ABSTRACT
This research
study adopted an econometric analysis on The Impact of Socio-Economic
Characteristics On Loan Repayment Among Cooperative Enterprises In Oshimili
South Local Government Area of Delta State. Chapter one of this research work
deals with the introduction and background study of the said topic, which also
include the specific objectives of the study; and the hypotheses to be
analyzed. Chapter two talks on the different sources of the financial structure
of cooperatives societies. The review of problems facing cooperative
enterprises in raising funds. The research methodology and design used in
analyzing the data is discussed in chapter three. Besides, chapter four deals
with data presentation and analysis using frequency tables, showing the
percentage of responses and the ordinary least square (OLS) method of empirical
analysis was used for the determinants of socio - economic variables on loan
repayment. Chapter five of this work deals with the
summary of findings, recommendation and conclusion. Consequently,
recommendations, which will assist policy makers in Nigeria to make policies
that will enhance the financing of cooperative enterprises in Nigeria, were
made.
CHAPTER ONE
1.0 INTRODUCTION
The importance of funds to any business enterprise, be it
private or public, cannot be over-emphasized. Co-operative societies need funds
to finance their fixed and working capital, to pay for services and for making
interest-yielding investments. Lack of funds had featured prominently among the
key constraints to co-operative business enterprise in Nigeria even at normal
times. We can then imagine, or rather, we are all aware of the situation under
the prevailing excruciating business climate in Nigeria. (Chukwuemeka, 2001).
The issue of funds has become critical, as expectations,
opportunities for small-scale enterprise cannot be seized due to a general lack
of investible funds. Added to the abolition of subsidies, the results is fewer
resources, tougher competition, higher capital cost and reduced access to
credit. This is more so because cheap government credit on which co-operatives
relied heavily in the 1980s has since dried up, many banks have gone from distress to bankruptcy, and the
surviving ones have constricted their lending. Many people and organizations
including co-operative lost their deposits in collapsed banks and finance
houses during 1990s. Indeed, the ‘banking culture’, the cultivation of which
has been seen as one of the necessary conditions for savings mobilization among
small and medium enterprises operators has worn off considerably in view of the
aforementioned travails of the financial sector in Nigeria. Worse still, donors
in Europe and America, especially the United States, that great watershed of
bilateral and multi-lateral aid funds for various assistance program are
suffering donor fatigue. Thus small and medium enterprises general are
severally hit. But co-operatives which have always been the least able to raise
finance capital, appears to be worst affected.
Today, many co-operative are hobbled by a weak capital base,
limited credit worthiness and are therefore not in a position to compete
effectively with rival business interests. It is on this background that the
research tends to review the source of funds
available to co-operative society and identify inherent constraints to proper funding of co-operative business enterprises; with a
view to stimulating thoughts as to ways and means of deepening and extending
them.
1.1 Background of
the study
In the mid to late 1970s, it was relatively easy for
cooperative societies to raise investment funds. A lot of funds were available
on concessionary terms from specialized credit institutions such as the
Nigerian Agricultural and cooperative Bank and the Central Bank (NACB) managed
Agricultural Credit Guarantee Scheme Funds (ACGSF), which encouraged lending
practices through Sundry Channels. In 1977 the Rural Banking programme further
boosted the pool of funds, which cooperatives could source for investment. In
addition to these opportunities, special government food production and rural
development programmes like the National Accelerated Food Production Programme
(NAFPP:1973), the Green Revolution (1980-1983), the Operation Feed the Nation
(1976-1979) provided opportunities for rapid expansion of credit to cooperative
societies. All these institutions and programmes operated from the praxis of
the old theory of rural credit in which it was assumed that rural production
enterprises (including cooperatives) were poor and helpless and needed cheap
supply-leading government credit to remain active.
However, the combined effect of the oil price crises, global
recession, Austerity measures of 1982 and the Structural Adjustment programme
(SAP) Since 1986 drastically rolled back all those opportunities. Many
cooperative societies that could not adapt to the new climate had since either
wound up or gone moribund. When government took bold steps to mitigate the
harsh effects of its adjustment measures by establishing such institutions and
funds small and Medium Enterprises (SME) Funds, Peoples’ Bank (PB), Better Life
For Rural Women Programme, Family Support Programme, the Directorate for Food,
Roads and Rural Infrastructures and the Directorate for Social Mobilization
(MAMSER) all of which had special recognition for cooperatives as avenues for channeling funds to
productive activities, we expected a brighter prospect for cooperatives.
However, not many of them took advantage of such
opportunities.
1.2 Statement of
the Problem
Most co-operative societies are under funded, thereby making
the diversification of projects slow. This arises from the fact that financial
structure of the co-operative does not provide enough finance, which results in
productivity. Many of co-operators in Nigeria, have quite often lamented the
impediments on their way as they try to raise funds for the operations of their
co-operative society.
However, co-operative are subject to frustrations of all
small and medium enterprises in Nigeria such as lack of collateral, general
lack of credit, worthiness in the estimation of potential lenders, and high
interest rate structure and so on. In this regard, both government and finance
houses have not lived up to expectation. At times government does not give grants and
loans to the co-operatives.
Besides, co-operatives are affected by the peculiarities
inherent in their nature and structure: the principle, laws and regulations
guiding them. Notably, share contribution is not combined with higher direct
influence in the society’s affairs according to the principle of one member,
and vote, therefore, member are often reluctant to contribute more than the
minimum. In most co-operative societies, the amount of money that can be raised
through issue of shares in too low as directed consequence of low membership
size and general poverty of the members.
Managers and leaders of co-operative societies in Nigeria on
their part, have become too used to easy hand outs from government to be
innovative in their fund raising activities. Besides, they often are not able
to conceive bankable projects.
These unfavorable financial constraints therefore lead to
poor performance of the co-operative movement. Finding ways to overcome these and other
obstacles is a major challenge of the co-operative movement in Nigeria.
1.3 Objectives of
the study
The broad objective of the study is to examine the challenges
in the financing of co-operative enterprises- A case study of some selected
co-operatives in Asaba, Oshimili South Local Government Area of Delta State.
Specifically, the study aims to:-
1. Examine the socio-economic characteristics of the members;
2. Identify the internal and external sources of funds open to
the co-operative enterprise;
3. Examine the inherent constraints to the proper funding of
co-operative enterprise;
4. Ascertain the income raised internally by the cooperative
societies.
5. Examine the amount of loan requested, disbursed, and repaid.
6. Ascertain the impact of some variables on loan repayment.
7. Make recommendations based on the
findings.
1.4 Significance
of the Study
This research work intends to empirically investigate the
determinants of loan repayment under the indigenous financial system.
Considering the fact, that low repayment of loans by cooperative enterprises in
turn affects the amount of credit given to cooperative by commercial banks.
The importance of this study lies on the fact that no project
could be executed without a functional financial structure. If co-operative
societies do not have access to an input that is most essential for their
development such as finance, their situation is critical. This is because
project execution cannot be successful without funds just as it is impossible
for individual to live in the absence of all needs and necessity of life such
as food, shelter and clothes among others. Therefore, the business organization
needs finance as the life wire and blood for its survival.
i. What are the Socio-economic profiles of the members?
ii. What are the sources of funds open to the co-operative
business?
iii. Which of the major sources of finance is more convenient and
reliable to the society
iv. What is the major problem encountered in the operation of the
co-operative enterprise?
v. What are the factors militating against co-operative
enterprise in raising funds?
vi. What are the variables influencing loan repayment by
cooperative enterprises?
1.6 Research
Hypotheses
Ho: Socio-economic
variables do not significantly affect loan repayment by cooperative societies.
Hi: Socio-economic variables significantly affect loan
repayment by cooperative societies.
1.7 Scope of the
study
The scope of any study examines or views the areas, which the
study intends to cover. The study covers co-operative enterprises operating in
Asaba, Oshimili South Local Government Area of Delta State.
This research work, focuses extensively on how co-operative
enterprises are financed with more attention on the determinants of loan
repayment, as well as challenges encountered in the proper funding of
co-operative enterprises. Possible measures to be taken to improve on the
financing of co-operative enterprises were also identified.
1.8 Limitation of
the Study
The uncooperative attitude of members of the various
co-operation societies covered posed a major constraint. This is because after
assurance, most of them still believe that the study will in one way or the
other jeopardizes their business and therefore withheld vital information
relevant for the study. Also, financial constraints and time frame for the
completion of this research work are as well limiting Factors.
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