The Role of Saving and Credit Cooperatives on Household Income: The Case of Endert A Woreda in Tigra Y Region
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Date
2009-02
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Addis Abeba university
Abstract
Generally, in Ethiopia, there are two types of non-banking financial intermediaries: share
company micro finance institutions, which are 23 in number and savings and credit
cooperatives, which are 4178 in number. However, as compared to the demand for the service
their coverage is very small. Although savings and credit cooperatives are user-owned financial
intermediaries, many of the savings and credit cooperatives are located in the urban area and
savings and credit cooperatives are increasingly being organized in the rural areas recently. The
research was conducted in Enderta Woreda, in Southern Zone of Tigray National Regional
State. The general objective of the study was to assess the role of saving and credit cooperatives
on household income. Based on the general objective the study tried to address specific
objectives. The specific objectives were assessing the impact af saving and credit cooperatives in
increasing the income of the household, to identify the constraints of R USA CCQ, to see the
service and growth pattern, to identify factors that can affect the participation of the household
to join RUSACCo and identify challenges of SACCO. In order to carry out the stated objectives
of the research, primary and secondary data were collected ji-om sample households and
respective organizations and analyzed using descriptive statistics and econometric model (logit
model). Descriptive statistics such as mean, standard deviation and percentage were used for
analyzing the data. In addition, t-test and %' test were employed to compare members and
nonmembers of the cooperative with respect to the hypothesized and other related variables.
Logit model was used to identify the factors influencing the participation of household in saving
and credit cooperatives in the study area. Nine explanatory variables were included in the logit
model. . Variance Inflation Factor (VIF) and Contingency Coefficient (CC) were used to check
the multicollinearity problems for continues and dummy variables respectively. Based on the
model out put, five were significant and the rest were insignificant to explain the dependent
variable. The significant variables that affect households to participate in R USA CCQ include:
annual social expenditure of household, credit taking ji-om saving and credit cooperatives, the
amount of first loan taken by the household, training, and participating in other types of
cooperatives. Besides, based on the result of weighted scored, the major constraints that affects
the pel/ormance of saving and credit cooperatives were financial constraint of the institutions
shortage of the qualified staff members, poor technical support of government officials, poor
financial capacity of members and shortage of availability of facilities. The study concluded that
the services of RUSACCQs have increasedfrom time to time, members of household income was
better than non members by the expenditure approach. Therefore RUSACCQ has a positive
effect on household income and is an appropriate option for the rural households to increase
their income. Hence, to promote such financial institutions in the rural areas in a sustainable
manner the study suggested some measures to be taken by the concerned stakeholders.
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Keywords
Saving and Credit Cooperatives