Accounting and Auditing

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Role and Potential of 'Iqqub' in Ethiopia
(A.A.U, 2008-01) Teshome, Temesgen; Yitayew, Abebe (Professor)
This paper examined the role of 'Iqqub ' with in the community. The findings show that people participate in ' Iqqub' for more than economic reasons. With in the paper two types of ' Iqqub' are identified, the Traditional small scale and simple ' Iqqub's and Emerging large scale complex' Iqqub's. The operations, number of members they incorporate, the cycle period and their fund allotment mechanisms of these two ' Iqqub's differed widely. ' Iqqub' plays a dominant role in serving the financial needs of households that are excluded from the formal sector due to bureaucratic working processes and high collateral requirements. The paper also examined features of emerging ' Iqqub' s, including safety, return, Liquidity, divisibility. The default rate as observed in surveyed 'Iqqub's is very low, implying good collateral management and loan screening in these informal financial sectors. The paper also examined the potential of 'Iqqub ' to be further enhanced to provide more services and accordingly, two potential areas were identified, based on other country's experience: Linking 'lqqub' with the formal sector and transforming it into village bank. This potential of 'Iqqub', if utilized effectively, can solve the existing problem of ' Iqqub' and makes it more attractive, however further research in this areas must be made