Effective Cooperative Loan Administration; A Strategy Tool For Poverty Eradication
The focus of this study is impact analysis of effective cooperative loan administration: a strategy tool for poverty eradication. The study analysed cooperatives among crop farmers in three Local Government Areas of Niger State, Nigeria. Primary data were collected from two categories of farmers; beneficiaries and non-beneficiaries of savings and credit cooperative societies (SACCOS) lending activities through the use of structured questionnaires. The results of poverty severity index revealed that about 2% of the beneficiaries constitutes the poorest among the respondents while, about 4% of the no beneficiaries constitutes the poorest among the respondents after obtaining credit. The results from double difference estimator revealed that Cooperative loan impacted positively on the beneficiaries‟ crop output and per capita annual farm income with a positive mean value of 290.03kg and ₦2054.77, respectively. The results from multiple regression analysis revealed that household size, farm income, non-farm income, educational level and interest rate charged on credit were the significant factors that influence the level of participation in SACCOS at 1% and 10% levels of significance respectively.
1.1 Background of the Study
Cooperative Societies such as (SACCOS) are important inthe provision of financial and banking services to low income households who for economic reasons cannot be covered by the activities of formal banks and financial institutions (Mwakajumilo, 2008). Cooperative Societies performs three major functions in relations to its members and general economic development of the country. In particular, these functions are collecting savings from its members, giving loans to its members and giving financial and non-financial advice to its members in order to facilitate Cooperative Societies members utilize well the micro credit they have borrowed from SACCOS. In some cases, some government and private institutions may also give financial assistance to SACCOS in order to enable them give micro credit to their members (Mwakajumilo, 2008). According to Mwakajumilo (2008) the different activities done by households in both urban and rural areas also mean the existence of different Cooperative Societies.Thus we have SACCOS for food crop producers, cash crops SACCOS, traders SACCOS, fishermen SACCOS, Teachers SACCOS, Armies (e.g. Police) SACCOS with the Aim of assisting the Government to reduce high level of poverty and income inequality in the society.
Unemployment breeds a lot of private and social consequences which are negative (Alam et al., 2009; Alam, 2009).These includes poverty, crime, social inequality, loss of output, family disintegration, among others. Governments all over the world make concerted efforts to mitigate these problems (Alam, 2009). In Nigeria, several efforts have been made to create jobs for the teaming able bodied people who are available for work but who are yet to find jobs (Goodluck, 2011). One key element is the management and administration of such loans which in turn would enable beneficiaries stand a chance against poverty.
Although growth is critical for poverty reduction, focus on growth alone is not enough (Almas 2003). Micro-lending has been considered as the latest panacea for poverty alleviation (Magbagbeola et al., 2010). There has been a growth in the recognition of the importance of empowering all people of their access to all the factors of production including credit (Ahmad, 2004). Cooperative Societies all over the globe have been seen as one of the ways of reaching out to the un-banked and the neglected in the society and not a few have come to see it as an alternative to the regular banking, since it, in most case provides members of the group the financial incentives without the rigours usually experienced in banking halls (Adewakun, 2012).Traditional cooperatives are common throughout Nigeria, but these groups tend to be small, with a common bond based on membership of a kinship, societal and low professional group (Adewakun, 2012). Savings and Credit Cooperative Societies are known to provide funding to their members at reasonable interest rate and without requirement of collateral. They are therefore vital organs for financing food crop production (Mavimbela et al., 2010). However, no known work have been done on the extent to which these organs have been helpful towards combating poverty in Nigeria. This study would attempt to fill this gap
1.2 Problem Statement
The concern about the threat posed by poverty has led the Nigerian government to devote considerable attention to alleviating its scourge through various aid programmes, some of the time in collaboration with the civil society and donor agencies (Girei et al ., 2013). According to Girei et al., (2013) some of these programmes include: Agricultural Development Programme (1975), Operation Feed the Nation (1986), National Directorate for Employment (1987), National Fadama Development Programme I (1992), Family Support Programme (1996), National Poverty Eradication Programme (2001), Special Programme on Food Security (2001), National Fadama II Programme (2004), National Special Food Security Programme (2005), National Fadama III Programme (2009) and Sure-P programme (2013). Despite all these programmes, the percentage of the population living below the poverty line in Nigeria is still a subject of concern to government and donor agencies (National Bureau of Statistic, 2011). The willingness of the low income group to borrow and repay at seemingly high interest confirm the view that their financial problems has more to do with access to funds as put by (Anyanwu, 2004). According to Jidenma (2007) the poor lacked good credit history because they never gained access to credit in the first place, thus the poverty level continues to aggravate as observed by Akanji (2006) and Ojo (2009). Also small and medium enterprises that have been described as the nerve of a nation‟s economy are suffering from poor funding (Basu, Balvy and Yulek, 2004; Oladejo and Dada, 2008).
Over time, savings and credit cooperative societies have been trying to address members‟ demands by mobilizing funds and granting credit to members. However, they have not been able to grow their wealth sufficiently through accumulation of enough institutional capital to finance non-withdrawable capital funded assets, provide cushion to absorb losses and impairment of members‟ savings. However, previous studies (Agrawal et al., 2002; Adeyemo & Bamire, 2005; Deji, 2005; Asher, 2007; Ogsi et al., 2007) have shown that lack of growth of savings and credit cooperative societies wealth has threatened their sustainability such that they have not been able to absorb their operational losses. As a result of this the small holder crop farmers‟ cooperatives societies such as savings and credit cooperative societies received financial assistance from World Bank in which the Fadama development association serve as a link (National Fadama Development Program III, 2009).
The National Fadama Development Program (NFDP III) is an international development association (IDA) credit facility which represents the World Bank. It is co-financed by the federal government of Nigeria, state government, local government and communities in terms of their counterpart contributions. The NFDP III was declared effective in March, 2009 as the base line and 2013 being the end line (National Fadama Development Program III, 2009).The aim is to increase the incomes of farmers, the program uses the community driven development approach which is being supported by an international development association credit facility (National Fadama Development Program III, 2009). The development objective is to increase the incomes of users of land and water resources on a sustainable basis that relies on facilitation for demand driven investments and empowerment of local community groups and to improve productivity and land quality (National Fadama Development Program III, 2009).
The micro finance power of cooperative societies cannot be overemphasized. They have the power to both fund and advise beneficiaries on effective utilization of the loans which forms the essence of the study on effective cooperative loan administration: a strategy tool for poverty eradication.
1.3 Purpose of the Study
The purpose of the study is to investigate effective cooperative loan administration: a strategy tool for poverty eradication
1.4 Objectives of the Study
The broad objective of the study was to analyze the impact of savings and credit cooperative societies in combating poverty among farmers in Bosso, Lapai and Wushishi local Government Areas of Niger State, Nigeria. However, the specific objectives were to:
- Describe the socio-economic characteristics of beneficiaries and no beneficiaries of Cooperative loan in the study areas;
- Determine the poverty status of beneficiaries and non-beneficiaries of Cooperative loan;
- Aanalyze the impact of effective loan management on the crop output of beneficiaries and no beneficiaries of Cooperative loan;
- Analyze the impact of credit on poverty status of beneficiaries and no beneficiaries of Cooperative loan;
- Describe the constraints faced by beneficiaries and non-beneficiaries in the study areas.
1.5 Hypotheses of the Study
The following hypotheses were tested in line with the objectives (iii) and (iv). The annual farm income was used as proxy for poverty status:
- Ho: there is no significant difference between the crop outputs of beneficiaries and non-beneficiaries of Cooperative loan.
- Ho: there is no significant difference between the per capita annual farm income of beneficiaries and non-beneficiaries of Cooperative loan.
1.6 Justification of the Study
Cooperative organizations seem to be veritable sources of funding for smallholder farmers to earn extra income and to grow their own food (Mavimbela et al., 2010). Nigerian government at different times has been launching different poverty alleviation programmes at different times by different regimes of government; yet the outcome is always a deviation from expectations (Girei et al., 2013). Policy maker and governments have neglected these veritable sectors.
The World Bank in its „May 2013 Nigeria Economic Report‟ said the number of Nigerians living in poverty was increasing too rapidly. A grim statistics of the population of Nigerians in abject poverty released by the National Bureau of Statistics which said that about 112million Nigerians live below the poverty line (National
Bureau of Statistics 2013).This followed another depressing disclosure by the World Bank, which also said that the population of Nigerians in poverty has increased considerably. The figure represents about 67% of the entire population and that the scourge will continue to rise if nothing is done to arrest it (World Bank 2013).
This bizarre picture requires an urgent intervention of which the proposed study on the savings and credit cooperative societies is one. The preponderance of the poor population in the activities of the informal sector of the Nigeria economy implies that any meaningful effort to reduce the incidence of poverty in the country most necessarily be focused on participants in this unrecognized yet important sector. Currently, there is a relatively scanty research on the activities of the informal financial institutions in most developing countries including Nigeria, especially as it relates to poverty reduction. This study was meant to fill this gap by providing first hand data and analyze the impact of Savings and Credit cooperative societies in combating poverty.
1.7 Organization of the Study
The study is organized into six chapters.
- Chapter one covers; background to the study, statement of the problem, general objective of the study, specific objectives of the study, research hypotheses, significance of the study, limitation of the study, delimitations of the study, operational definition of terms and organization of the study.
- Chapter two covers review of related literature arranged as per study objectives and explained from global, regional and narrowing to Nigerian situation while identifying research gaps through local studies done, summary of the literature review, theoretical framework and conceptual framework.
- Chapter Three covers research methodology which includes: introduction, research design, target population, sampling techniques and sample size, data collection instruments, validity and reliability of research instruments, data collecting procedures, data analysis techniques and ethical considerations.
- Chapter four covers research results of the study.
- Chapter five covers discussions and interpretations of research findings.
1.8 Definition of Terms
Loan is a form of debt incurred by an individual or other entity. The lender—usually a corporation, financial institution, or government—advances a sum of money to the borrower.
Co-operative society is often a voluntary association of individuals who come together with the intention to work together and to promote their economic interest
Conclusion and Recommendations
Savings and Credit Cooperative Societies have been able to achieve some of its stated objectives. It has helped to improve crop output and per capita annual farm income of beneficiaries of Cooperative loan. However, the non-beneficiaries mentioned poor access to credit, illiterate level and high interest rate charged as constraints they faced as members more than the beneficiaries. There is therefore, more room for improvement in crop output and per capita annual farm income of the farmers.
In general, the effectiveness of loan management was noted to be effective at the general overall average mean of 2.65. The loan policies of the SACCO could be effective enough because the management is well trained and tries to put in place the recommended procedures of credit management as stated by King (1968).
Based on the findings, the following recommendations are made:
- Since the savings and credit cooperative societies‟ credit had positive impact on the crop output and mean per capita annual farm income of beneficiaries on their small-medium holder farm. It is recommended that savings and credit cooperative societies should source more loans and make it available to members, so that farmers could expand production and embark on large scale crop farming and also mechanized farming; this would further improve their living standard and help combat poverty.
- Majority of the respondents complained of high cost of farm input such as fertilizers and agrochemical as one of the foremost constraints faced. The Savings and credit cooperative societies could link –up the farmers with sources of quality input for bulk purchase. This will enable the groups to buy inputs at factory cost thereby helping to reduce cost of production.
- From the result of multiple regression analysis farm and non-farm income significantly influence the level of participation in savings and credit cooperative societies. Efforts should be made by non-governmental Organisation and local government council in the areas to boost the income diversification practices of farmers through provision of infrastructure especially feeder roads. This could enhance the level of farm and non-farm activities that could generate more income for the household and thereby help to combat poverty among the respondents.
- Most of the respondents among the non-beneficiaries mentioned inadequate capital and poor access to credit as some of the constraints in participating in savings and credit cooperative societies. Since savings and credit cooperative societies cannot provide the entire needed fund for the respondents, farmers should be encouraged to diversify their livelihood activities by engaging in non-farming activities in order to augment farm family income and thereby alleviate poverty among the respondents.
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