Effective Administration Of Credit In Co-Operative Credit Enterprises (A Case Study Of Selected Co-Operative Societies In Enugu North L.G.A)
This research is an attempt to bring to light the effectiveness of credit administration in cooperative credit society in various cooperative societies based in Enugu North Local Government Area of Enugu State.
This research has five chapters with introduction. It tells about the meaning of cooperative credit society, credit administration, the statement of problem, objectives of study, significance, scope and limitations as well as definition of some cooperative and general terms.
Chapter two, took a look at related literature review of authors about credit cooperative and credit administration, its weakness, effect of credit administration and its importance as well as problems associated with it.
Chapter three, talked about method use by the researcher in gathering information i.e. the main the research questionnaires was carried out and investigation method.
Chapter four, was about the presentation of data, the interpretation and analysis of the data obtained. It also talked about responses of respondent.
Chapter five, conclusion, pinpoints the major problem, which inhabit the full success of credit administration and same suggested solution which are necessary to convert some of these problem.
Table Of Contents
- Title page
- Table of contents
- 1.1 Background of study
- 1.2 Statement of problem
- 1.3 Objective of study
- 1.4 Significance of the study
- 1.5 Hypothesis
- 1.6 Scope and limitations
- 1.7 Definition of terms
2.0 Literature Review
- 2.1 The nature of cooperatives
- 2.2 Credit Cooperative and their problems
- 2.3 Source of Cooperative Finance
- 2.3.1 Internal source
- 2.3.2 External Source
- 2.4 The process of credit administration
- 2.5 The loan committee
- 2.6 Assessment of loan application
- 2.7 Terms of credit
- 2.8 Supervision of Credit
- 2.9 Loan recovery
- 2.10 Credit cooperative in Enugu North LGA
- 2.11 Factors militating against efficient credit administration
3.0 Research Methodology and Research Design
- 3.1 Area of Study
- 3.2 Population Studied
- 3.3 Sample size
- 3.4 Method of data collection
- 3.4 Method of data analysis
- 3.5 Source of data
- 3.6 Method of data
4.0 Data Presentation, Analysis and Interpretation
- 4.1 Data Presentation
- 4.2 Data Analysis
- 4.3 Data Interpretation
5.0 Summary, Recommendation and Conclusion
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
1.1 Background Of Study
Agricultural credit in Nigeria dates back to the 1930s but organized credit to farmers did not start until 1972 when the Nigeria Agricultural and Cooperative Bank (NACB) was established.
The awareness of the serious decline in agricultural production was probably partly responsible for the establishment of the bank.
The NACB is not the only financial institution which provides agricultural credit. Prior to the establishment of NACB, agricultural credit scheme was operated by some agencies such as the Ministry of Agriculture’s Supervised Credit Scheme, Agricultural Credit Cooperative, cooperative thrift and loan scheme, farmer’s multi-purpose cooperative societies. Most of these institutions were not effective sources for strictly agricultural credit. There was a lot of evidence that creditors borrowed money for agriculture but diverted it to other ventures.
Again, credit was often extended to only favouries and scarcely to genuine small –scale farmers. Besides they could not meet the collateral and equity contribution requirement, a situation that compelled a significant proportion of the farmers to seek for other sources of credit.
According to Dachaba quoted from Cardoso, (1987) a survey carried out should that 58% of farming related borrowing was from family and friends, 24% from private money lenders, 15% from merchants and only 3% from financial institutional sources. However, while family and friends charged little or no interest. Organized credit facilities for Nigeria’s rural farming population would reduce the dependence on sources other than the formal financial houses.
It is against this background that the researcher is to investigate how credit will be effectively administered in cooperative enterprises. This will enable us to identify the major problem associated with credit administration and seek for solution to these problems to ensure continued existence of the cooperative.
1.2 Statement Of Problem
Cooperative society mobilizes credit to their members through the savings of members. It has been observed that they are inefficient in mobilizing and utilization of credit. Many problem lead to this ineffective mobilization of credit. They are as follows:
- Inadequate fund for loan purpose
- Inefficient management of loan
- Faulty loan policy which may sometimes emphasize on credit worthiness of borrowers and not viability of project.
- Credit operations are mere money activities without proper organization procedure and planed systematic arrangement.
- Absence of regular monitoring and supervision of loans.
The above problems need to be solved for effective performance of cooperatives.
1.3 Objective Of Study
The situation of cooperative is nothing to write home about, if cooperative should continue at this rate, they will wind up.
In view of the above, solution have to be designed for these problems:
- Therefore, the objective of the study is to find out the various societies existing in the area under review.
- To find out various problems being encountered by these cooperative which led to hindrance of their effective and efficient performance as agents of credit.
- Finally, to make recommendation and suggest probable solution that will enable these societies overcome these problems.
1.4 Significance Of The Study
This study will assist the loan committee managers in their decision making as a concern credit policy and management to credit in form of proper assessment of loan application. Proper supervision of credit, and evaluation of project proposals, it will help the management to see the need to employ professional staff and lastly this study or findings will be of educational importance to the various universities, polytechnic and students of cooperative department in the various schools.
1.5 Research Hypothesis
- H0: Credit administration is not necessary in cooperative societies in Enugu North L.G.A.
HA: Credit administration is necessary in cooperative societies in Enugu North L.G.A.
- HO: Poor Funding do not constitute a major constraint to effective administration of credit in cooperative societies.
HA: Poor Funding constitute a major constraint to effective administration of credit in cooperative societies.
- H0: Effective administrations of credit do not create positive impact on cooperative organization.
HA: Effective administration of credit create positive impact on cooperative organization.
1.6 Scope And Limitation
The researcher will limit this study to effective administration of credit in cooperative enterprise in Enugu North Local Government Area. The researcher intends to find out the available source of fund to cooperative as well as the financial problem of cooperative. The researcher will also find out the process of credit administration and some factors militating against credit administration.
In the course of accomplishing this study, the researcher were faced with the following problems.
Due to financial constraint as a result of the present economic conditions of the students in the country, the researcher was able to select those registered cooperative societies, simple random sampling is uses and types of societies used in this study included farmers multipurpose cooperatives society, consumer cooperatives and others; which were decentralized in Enugu state; these and more constitute a large sum of money both for transport and for stationeries.
The time given for the study was rather too short coupled with short semester period and the researcher being a full time or regular student had to read and take lectures in other courses during the period of this study. Moreover, a research of this type requires total concentration and effort to enable the researcher come up with a comprehensive result.
Lack of Data:
Due to finance and time constraints, the researcher limited his literature review to what was taught in the class and what was obtainable is some journals and textbooks, likewise seminar papers concerning cooperatives in Enugu State and other parts of the country.
The inadequate transport system in Enugu state as a result of that, the transportation fare is high, which made it extremely difficult for the researcher to visit all the cooperative societies in Enugu State.
1.7 Definition Of Terms
For clarity of purpose, elimination of confusion of any kind and the proper understanding of this study. The following definitions of terms are necessary.
Administration or management is the art of attempting to achieve staked objectives by directing human activities in the production of goods and services.
This is an economic system in which individual are free, single or collectively, to own capital and undertake economic activity within a framework of social legislation designed to protect the interest of individual (Hanson 1974:218).
Credit is financing directly or indirectly, the expenditure of other against future, repayment, such landing or financing is direct when say, a bank extends an overdraft facility to a customer who then uses it. It is indirect when a trader or producer supplies goods on credit (David, W. Pearil).
5.0 Summary, Conclusion And Recommendation
This study has looked into the nature of credit administration in cooperative credit enterprises and the achievement of cooperative societies namely: The transfer of agricultural innovation mobilization of rural savings, provision of education service and control of inflation and others.
Some cooperative problems were highlighted, such problems include: The difficult economic situation prevailing in the country, high inflation rate and low savings, poor leadership, distance of bank branches from the rural communities among others.
The available sources of fund to cooperative which are categorized into internal and external sources were covered. The internal source includes: Share capital, reserves, deposit, revolving fund etc. However, the external sources were namely: the commercial and cooperative banks and other financial institutions, cooperative financing apexes, central bank of Nigeria and NACRDB.
The study also disclosed the total sum of loan disbursed by commercial bank to agricultural sectors. Also the process of credit administration in cooperative societies as well as the processes of loan application and its assessment were in detailed. These processes includes: Application for loan, loan contract, supervision of credit and credit recovery.
The procedure for making applications for loans in financial institutions was disclosed.
Furthermore, the factors militating against efficient credit administration were namely:
Inadequate qualified professional staff, long time la between loan application and approval, disbursement, equity contribution and collateral requirement, unsound lending practice etc. were highlighted in this study.
Finally, the study reviewed that loans given to society members were used for manufacturing, agricultural and trading purposes. The loans given were for short and medium terms periods and securities acceptable for the loans were share assets materials security and suretee among others. The loans are repayment at 10% interest rate and attitude of members towards savings as revealed by the study was indifferent, though some, were positive. The minimum of loan given to members was N1,000, the societies encountered problem of lack of adequate collateral, loan default and diversion.
Based on the findings of the study, the following conclusions have been reached.
- The cooperative members in that area have poor educational background
- The number and amount given out as loan to members is very small.
- The minimum amount of loan administered to members of the societies was N1000 or N1,500 depending on the society responsibility.
- The cooperative societies can raise capital either internally or externally or from both.
- The cooperative in administering credit to members encountered problem like lack of adequate collateral loan default and diversion.
On the other hand, cooperative feared high interest rate. All these resulted from byelaw.
Consequently, the banks lending scheme was handicapped. I believe that if proper attention is giving to the recommendations that will be given. The further prevalence of these problems would be a thing of the past. thus, a new area in cooperative credit administration will be observed.
However, there is need to intensify the activities of cooperative credit management and the need to encourage members and non-member to apply for credit facilities for their investments. The participating member would in no time be above to improve their productivity output and increase savings and investment. It is also expected that there would be enhance standard of living of the members and increased contribution to the community and national development.
In the near future, the dream of hiring Nigeria from a net importer of major food items to a country that is self-reliant and sufficient in food production would be realized.
Based on the findings of the study, and the problems encountered above, the following recommendations was made:
- Employment of Qualified and Adequate Staff: The known fact that credit is not an end in itself but a means to an end necessitates the supervision of any project for which credit was granted. Default in loan repayments is at times made as a result of no attention paid to the beneficiaries in advising and encouraging them to utilize the credit for the original purpose for which it was obtained. By increasing the quality of staff in the cooperative society, the default risk could be reduced.
- Inculcating Savings Habit in the Rural People: The commercial bank, CBN, NACRDB, cooperative apexes should plan and intensify programme to educate the rural dwellers, the societies on the need for banking services and savings. When this is done, majority of the cooperators would realize and cultivate positive attitude towards the loans and savings. This will also mobilize the savings of the cooperative members and facilitate the banking dealings with the societies in the area.
- Provision of Necessary Infrastructural Facilities by the Government: The infrastructural facilities includes good road, pipe borne water, communication system in the area. This will foster lending and reasonable coverage by the banks. Consequently, this will enhance the productivity of cooperative hence relieving the lending institution of the problem facing due to agricultural credit lending.
- Formation of Cooperative by the Rural Farmers: Since commercial banks among other financial institutions prefer lending to more organized group like cooperative, these farmers would therefore, be better of, if they can pool their operation together and organize themselves into cooperatives.
- The Agricultural Credit Guarantee Scheme fund should be modified both in its provision and coverage by the government.
Effective Administration Of Credit In Co-Operative Credit Enterprises (A Case Study Of Selected Co-Operative Societies In Enugu North L.G.A)
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