore, in addition to the above benefits from group-based lending approach, commitment
of the borrower to feel indebtedness to the obligation they entered into is an exemplified character
of borrowers for on-time loan repayment performances (Florence & Daniel, 2014).
2.3 SACCOs
SACCOs is an acronym for Savings and Credit Cooperative Societies. It is a cooperative which
encourages its members to save money and enables them the obtain loans they may need for
various purposes from their collected savings. This definition provides an indication of the two
main tasks of the cooperative.
The first task is to enable members to save their money on a regular basis, or according to their
needs. The member saves his/her money within the context of the cooperative. Knowing that
he/she will receive a suitable return for his effort, in the form of interest on his savings.
Accordingly, in order to encourage savings, it is wanted to pay members interest at a higher rate
than that obtainable at any other type of financial institution. The member will then realize that it
is choice to save with his/her own cooperative. Cooperatives in many countries make the mistake
of paying interest on their members' savings at a lower rate than that accessible elsewhere (Aredo,
D. 2013).
The second task of the cooperative is to grant loans to its members. Loans are arranged from the
members' accumulated savings. Obviously, not all the members can take out loans, or obtain them
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immediately or simultaneously. Members are granted loans in accordance with their seniority
within the cooperative and the amount of their savings. Generally speaking, the size of loans
granted from the cooperative's fund is governed by the liquidity regulations of the country in which
it is located. Clearly therefore, the size of loans granted to members does not exceed the total of
their savings. But there are some exceptional cases where the cooperative serves as an intermediary
for obtaining additional credit for a member. This subject will be discussed more extensively later.
The member pays the (cooperative) fund interest on the credit his/her receives. The rate of interest
will be lower than that at other, commercial financial institutions, for this is part of the service the
cooperative provides to its members.
2.4. History of Savings and Credit Cooperatives in Ethiopia
Cooperation is the way of life of Ethiopians and has a long year of experience as a tradition. This
Cooperation may be facilitated by cultural or religious organizations that make the population
bring together. For example, Iddir /focuses on funeral celebration/, Ikuib /which helps for saving
money and self-help to the members/, and Debo / which is focused on the cooperation on labor
peak times like in the time of harvest, wedding , etc./.
Modern cooperative in Ethiopia was started at the time of Emperor Haile-selasie first in 1961 by
Decree number 44/1961 and later on a proclamation were enacted on 1966. With all shortcomings,
this legal ground gave inputs for co-operative development in the country. During the Dergeue
regime, tremendous efforts were exerted to organize different types of co-operatives in line with
proclamation No.138/1983. During this time, co-operatives were mainly organized to transform
rural economy to the socialist style rather than benefiting their members. In this process,
internationally accepted co-operative principles were violated which consequently led to the
dissolution of co-operatives and devastation of their properties during the transition period.
(Dagnew Gessesse, 2004)
However, the recent enactment of co-operative society proclamation No.85/94 and
No.147/98Created fertile ground for restructuring the previous co-operatives and organizing new
ones, in line with the new market oriented economic policy of the government, EPRDF .
Savings and credit cooperatives in Ethiopia have no very long origin. The first savings and credit
cooperative in Ethiopia was established in 1964 by employees of Ethiopian Airlines and the
initiative of interested individual Ethiopians who have foreign countries exposure and peace-core
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workers of foreign citizens. During the same period, savings and credit cooperatives were
established by employees of Ethiopian Road Authority and the Telecommunication Agency
(Dejene, 1993).
Until the year 2001, there was no a saving and credit cooperative society in rural Ethiopia. The
first rural savings and credit cooperative society in Ethiopia is Hidu primary savings and credit
cooperative society. It is found in Oromiya Regional State, East Shewa Zone, and ‘Errer’ Woreda
at ‘Hidu’ farmers association (Kebele).
2.4.1 RUSACCOs in the Amhara Region
RUSACCOs are rural member-owned organizations with governance and operating procedures
defined by their by-laws. Currently there are 3,050 RUSACCOs operating in the region. These
RUSACCOs have a membership size of 598,454 out of which are 388,861 male and female.
209,593.
The general assembly, the management and board of directors are in charge of day-to-day
activities. Some RUSACCOs have employed staff and are managed by a management committee.
Other committees are the control committee, loan, saving, education and dispute committees. Low
skills and weak incentives for committee members limit sound management and growth.
2.5. Organization and Management of SACCOs
The organizational structure of a typical primary saving and credit cooperative society in Ethiopia
is shown in Figure 1. The organization and management of SACCOs essentially follow the
cooperatives principles.
The ‘democratic member control’ principle of cooperatives allows for all management functions
to be delegated to an elected management committees and to hired nature; (ii) regional cooperative
societies found in two or more regions; and (iii) the union cooperative Societies organized by the
union of different cooperative societies (Proclamation No. 274/2002).
Management while the source of power remains with the members of the cooperative. SACCOs’
day-to-day management rests with different committees. These are: Management Committee,
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Control Committee, Loan Committee, Saving Committee Training and Education Committee
Arbitration or dispute resolution committee.
2.6. Empirical Studies on Loan Repayment Performance
Loan repayment show is affected by a number of socio-economic and institutional factors. While
some of the factors positively influence the loan repayment, the other factors are negatively
affecting the repayment rate. Regarding to the loan repayment performance of borrowers several
Studies have been conducted in many countries by different authors. Some of the studies are
summarized below.
2.6.1. Empirical studies in Ethiopia
A recent study by Fikirte (2011), Samuel (2011) indicated that age, education, income, loan
supervision, suitability of repayment period, availability of other credit sources and livestock
holding are important and significant factors that enhance the loan repayment performance of
borrowers, while loan diversion, celebration of social ceremonies, household size and loan size are
found to significantly increase loan default. The study also revealed that being female and business
experiences of the borrower were found to be significant in enhancing loan repayment performance
of borrowers.
A study conducted by Diribsa (2010) on determinants of members’ loan repayment in Ambo
Farmers ‘Cooperative union revealed that educational level, livestock ownership , interest rate,
distance of market ,experience with credit use, sources of income, land ownership and sex of
member were important factors influencing loan repayment in cooperatives.
Abebe (2011) examined determinants of credit repayment and fertilizer use by members of
cooperatives in Ada district, Oromia Region, Ethiopia. Tobit model was employed to identify
factors influencing loan repayment performance of the households. The result of the model showed
that family size, livestock ownership, on-farm income, non-farm income and saving habit were the
statistically significant factors influencing timely loan repayment performance positively
Brehanu and Fufa (2008) employed probit and logit regression to study the determinants of loan
repayment rates for agricultural loans among small-scale farmers in Ethiopia. In the study, they
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found that borrowers with larger farms, higher numbers of livestock and farms located in a rainfall
area had a higher capacity to repay loans, since all those factors increased the farmers’ productivity
and income. The study also found that borrowers who had extra business income and were
experienced in using agricultural technology had a good repayment performance.
Million et al. (2012) studied factors affecting loan repayment performance of smallholder farmers
in east Hararghe zone, Oromia, Ethiopia using a tobit model. The result of the model showed that
agro- ecological zone, off-farm activity, production loss, informal credit, celebration of social
ceremonies, number of contact days of the farm household head with extension agents and loan
income ratio, determined repayment performance.
Brehanu and Fufa (2008) employed probit and logit regression to study the determinants of loan
repayment rates for agricultural loans among small-scale farmers in Ethiopia. In the study, they
found that borrowers with larger farms, higher numbers of livestock and farms located in a rainfall
area had a higher capacity to repay loans, since all those factors increased the farmers’ productivity
and income. The study also found that borrowers who had extra business income and were
experienced in using agricultural technology had a good repayment performance.
Bekeleet al. (2005) studied the socio-economic factors influencing repayment of agricultural input
loan in Ethiopia using a logit model. The result of the model showed that total livestock holding,
the amount of loan taken by households, off farm income by member of the household, yield loss,
grain production and timeliness of input supply, were became significant variables
As study founded by (Degu Addis, 2007) indicated that socio economic variables such as age,
family size, resource ownership and expenditure pattern affects the decision of household savings
significantly.
Studies done so far as mentioned earlier concentrated more on a rural women Savings and Credit
Cooperative loan repayment. This study therefore tries to narrow the research gap paying particular
attention to factors influencing loan repayment rural women saving and credit cooperatives loan
that lead members to be defaulters.
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2.7 Conceptual Framework
The conceptual framework in diagram 1 shows the relationships between the independent and
dependent variables. The researcher conceptualizes the given independent variables that influence
loan repayment of the rural women in saving and credit cooperatives in diagram 1 as below.
Diagram1: Conceptual framework of factors affecting loan repayment rural women
Economic factors
Livestock
price
Returns from
actions
financed by
the loan
Returns
from other
sources
Participation
on voluntary
Loan
amount
Dependent variable
Loan repayment
SACCOs
Institutional
factors
Loan control
Appropriaten
ess of
repayment
Demographic & cultural
factors
Age
Marital status
Education level
Celebrate on social holidays
Family size
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CHAPTER THREE
3. RESEARCH METHDOLOGY 3.1 Description of the study area
3.1.1 Location and Area Description
The studies were undertaken in Gubalaffto worda which is one of the 14 woreda’s of North Wollo
administrative zone in Amhara National Regional State (ANRS). The woreda covers a total area
of 931.0km2and located at the distance of 120 km from Dessie and 2km from the capital city
Woldiya.
According to 2016 projection population of Amahra region finance and economic office, the
population of the Woreda is estimated to 154,323 are living in rural kebels & the remaining 9,114
are urban dwellers. Among the rural dwellers, 79,490(51.51%) are males and74, 833 (48.49%)
females. The altitude of the Woreda ranges from 1325 to 882masl. The Woreda is divided in to
three agro ecological zones namely, Kolla (lowland) accounting about 17%, WoynaDega
(midland) accounting for 46% and the remaining 37% is Dega (highland) (Gubalafeto Agriculture
and Rural Development office 2016report).
Topographic conditions vary between flat (20%), rugged (35%), valley (15%) and hilly (3%)
conditions. The Woreda receives a bi-modal type of rainfall that occurs in the periods from
February to May (known as ‘belg’ or short rainy season) & from July to end of November (known
as ‘Meher’ or the main/ long rainy season).The average rainfall of the woreda (20062008) ranges
from 650-1000mm (HWAO 2010). Consequently, out of the 38 rural kebeles 12kebeles both meher
and belg producing areas whereas the remaining 26are meher producingkebeles. Both seasons are,
characterized by a variability of rainfall in amount and distribution, which in turn critically affect
the planting and production of most agronomic crops.
3.1.2Farming system
Farming system in the study area is mixed largely depends on rain fed subsistence agriculture,
mainly on cultivation of field crops, of which cereals mainly take the dominant ratio. The major
crops cultivated are teff and sorghum, but crops such as barley, maize, peas, and wheat are also
grown. Furthermore, farmers having irrigable lands also cultivate horticultural crops such as onion,
cabbage, tomatoes & coffee as well as sugarcane and orange. (Nwgwrdao, 2016)
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Field crops are primarily produced for home consumption, while horticultural crops are cultivated
as cash crops. In addition to crop production, farmers are also involved in livestock production
consisting of mainly cattle and small ruminants. Cattle production is not as wide spread as small
ruminant production because of inadequate grazing lands. Apart from crop and livestock, wage
labor, firewood and charcoal sale are the source of incomes for the rural women. Migratory labor
opportunities are also available mainly out of the woreda and extended to other main towns and
Arab countries. Engagement in various types of trading activities is an important supplementary
occupation for many households of the study area which include marketing different kinds of
agricultural (grain and animals) and consumer goods; handicrafts of several types (Nwgwrdao,
2016)
3.1.3 Farmer’s cooperatives
North Wollo zone administration’s cooperative promotion accountable office 2008 annual report,
there are 18 kinds of cooperatives, members of farmers’ and 127,291,571.91 capital cooperatives
in rural and urban cooperatives. Gubalaffeto cooperative promotion accountable office 2016.There
are 5kindsof cooperatives, members of farmers’ and capital cooperatives. Those cooperatives
are engaged in different kinds of streams Table 1. Kinds and numbers of cooperatives Gubalaffeto
woreda
No.
kind of the cooperative
Number number of its members Capital
male Female Total
1 Saving and credit cooperative 38 5407
1617
7024
728,706.61
Source, Nwzgwcop, 2019 annual report
The sampling design According to the data obtained from Gubalaffto Woreda cooperative promotion bureau there are
38 registered primary saving and credit cooperatives .From those38 primary saving and credit
cooperative are in rural. This study is about rural saving and credit cooperatives.
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3.2 Sample size determination
A simple random sampling procedure was adopted for the selection of the sample households who
are the member of RUSACCOs in the woreda. The sample size for the study is determined by a
simplified formula suggested by Yemane (1967).Sampling of error 0.09 Because of time, resources
and accessibility limitation to address all cooperatives.
The Yamane formula for determining the sample size is given by:
n = N / (1 + Ne^2)
Where
n= corrected sample size,
N = population size, and
e = sampling of error 0.09.
Accordingly, the sample size or number of respondent needed for the study is calculated as follow,
n = N / (1 + Ne^2)
n=1617/ (1 + 1617(0.09)2
n= 114.699560
n= 115
3.3 Sampling technique
In the 2019 fiscal year report there were 38 saving and credit cooperatives in the Gubalaffto woreda
from 38 RUSACCOs found in the Gubalaffto woreda from the total RUSACCOs found in the
district, 3 were selected randomly. Out of 1, 617 total member’s households of RUSACCOS 115
sample members of households were selected randomly using probability proportional to size
sampling technique. Concurrently, 25 committee members, from the sampled RUSACCOs, were
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selected for focus group discussion (FGD) and 5 professionals from Woreda cooperative office
were selected as key informants (KI).
Table: 1 Sample primary cooperatives of sampling members: Woreda Cooperative Promotion
Office
No RUSACCOS Total Members of
RUSACCOS Sample size
1 Saknqa 650 47
2 Beqalo maneqia 402 29
3 Doro geber 565 39
Total 1617 115
3.4 Methods of data collection
For this study both primary and secondary data sources were used. Primary data were collected
from the sample SACCO women members using questionnaire. Personal observations focus group
discussion and key informant interview were the primary data collection methods. Secondary data
were gathered from SACCO reports and records of DAs, woreda cooperatives report, audit report
RUSACCO. To collect the data in the proper manner enumerators who are responsible and familiar
to the culture of the area will be assigned for each Sacco and training will be given. The training
will focus on how to approach and ask the respondents and how to collect data using the
questionnaire. The researcher was visit each enumerator every day and crosschecking has been
made when there is mistrust of any error.
3.5 Methods of Data Analysis
In the literature review part, several descriptive and econometric models that have been used to
analyze factors influencing of loan repayment. This section presents descriptive and Econometric
analytical techniques that were used in this study.
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3.6 Descriptive statistics
A descriptive analysis was employed to examine socio economic and institutional characteristics’
of the respondents. Under this method of data analysis, descriptive statistics including mean,
standard deviations, frequency, percentages, etc. were used to summarize and describe the socio-
economic characteristics of the respondents .These are inferential t-test and chi-square tests were
used to compare the defaulters and does not defaulters in terms of different explanatory variables.
3.7 Econometric model
Loan repayment is a dependent variable, while different socio-economic and lender related factors
are considered as independent variables. In this study, the dependent variable assumes
Values 0 and 1, which is 1 if the debtor is a defaulter and 0 if the debtors does not defaulter.
Therefore, loan repayment is treated as dichotomous dependent variable. Loan repayment is,
therefore, a non-continuous dependent variable that does not satisfy the key assumptions in the
linear regression analysis.
To examine the factors affecting the loan repayment, discrete choice model should be used. Thus,
the most widely used and appropriate qualitative response models are the logit and probit models
(Verbeek, 2008).
According to Gujarati (1995), the logit model follows the maximum likelihood estimation
technique, and assumes that the random variable follows the normal cumulative density function.
It means that the likelihood of an event to occur happens when the utility exceeds certain critical
thresh hold level.
Logit and probit models are used for binary response variables. These models have some
advantages over the linear probability model: fitted probabilities are between zero and one and the
partial effects diminish (Wooldridge, 2000).
Linear Probability Model (LPM) is plagued by several problems such as non-normality and
heteroscedasticity of the error term, possibility of the dependent variable lying outside the 01range
most importantly it assumes that the mean value of the dependent variable is linearly related with
the explanatory variable, that is the marginal effect of the explanatory variable is remaining
constant throughout, which seems patently unrealistic (Gujarati, 1995).
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3.7.1 Specification of the Logit Model
According to Maddala (2001), the usual logit model can be used without any change even with
unequal sampling rates. Logit is the natural logarithm. By taking the aforementioned justifications,
logistic model is selected for this study. Econometrically the Cumulative logistic probability is
here by shortly specified.
The specification of the Logit model is;
Pi = F (Zi) =F (α+Σ β iXi) = 1/ 1+ e-zi……………………………1
Where, Pi is the probability that an individual will make a certain choice (default or does not
Default) given Xi e denotes the base of natural logarithms, which is approximately equal to
2.0718;
Xi represents the ith explanatory variables; and α
and βi are parameters to be estimated
Hosmer and Lemeshew (1989) pointed out that the logistic model could be written in terms of
the odds and log of odds, which enables one to understand the interpretation of the coefficients.
The odds ratio implies the ratio of the probability (Pi) that an individual would choose an
alternative to the probability (1-Pi) that he/she would not choose it.
(1-Pi) = 1 / 1+ezi ……………………………………………………….. (2)
Therefore,
(Pi) = 1+e-zi = e zi …………………………………………………….. (3)
(1-Pi) 1+ezi
Or,
(Pi) = (1+e-zi) = e (α+Σ β iXi) ………………………………..………… (4)
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(1-Pi) (1+ezi)
Taking the natural logarithm of the equation (4)
Zi= Ln (Pi) = α+β1X1+ β2X2+…+ β
MXm…………………………………………………….. (5)
If the disturbance term (Ui) is taking into account, the logit model becomes
Zi= α +Σm β iXi +ui…………………………….…………………………………….. (6)
3.8 Hypothesis and Definition of Variables
Explanatory variables for this study are selected and hypothesis of this study is recognized based
on the literature reviewed, discussion held with stakeholders, and the researcher’s Knowledge on
the study area. Definition and brief explanation of the explanatory variable selected for this study
and their Likely factors influences on loan repayment are presented below.
The dependent variable of the logit model: The dependent variable of the model is loan
repayment. It is a dummy variable which has a value of 0 if the debtor repays all amount of loan
it took from the specific saving and credit cooperative on the loan pay on time and 1 if failed to
do so.
The independent variables of the model: The independent variables of the model are those which
are hypothesized to have an association with loan repayment show? The potential explanatory
variables which will hypothesize to factors influencing loan repayment show of rural women are
explained below.
Age /AGhh/: It is a continuous variable measured by total number of years from the respondent’s
birth until the examination conducted. The household’s age is hypothesized to have positive
association with farmers’ loan repayment show. As the age progress, farmers ‘experience,
knowledge, stability and honesty which in go might assistance them to collect wealth over time
which would enable debtors to repay their debt in time than young borrowers. Fikirte (2011) noted
that with increase in age, it is usually expected that borrowers get more stability and experience on
their business.
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Family size (FA-SIZ): Refers to the number of people under the similar roof. The larger the
household members, the more the labor force available for production determination. Therefore,
there is a possibility to have more alternative sources of income to overcome credit risk. Based on
this, families with adequate labor-force would be expected to low probability of defaulting. On the
other hand, large family size may imply self-insufficiency in terms of food consumption because
large family consumes more than do small households. This is usually true if the dependency ratio
of the household is large. Therefore, the effect of family size, on formal loan repayment capacity
may be unknown a prior. Besides, because large family size implies more consumption
expenditure that will be not on time for loan repayment. In this case, we expect a negative sign for
the variable (Abraham, 2006; Samuel, 2011).
Marital status /MATS/: It is represented by 0 if the respondent is married while she took her last
loan and 1 if she is single. It is assumed that married households are more established and
responsible for social values than the rest of the groups. In addition married persons believe that
the value of their occupational show is highly consequential as far as making a good family is
concerned. As study (Marziehet al., 2013) stated that married households are more economically
developed than single households. Therefore, married cooperative members expected to have a
positive effect on the magnitude of savings.
Education level /EDULE/: This is a categorical than example Uneducated, below high school ,
Certificate, and College variable measured by level of formal education accomplishment. It is
assumed that educated debtors may acquire better awareness in choosing a money-making
business, could have better market information, and exposure to technologies. Thus, it is
predictable that it will have a positive influence on loan repayment. A more educated client is
expected to use the loan effectively as compared to a less educated one. In line with this, educated
borrowers may develop the entrepreneurial skill and they may engage in a new business (Pasha
and Tolosa, 2014).
Celebrate on social holiday’s /CSCOH/: This is a continuous variable measured by the total
amount of money spent (in Birr) for celebrating different types of social holidays like wedding.
This variable is hypothesized to have a negative influence on loan repayment as it is nonproductive
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expense. . Performance. Besides, because more consumption expenditure hence may erode the
fund that will be available for loan repayment. In this case, we expect a negative sign for the
variable (Abraham, 2006; Samuel, 2011).
Participation on voluntary saving /PVSA/: A type of saving produces applied by saving and
credit cooperatives in which members are invited to save money voluntarily, and allowed to
withdraw it freely upon their request. It is a dummy variable which is represented by 1 if the
respondent has voluntary saving and 0 otherwise. Those members who are involved in such
activities can easily pay their loan back from what they saved. Therefore, it is hypothesized that
this variable positively influences loan repayment.
Loan amount /LOANT/: This is because the borrowers have enough funds to finance their
business that makes them get more profit and increase their business profile (Nawai and Shariff,
2012; Pasha and Tolosa, 2014).It is a continuous variable measured by the total amount of money
(in Birr) accessed as a loan from the cooperative. An efficient amount of loan which equals with
the arranged business plan can create favorable situation for the debtor to use it appropriately and
repay it back. But, if the disbursed loan size is below or above the required, it will lead to diversion
of the resource to other activities or mishandling respectively. Thus, this variable may have
positive and negative indication.
Agro ecologic differentials /AGEO/:The area is divided into two which are dega and Woynadega
areas, which are represented by 0 and 1 respectively. As the life of farmers is highly connected to
nature and most of the farmers are engaged in agriculture correlated activities the amount of rainfall
will meaningfully influence their activities. Thus, those debtors from areas with relatively better
rainfall are expected to have a better loan repayment show. Amare (2005) found that being a
residence of adequate rainfall area will increase the probability of not becoming a non-defaulter.
Appropriateness of repayment time/ APPRTI/: It is a dummy variable which takes 1 if the loan
repayment dated is appropriate and 0 if not. It is expected that suitable repayment dated could help
debtors benefit from the loan investment properly, gain income and pay the loan back on time.
This variable is hypothesized to have a positive influence on loan repayment. Timely disbursement
of loan increases the borrowers’ loan repayment ability. Therefore, this positive precondition
enables borrowers to enhance better loan repayment performance (Pasha and Tolosa, 2014)
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Loan supervision/LOSU/If there is a continuous follow up and supervision visit to evaluate the
loan utilization and repayment, this makes borrowers to observe their obligation and improve the
proper use of the loan thereby improving repayment performance. Therefore, we expect a positive
relationship. If the lender provides training facilities, the clients will be able to understand the rule
and regulations easily. They also develop skill on how to do a business and money utilization
(Fikirte, 2011). Pasha and Tolosa (2014) also agree on the importance of well-organized and
sufficient training so as to improve loan repayment performance.
Income from on farming activities /INCONFAA/: In addition, if the business plan of the creditor
is profitable, it will contribute to timely repayment of the loan. Hence, this variable is expected to
have a positive sign. Total annual income earned from sale of agricultural products, petty trade,
off-farm activities, and livestock products by improving its productivity to secure the members’
basic needs and gradually to change the household members’ life style. As (Abdelkhalek et al.,
2009) stated that annual income positively affects the saving level of the household.
Income from off farming activities /INCOFFRAA/: It includes any income gained from
activities or sources other than the provided loan. Such sources of income are hypothesized to have
positive impact on loan repayment show. It is a dummy variable which is represented by 0 if the
respondent has other sources of income and 1 otherwise. It is believed that respondents’ additional
source of income could influence loan repayment performance of clients. This is because
borrowers could have enough funds to finance their business that makes them get more profit
(Firafis, 2015).
Timeliness of loan issue /TMILOIS/: Timely disbursement of loan increases the borrowers’ loan
repayment ability. Therefore, this positive precondition enables borrowers to enhance better loan
repayment performance (Pasha and Tolosa, 2014).It is a dummy variable which takes 0 if the loan
is distributed on the right time which is demand by the debtor and 1 if not. It is predictable that
those loans which are distributed on the right time will make the creditors gain revenue from their
business which in turn leads them to pay their credit on time.
Loan diversion /LONDIV/: Sometimes debtors may distract the loan from the proposed business
and use it for consumption. This type of act may lead debtors to be defaulters. It takes the value of
0 if the loan is not distracted to consumption purpose and 1otherwise.In addition, Gerald and
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Deogratius (2013) have also concluded that loan diversion negatively influences loan repayment
show.
Livestock production /LISPRO/: This variable is defined in livestock production and may serve
as a proxy for the capacity to tolerate risks of using credit for the buying of new technology such
as fertilizer and capture wealth effect. Livestock may also serve as proxy for oxen membership,
which is important for farm operations.
The higher the number of livestock owned, the more the probability of being non-defaulter and
vice versa because a women with higher number of livestock is better-off than those with less
number of livestock. Therefore owning more livestock can help women use the debtor money on
the appropriate scheme and receive income. Thus, it is expected that this variable would have
positive influence on loan repayment performance. Amare (2005) found that total livestock
holding significantly influences loan repayment performance.
Table x Summary for independent variables, measurement scales and the
hypothesized Relationships
Variables Description of variables Variable type Unit of measurement
and expected sign
AG Age of household Continues +/-
FA-SIZ Family size number +
MATS Marital status dummy +
EDULE Education level Year +
CSCOH Celebrate on social holiday’s Continues +/-
PVSA Participation on voluntary
saving
Birr +
LOANT Loan amount Birr +/-
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AGEO Agro ecologic differentials
APPRTI Appropriateness of repayment
time
Continues No of years (+)
LOSU Loan supervision number Contact amount
INCONFAA Income from on farming
activities
Birr Amount of income
TIMLOIS Timeliness of loan issue On time pay
INCOFFAA Income from off farming
activities
number Amount of income
LONDIV Loan diversion
LISPRO Livestock production Number +/-
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CHAPTER FOUR
4. RESULTS AND DISCUSSION This chapter presents the outcomes from the descriptive and econometric analyses. The descriptive
analysis made use of tools such as mean, percentage, standard deviation and frequency distribution.
In addition were working to compare defaulters and non-defaulters group with respect to some
explanatory variables. Econometric analysis was carried out to identify the most important factors
that affect the loan repayment show and to measure the relative importance of significant
explanatory variables on loan repayment.
4.1. Demographic and Socio-economic Characteristics
4.1.1 Age of the borrowers
Table 1 Age structure of the borrowers by saving and credit cooperative
Age
Non-defaulter Defaulter Total
No % No % No %
18-35 29 53.70 39 63.93 68 59.13
36-45 12 22.22 12 19.67 24 20.87
>45 13 24.08 10 16.40 23 20.00
Source: Survey results 2020
**Significant at 0.05 per cent significance level
In the above table 1, interviewed households 39 (63.93%) were defaulters, and 29(53.70%) were
non-defaulters was found to be statistically significant, according to Fikirte (2011) noted that with
increase in age, it is usually expected that borrowers get more stability and experience on their
business.
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4.1.2 Family structure
The family size of the non-defaulters &defaulters was 40.74% and 45.90%respectively, with that
was found to be statistically significant (Table 2). The average family size of non-defaulters was
5.96, while that of defaulters was 6.33with significant difference between means.
Table 2 Family size of the respondents by borrower group
Family size Non-defaulters Defaulters Total
1- 5 19 35.19 23 37.70 44 38.26
6 - 8 22 40.74 8 13.10 27 23.48
7 - 8 7 12.96 28 45.90 35 30.43
> 8 7 12.96 2 3.30 9 7.83
Total 54 61
115
Mean 5.95 6.33 6.1
Source: Survey results 2020
4.1.3 Educational status
Respondents in terms of literacy level has shown that 53. 04% were illiterate, 36.52% could read
and write, 10.43% had attended formal education. This study it was found that there exists
significant difference between defaulter & non-defaulter in relation to education level, at 0.05%
level of significance. A more educated client is expected to use the loan effectively as compared
to a less educated one. In line with this, educated borrowers may develop the entrepreneurial skill
and they may engage in a new business (Pasha and Tolosa, 2014).
N % N % N %
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Table 3 Education level of respondents by borrower
Illiterate 28 51.85 33 54.10 61 53. 04
Read and write 22 40.74 20 32.79 42 36.52
Above high school 4 7.41 8 13.11 12 10.43
College 0 0 0 0 0 0
Mean 0.81 1.12 1.00
Source: Computed from survey data 2020
**, significant at 5 per cent significance level, respectively
4.1.4 Celebrate on social holidays
Social ceremonies such as different holidays, wedding, Religion day and funeral of family
members remained celebrated in the study area. According the study outcome, 81 respondents
(70.43percent) have informed that they was celebrated one or more of these irregular ceremonies
and 34 respondents (29.53 per cent) stated that they had not celebrated any ceremonies. These
social ceremonies have their own negative impact on the loan repayment performance of
Borrowers and force the household to use the borrowed money for consumption. However, there
is statistically significant difference between non-defaulter and Defaulter regarding the number of
members celebrate social ceremony. Besides, because more consumption expenditure hence may
erode the fund that will be available for loan repayment. In this case, we expect a negative sign for
the variable (Abraham, 2006; Samuel, 2011).
Educational level N % N % N %
Non - Defaulter Defaulter Total sample
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Table 4: Amount of money spent to celebrate holidays
Description Non-defaulter Defaulter Total
No % No % No %
Not celebrated 19 35.19 15 24.59 34 29.57
Yes celebrated 35 64.81 46 75.41 81 70.43
Mean of Expenditure 425.75 930.27 481.03
Maximum 4000 8691 8691
Minimum 0 0 0
Standard deviation 604.85 1536.56 1190.38
Source: Computed from survey data 2020
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4.1.1.5 Participation on saving & Loan amount
Table 5 Participation on saving & Loan amount
Variable Number % of borrowers Loan repayment
Mean Stan.Dev
Participation on saving
voluntary saving 34
64.67 .6466667 .4803845
Otherwise 81 80.04 .800411 .3145386
Loan amount
Adequate
34 50.14 .5014286 .5039526
Inadequate 81 90.06 .9005556 .2559923
Source: Survey results 2020
The Participation on saving had any effect on their loan repayment saving or otherwise.
Accordingly, 64.67% of the voluntary saving that it had a positive effect, while 80.04% reported
that it had a depressing effect on their loan repayment act. Representative differences between the
two was not statistically significant (Table 5)
The survey results disclose that 50.14% of the borrowers stated that the loan was adequate while
90.06 % described that the Inadequate. More specifically, defaulters informed that the loan they
established Inadequate (Table 5) .Timely disbursement of loan increases the borrowers’ loan
repayment ability. Therefore, this positive precondition enables borrowers to enhance better loan
repayment performance (Pasha and Tolosa, 2014)
4.1.6 Agro ecologic differentials
Natural disasters such as drought, pest and diseases infestation of crops and animals reduce farm
income of the household by affecting the productivity crops as well as animals. Hence natural
calamities have a negative impact on loan repayment of farmers. According the survey result out
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of the total 115 respondent’s only 40.87, 35.65% &23.48% kola, Dega and woyena Dega
respectively told as they had faced with different natural disaster especially with flood problem
and loss of animals due to disease infestation respectively. But 40.87 % kola respondents reported
as they didn’t face any natural calamity. The Chi-square value, revealing differences between the
three groups agro ecology, was no significant at0.005% significant level (Table 6). Amare (2005)
found that being a residence of adequate rainfall area will increase the probability of not becoming
a non-defaulter.
Table 6: Borrowers’ responses on of agro ecologic differentials problems
Problem of natural
disaster
Non-defaulters Defaulters Total
Number Percent Number Percent
Number Percent
Dega 21 38.18 20 33.33 41 35.65
kola 24 43.64 23 38.33 47 40.87
WoynaDega 10 18.18 17 28.33 27 23.48
Total 55 100 61 100 115 100
Source: Survey results 2020
.* Significant at less than 0.005 per cent level of significance
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4.1.7 Loan diversion
Table 7 Loan diversion & others
Variable Number % of
borrowers
Loan repayment
Mean Stan.Dev
Loan diversion
Diverted 106 90.62 0.9061538 0.367946
Not diverted 9 7.43 0.0000074 0.383141
Appropriateness of loan repayment
Positive effect 23 50.07 0.5006667 0.504006
negative effect 92 94.29 0.9428571 0.233791
supervision beneficiaries by loan committee
Yes visited 86 91.30 0.9130435 0.283835
No visited 29 64.50 0.6451613 0.486373
source of income
On farm income 40 70.55 0.7054545 0.4396203
Off farm income 75 90.33 .9033333 0.2522625
Source: Survey results 2020
Loan Diversion
Divert their loans partially or fully from the intended projects due to many reasons, which mostly
are related with the technical and marketing problems related. Loan repayment performance of the
borrowers in relation with loan diversion expressed, 90 .62 % of the sample borrowers who divert
their project due to various reasons repay their loan. And among the sample borrowers who did
not divert their loan, 7.43. % of them repay their loan. Shown on above table 7. Therefore, this
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positive precondition enables borrowers to enhance better loan repayment performance (Pasha and
Tolosa, 2014)
Appropriateness of loan repayment Period
The respondents were asked whether savings and credit cooperative had any effect on their loan
repayment performance or not. Accordingly, 50.07 % of the payees stated that it had a negative
effect, while 94.29% described that it had a depressing outcome on their loan repayment
performance. Repayment the mean saving &credit cooperative with lower repayment period and
that show unsuccessful repayment performance is 0.94% Shown on above table 7. Therefore, this
positive precondition enables borrowers to enhance better loan repayment performance (Pasha and
Tolosa, 2014)
Supervision of loan beneficiaries by loan committee
can see from above Table 7, about 91.30 % of the sample households responded that as they are
supervised by loan committee before the due date of loan repayment whereas 64.50% of the
respondents reported that as they did not supervised by any committee member. They also develop
skill on how to do a business and money utilization (Fikirte, 2011). Pasha and Tolosa (2014) also
agree on the importance of well-organized and sufficient training so as to improve loan repayment
performance.
Income sources
According to the survey result shown on, regarding their repayment loan, 90.33 % of off farm
income borrowers who have repay their loan. Who have other source of income 70.55 % of on
farm them repay their loan. On the above Table 7. As (Abdelkhalek et al., 2009) stated that annual
income positively affects the saving level of the household. This is because borrowers could have
enough funds to finance their business that makes them get more profit (Firafis, 2015).
4.1.8 Timeliness of credit.
Timeliness of credit, 90.74 percent of the non-defaulters and 96.72 percent defaulters reported that
these loan services were delivered on time and 9.26 percent non-defaulters and 3.28 percent
defaulters’ testified. Timely disbursement of loan increases the borrowers’ loan repayment ability.
35 | P a g e
Therefore, this positive precondition enables borrowers to enhance better loan repayment
performance (Pasha and Tolosa, 2014) that they were not given on time. As it is shown in table 8
There is no statistical difference.
Table 8: Borrowers’ responses on Timeliness of credit
Description Non-defaulters Defaulters Total
Number Percent Number Percent Number Percent
Timeliness credit
Yes 49 90.74 59 96.72 108 93.91
No 5 9.26 2 3.28 7 6.09
Total 54 100 61 100 115 100
Source: Survey results 2020
4.1.9. Livestock ownership of sample households
In the area, livestock are kept for various economic and social reasons. The major economic
reasons include provision or supply of draught power, generation of cash income and food. Table
8 shows livestock type held by the borrowers. It is evident that respondents in the area keep more
goats and cattle. Oxen are the most important source of draught power for cultivation of land in
the area. Amare (2005) found that total livestock holding significantly influences loan repayment
performance.
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Table 9 Average size of livestock (TLU/household) for sample respondents
TLU
Defaulter
Non
defaulter
Total
Number Percent Number Percent Number Percent
< 4 40 65.57 12 22.22 52 45.22
4-7 15 24.59 6 11.11 21 18.26
7-9 3 4.92 13 24.07 16 13.91
9-13 2 3.29 8 14.82 10 8.70
>13 1 1.63 15 27.78 16 13.91
Total 61 100 54 100 115 100
Mean 4.00 5.60 4.80
SD 4.47 6.06 4.89
Source: Survey results 2020
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4.2.2 Results of Econometric Analysis
4.2.2.1 Factors affect loan repayment of borrower
Econometric analysis was carried out in order to identify the most important and significant factors
that factor influencing the loan repayment women borrowers. For this analysis logit using
maximum likelihood estimation the parameters of the equation. Has indicate that are many
variables that affect the probability of a borrower being either a defaulter or non-defaulter.
Table 10: VIF of the continuous explanatory variables (Xj)
Variable Adjusted-R2 VIF
AGhh 0.301 1.437
EDULE 0.107 1.011
FA-SIZ 0.120 1.240
CSCOH 0.150 1.317
PVSA 0.141 1.306
LOANT 0.237 1.308
AGEO 0.108 1.101
APPRTI 0.078 1.005
LOSU 0.106 1.029
INCONFAA 0.231 1.308
INCOFFRAA 0.110 1.128
TMILOIS 0.203 1.255
LONDIV 0.109 1.333
Source: Own computation 2020
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Table 11: Contingency coefficient for discrete variables
Variable INCOFFRAA PVSA LISPRO INCONFAA
LISPRO 1 0.096 0.120 0.006
PVSA 1 0.038 0.101
INCONFAA 1 0.106
INCOFFRAA 1
Source: Own computation 2020
To determine the explanatory variables that are good of the loan repayment performance of rural
women, the logit model was estimated using the Maximum Likelihood Estimation Method. The
results of the analysis.
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4.2.2.2 The binary logit model
Table 12 the logit model
Sample size 115
Source: Survey result, 2020
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**Significantat0.05% level
4.2.2.3 Discussion on the significant explanatory variables
Out of the 13 variables hypothesized to influence the loan repayment performance of borrowers,
six were found to be statistically significant. The estimation of effects of loan repayment performance
regression model shows that education (EDULE), age of the household (AGhh), family size of the
household (FA-SIZ), social ceremony (CSCOH), amount of credit borrowed by the household
(LOANT), supervision of borrower by loan committee (LOSU), were important factors influencing
the loan repayment performance of member borrowers in the study area. More specifically, the
coefficients amount credit borrowed was statistically significant at less than 0.05 percent
probability level. On the other hand, the coefficients of 13 explanatory variables, namely income
of the household from crop (INCONFAA, INCOFFRAA), Participation on saving (PVSA), Agro
ecologic differentials (AGEO) income of the household from off-farm and on farm activity
(INCOFFRAA) and Appropriateness of the repayment period (APPRTI), number of livestock
(LISPRO) and on loan repayment were less powerful in explaining loan repayment performance
of the sample borrowers. Regarding the signs of the coefficients of variables four variables namely
Agro ecologic differentials, income of the household from off-farm and on farm activity, income
of the household from on-farm and on farm activity, Participation on saving have negative sign.
The interpretations of significant variables were present as follow.
Age (AGhh):- Thus they can perform their repay their loan on time. According to the result, there
is a positive relationship being female of falling in a defaulter. The value of 1.001 is thus
interpreted as elder borrowers had high the probability of falling in to a defaulter. Fikirte (2011)
noted that with increase in age, it is usually expected that borrowers get more stability and
experience on their business
Education/ EDULE/ : Higher educational levels enable borrowers to comprehend more
complex information, keep business records, conduct basic cash flow analysis, and make the right
business decisions. Hence, borrowers with lower levels of education may have lower repayment
rates. As per the output in Table12 being a literate borrower as compared to illiterates will have
statistical significant, higher chance of falling in to a non-defaulter category. In other words,
41 | P a g e
literate borrowers do have much lower probability of paying their loan on time as compared to
illiterates. More educated owner is expected to use the loan effectively as compared to a less
educated one (Amare, 2008).
Family size of the household (FA-SIZ), result of the study family size of the household was
found to be statistically significant. Which is interpreted as when family size increase the
probability of the household head being a defaulter will increase. This is so because of the fact
that the additional family burden as a result of higher number of dependents above the age of 62
and inactive children, puts a pressure on the borrowed capital whereby decreasing its chance of
being repaid within the time frame Besides, because large family size implies more consumption
expenditure that will be not on time for loan repayment. In this case, we expect a negative sign
for the variable (Abraham, 2006; Samuel, 2011). .
Social ceremony (CSCOH) if the borrower is experience utilize efficiently the credit for purpose.
As result in Table 12, celebrating social ceremonies increases the probability of the borrower to be
a defaulter. Besides, because more consumption expenditure hence may erode the fund that will
be available for loan repayment. In this case, we expect a negative sign for the variable (Abraham,
2006; Samuel, 2011).
Amount of credit borrowed by the household (LOANT) amount of required money borrower
get can do activity well. This is believed to change the repayment performance of borrowers and
increase their probability of default. According to the result, the effect -2.001 which is significant
for categories is interpreted as increment in the loan size makes the borrower to be a defaulter.
This is because the borrowers have enough funds to finance their business that makes them get
more profit and increase their business profile (Nawai and Shariff, 2012; Pasha and Tolosa, 2014).
Supervision of borrower by loan committee (LOSU) Norell (2001) stated the same thing that
frequent follow up and supervision by loan committee. This studies shows whether flexible or
more constant and frequent visit by loan committee always help to reduce defaulters. The
econometric logit model reveals that those borrowers receiving adequate supervisory visits by
loan committee less likely to fall in to a defaulter category.
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4.2.3 Focus Groups Discussion
The current profile of SACCOs in gubalffto woreda shows that 38 SACCOs provide their service
to 7024 members, out of which are 5407males and 1617 females. The financial status indicates the
presence of a total asset of Birr 728,706.61collected from members in the form of share capital and
saving account. Each members save monthly within a range of Birr 30 to 400. Currently these
organizations extend credit amount of Birr 1,145,105.00 dispersed to 1019 members for different
purposes.
From the FGD the following points have been summarized as merit and also the challenges that
hindered women participation in RUSACCO.
Joining for women in RUSACCO
• Saving of money in nearby area and which was being wasted easily before and in addition to
that easy to use for immediate issues like school fees and social contribution.
• Create access to woman to have money in her name since she was member of the RUSACCO,
but before all money was in the hand of men
• Since the saving was in hand of women, they have the ability to allocate the money for home
consumption, but before, some of the money was being wasted by men in town.
• RUSACOs helped women to manage the money properly, to build assets and to increase
income of the household
. • Saved from illegal interest
Easily access for getting credit (loan) with minimum interest and additional advantage associated
with dividend
• Women in cooperatives have good experience in managing the finance of the cooperative and
promoted empowerment of women.
4.2.4 Key Informants Interview
In light of the current problems of less participation of women in RUSACCO, the following
interventions should be considered to mitigate the problem:
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• Most of the currently assigned cooperative organizers /personnel/ should have basic and enough
knowledge about need of women participation in cooperatives. Because they lack the knowledge
in gender issues and cooperatives.
• At Woreda level, at planning stage and in all interventions, especially in cooperatives, the
percentage of women to be members of cooperative should be clearly indicate.
From group discussion and key informant interviews, it was understood that the majority of the
members attend the general meeting unless a problem beyond their control occurred. However,
women in most of the RUSACCO meeting did not get involved actively like men. They do not
make suggestions for the overall development of the society in the way men do. The reasons maybe
the traditional role of women in the society and the prevalent misconceptions around women’s
reproductive and domestic responsibilities and their low level of education. In the FGDs, I
understand that women by themselves were not active and not willing to share their ideas to the
Participant.
Strength
Management Committees are dedicated and keen to deliver satisfactory service.
Easy to save and borrow.
The interest rate as compare to other institution is very low.
Most of the members build their dwelling and become owner of household goods due the
presence of their SACCO.
Services are rendered with minimum cost.
Easy to become a member and to quit membership.
Corruption problem was at a minimum or none.
As much as possible they are governed according to the rules and procedures of SACCO
by-law and credit directive.
Annually undertake regular meeting with members (general assembly).
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Weakness
They have not their own office, equipment and professional employee.
Except management committee others are not actively performing their duty.
Lack of training and education to members.
All members were not present in general assembly meeting and there were not having created a
mechanism to express opinion of absent members.
Poor documentation about members profile and financial information.
Sometimes there is default problem of borrowers.
Since management committees are voluntary service providers, it is not possible to get them as
required.
Due to limitation of diversified collateral system, it is not possible to get loan unless the
borrower gets enough personal guarantors from the members.
Limited effort to attract nonmembers.
Management committees are serving for long years beyond the permitted period of time was
illegal action and it can be considered as violation of SACCOs by-law.
Accumulation of excess liquid asset in banks.
The management committee was not trying to invest the excess money in reliable financial
businesses in addition of lending to members.
The time to repay the loan is short; and it leads to loss for some business types which needs
long period to return the investment capital.
Normally pass book used as individual member’s evidence for his/her account in SACCO, but
some SACCOs take passbook from members and keep it for a long period in their office with a
reason to record the accrued interest on the pass book. But it is improper experience and will
bring a question of trustworthiness on Sacco’s operation.
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5. Women rural saving and credit cooperatives loan status
Table 13: SACCOs in Gubalffto woreda
N
o
No
of
me
mb
ers
SA
CC
Os
Total members
Amoun
t of
loan
allocate
plan
Birr
Amount of loan Birr Amount of loan
allocate
Borrower
Loan amount
repayment in
number
Loan amount
repayment in Birr
Mal
e
Fem
ale
Tot
al
5,263,2
48
Mal
e
Fema
le
Total Ma
le
Fema
le
Tota
l
Ma
le
Fe
ma
le
Tota
l
Mal
e
Fema
le
Total
1 38 540
7
161
7
70
24
449,
968.
00
695,1
37.00
1,145,10
5.00
40
0
619 101
9
40
0
20
0
600 449,
968.
00
224,6
00.00
674,5
68.00
RUSACCOs start in the gubalffto woreda because members believe they can provide financial
services at a fair and reasonable interest rate and they have no other alternative to formal financial
institutions.
RUSACCOs are rural member-owned organizations with governance and operating procedures
defined by their by-laws. Currently there are 38 RUSACCOs operating in the gubalffto woreda.
These RUSACCOs have a total membership size of 7024 out of which are 5407 male and 1617
female.
These RUSACCOs have managed to mobilize loan amounting allocate plan to 5.2 million Birr and
with a total capital share 728, 706 birr. The RUSACCOs disbursed total loans to their members
amounting to Birr 1.1 million dispersed to male 400 female 619 total 1019 members’ and amount
loan male 449,968.00 female 695,137.00 total 1,145,105.00 for different purposes. 100% of male
the non-defaulters pay on time amount loan birr 449,968.00 and 68 % of the female defaulters
not pay on time amount loan birr 470,537.00 and the defaulters women borrowed a larger in
number & loan amount compare male borrower. Were able to repay their loan on due time.in loan
during year 2011/12.
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CHPTER FIVE
5. CONCLUSION AND RECOMMENDATION
5.1. Conclusion
Access to means of secure savings and credit cooperative importance for the poor and those at risk
of becoming poor rural women. SACCOs provide credit on reasonable terms, either to render more
efficient the house hold sector (house construction and maintenance, to have furniture and goods),
to provide capital for activities, or provide resources at times of emergency. They enable the poor
to avoid dependency on moneylenders and permanent indebtedness. Based on the study the lessons
are concluded as follows.
For poor peoples in rural women, to fulfill their basic need to generate income activities to keep
up their contribution to the country’s economic development. Savings and credit cooperative for
rural women borrowers to continue getting a sustainable source of finance, borrowers have to keep
paying in accordance with loan repayment schedule. For the lending institute under consideration,
there is a serious problem of loan default, which significantly eroded the liquidity position.
From the study findings it can be fulfilled that even though many factors influence the loan
repayment performance to loan defaults, some of the factors were regarded to be of higher
effect. This is evident from the way respondents replied to questions and the analysis arising
thereof. This study has shown that borrowers factors all of which contribute to the loan repayment
performance positively or negatively impact.
Emphasis to women as defaulters statistically significantly supported by the result in this study.
A finding in this study weakness the need to treat women as credit risk.
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5.2. Recommendation
Based on the results of the study the possible policy recommendations that emanate from this study
are presented as follows.
1. As results of the study indicated illiterate borrowers have lower loan repayment
performance, then savings and credit cooperative should target them differently with prior
information that they need intensive training, follow up and monitoring on loan use.
when backed up by adult education can have unquestionable positive effect in
increasing the timely repayment .
2. Repayment of the loan. Since most of the clients are adults, trainings through informal means
can be a potential area to focus on to mitigate loan repayment problems.
3. Celebrate on social holiday’s amount of money spent for celebrating different types of social
holidays like wedding. Celebration of social ceremonies had a significant negative impact
on loan repayment performance. The social ceremonies should be minimize .Belay (2002)
found that celebrating social holiday can negatively influence loan repayment show.
4. Observed from the result that the existence of many dependents encourage exclusive burden
on the rural women and savings and credit cooperative loan repayment performance.
Macro-economic variables like family planning programs, as a long term solution, would
lower the family size attributed to clients where by increasing their chance of being a non-
defaulter.
5. Loan amount of money (in Birr) accessed as a loan from the cooperative. An efficient
amount of loan which equals with the arranged business plan can create favorable situation
for the debtor to use it appropriately and repay it back. But, if the disbursed loan size is
below or above the required, have positive and negative indication.
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Fanta Hun (2000) indicated that if the size of loan issued to a debtor is greater than his
project cost, it is possible that the debtor might spend that part of the loan proceed .which is
in excess of what is required to cover his business costs. This in turn could affect repayment
negatively.
6. Loan supervision systems were also found to be important factors that enhance loan
repayment performance. Therefore, Savings and credit cooperative credit should service
providers pay due attention on supervision of borrowers immediately after loan
disbursement to minimize the willing defaulters. Likewise, effective supervision systems
minimize the tendency of borrowers not to borrow multiple loans. Monitoring, organizing
discussion forums to understand the borrowers feeling and suitability of the lenders also
improves the lender- customer relationship thereby encouraging borrowers to stay long with
the organization and finally develop trust and sense of ownership.
7. Finally the Savings and credit cooperative should focus on the repayment challenges which
are stated by the borrowers and take corrective actions. In order to solve the internal and
external problems of the institution, the main thing might be improve the financial capacity
of the institution and expand the services and upgrade the skill of loan officers in line with
loan appraisal, loan monitoring and supervision.
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7. Appendixes
Questionaries’
The purpose of this questionnaire is to collect information on FACTORS INFLUENCING
LOAN REPAYMENT OF WOMENS’ IN RURAL SAVING AND CREDIT COOPERATIVES;
THE CASE OF GUBALAFTO WOREDA, NORTH WOLLO ZONE, AMHARA REGION.
I. Individual background
The climate zone of the Village 0.Dega 1. Weynadega 2. Kola
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Debtor’s name ______________
1. Age of the respondent__________ Years
2. Marital status?
1. Married 2. Single 3. Divorced 4. Widowed
3. Your family size is ______in number.
4. Educational level _______
0. Illiteracy 1 read and write 2. Above high school 3. College
5. If yes for Q 4, what is your level of education? ------------------------
6. What is your position in the cooperative?
1. Member 2. Member of board of directors 3. Member of control committee4. Member of loan
committee 5. Non-member
II. Income creating activities
1. The main occupation of the member is _______________________
1. on farm 2. None - farm
2. What are the most common on farm activities the member is engaged in?
1. Crop production 2. Livestock production 3. Mixed farming
3. Which of the following livestock and its products owned and sold
No Kinds of
livestock
Number of
livestock
private
Number of
produces sold
this year
Single price
in Birr
Total
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1 Cow
2 Ox
3 Camel
4 Sheep
5 Goats
6 Donkey
7 Horse
8 Chicken
Total
4. List the total annual plantation production you produce
No kinds of Crop number
produced in
Quintal
number
sold in
Quintal
cost per
Quintal
Total
1 Grains Sorghum
2 Teff
1 Vegetables Potato
2 Onion
3 Sugar cane
1 Fruit Banana
2 Avocado
3 Mango
1 Cash crop Coffee
2 buckthorn
5. Have you ever been involved in off-farm income sources to produce more revenue?
1. Yes 0. No
6. Whatkind of off-farm revenue sources did you have?
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No Kinds of income
source
Yearly income
1 little shop
2 Remittance
Daily laborer
3 Charcoal and wood
selling
7. Did you have any other sources of income which is not financed by the cooperatives?
1. Yes 0. No
8. Assessment the total annual revenue (on farm plus off farm revenue sources)
__________Birr
III. Credit provision
1. Do you have access to credit?
1. Yes 0. No
2. If your answer for question no 3.1 is yes, for how long have you been accessing credit?
____________________years
3. If you have an experience in credit use what type of credit sources you commonly used?
1. Formal credit 2. Local Credit
Please indicate the amount of credit taken and repaid with its sources
No Credit source Amount taken Amount repaid
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1 saving and credit cooperative
4. Did you take any credit last year from saving and credit cooperative in which you are?
Member?
1. Yes 0. No
5. If your answer for question no 4 is yes, what is the amount borrowed and when are yourequired
to repay it? _______________Birr and ____________date
6. What is the interest rate of the loan? __________________%.
7. If you haven’t paid all the amount of the loan on the due date, what is/ are the reason/s?
1. Weak follow up by the cooperative 2. Loan diversion3. Health problem 4. High interest rate
5. Others
8. Did you take the loan from saving and credit cooperative with any means of collateral?
1. Yes 0. No
9. If your answer for question no 8 is yes, mention the collateral systems
1. Group 2. Member3.Physicalasset 4. Others 10.
For what purpose did you use the credit?
1. Income generating purpose. 2. Consumption purposes 3. Both
11. If the credit was used for income generating activities for what activities did you used?
1. on farm activities 2. Nonfarm activities
12. Estimate the total annual income from loan financed income generating activities
_______Birr
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13. Did the saving and credit cooperative respond to your loan application on your need time?
1. Yes 0. No
14. If your answer for the question no 13 is No, what were the reasons?
1. I do not know 2. Long bureaucratic chain 3. Too many criteria needed
4. Infeasible business plan 5. Other
15. Did you found the loan repayment date in which you agreed up with the saving and
Credit cooperative suitable to repay your loan promptly?
1. Yes 0. No
16. Did you use your credit from the saving and credit cooperative for consumption
Purpose?
1. Yes 0. No
17. If your answer for question no 16 is yes, why?
1. Your accessed the loan while there was food shortage 2. Peer influence3. Misunderstanding the
loan 4. Others
18. Did you get the amount you requested from the saving and credit cooperative ampleenough to
conduct the business?
1. Yes 0. No
19. If no for the Q 18, what do you think is (are) the reason/s behind?
1. The cooperative did not approve my request
2. Price increase has affected my business
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3. My business plan was not correct
4. Other
20. How many times you are obliged to pay the loan from the saving and credit
Cooperative?
1. One time 2. Two times 3. Three times 4. Four times 5. Many times
21. What is the amount of loan you paid back on the due date? _______________
22. Did you face any problem in repaying the credit from saving and credit cooperative?
1. Yes 0. No
23. If yes for Q 22, what are the problems you faced to repay the loan on time? Orderly the
Problems from the sever to easier
Problems Rank
1 2 3
Bankruptcy
Used for consumption
Spouse pressure to use for other purposes
Unexpected health and natural disasters
Social festivals
Others (mention)
Social and institutional factors
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1. Did you participate in social ceremonies in the past one year?
1. Yes 0. No
2. If your answer for question no 1 is yes, in what types of social ceremonies youparticipated?
1. Wedding 2. Funeral ceremonies 3. Engagement 4. Circumcision 5. Religious 6. Others (specify)
3. How much money you spent for the ceremonies? _________________ Birr 4.
From where did you get the finance that you spent on those ceremonies?
1. The cooperative’s loan 2.Other loan 3. Saving 4. Others
5. Did you ever use the credit from the cooperative for celebrating social festivals?
1. Yes 0.No
7. Distance of the member’s house from the cooperative’s office ___________________km
8. Distance of the member’s house from the agriculture development agent’s office
___________________km
9. Did you save money voluntarily in the cooperative while you were engaged in thecooperative’s
loan financed business?
1. Yes 0. No
10. If your answer for Q9 is yes, what is the total amount of your voluntary saving in the
Cooperative _____________ Birr
11. If your answer for Q9 is no, why?
1. Engaged in more extravagant practices 2. Have more children3. Haven’t seen its importance 4.
Other
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12. Did your amount of voluntary saving support you in repaying your loan back?
1. Yes 0 No
13. If your answer for question no 12 is yes, in what ways?
1. able to pay the loan easily
2. Helped me to be engaged in new profitable business
3. Other
13. Did the cooperative’s loan committee or loan officer contacts you to give advice about
Your business activities in which you engaged by the loan you acquired from this institution?
1. Yes 0. No
14. If your answer for question no 13 is yes, how many times per month or year the
Cooperatives ______ per month or ________per year
15. SWOT supposed by SACCO’s
Strength Weakness Opportunities Threats
1 1
2 2
3 3
Appendix 1: Checklist for focus group discussion with management committee
1. What is the existing Status of the RUSACCOs from establishment up to the current year?
2. What are the benefits of the saving and credit cooperatives to the members?
3. What are the requirements for a member to get a loan from your RUSACCOs?
4. Discuss Education and training for members and non-members.
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Appendix 2: Key informants interview
1. Why nonmembers household not become members of RUSACCOs?
2. Discuss Women participation in the RUSACCOs as members.
3. Discuss on Factors that have been influence in the improvement of members’ savings behavior
of RUSACCOs
4. General suggestion on the members of savings behavior of RUSACCOs?
Thank you for your cooperation