DETERMANTS OF SAVING AND CREDIT COOPERATIVES (SACCOs) OPERATIONAL

PERFORMANCE IN BORICHA WOREDA, SIDAMA REGION, ETHIOPIA.

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF COOPERATIVES

BY: MATHEWOS YETERA

ID NO:PGCODLR/0012/12

A proposal submitted in partial fulfilment of the requirements the

Degree of master of Art in cooperative development and leadership

Submitted to: RobaHuka (Ass. prof)

HAWASSA, ETHIOPIA

OCTOBER 2020
LIST OF ACRONYM

CSA Central Statistics Authority

FAO Food and Agriculture Organization

FCA Federal Cooperative Agency

IMF International Monetary Fund

SACCO Saving and Credit Cooperative

SPSS Statistical Package for Social Science

WOCC World Counsel of Credit Union

CHAPTER ONE

1. INTRODUCTION

1.1 Background

Ethiopia stands as the fourth largest in size and the second populous country in Sub-Saharan
Africa; with a total area of 1104.3 thousand square kilometres and 80 million people enumerated
in the third Population and Housing Census, of which 50.5 % were males and 49.5 % were
females(CSA ,2007).

Savings and Credit cooperatives (SACCOs) can be defined as democratic members-owned

financial cooperatives exist to serve their members and communities through provision of
convenient and affordable financial services. SACCOs are institutions that play the role of a
financial intermediary and are owned by their users. Member saves their money in the
cooperatives and avail loan from the cooperatives. These members usually share a common link
(in term of geography, community, activities, etc) and have equal voting rights, regardless of the
number of shares they own. Saving and Credit Cooperative (SACCO) have been developed to
meet the fundamental human need to find a way of saving and borrowing methods without
taking risks (WOCCU, 2012).

According to the statistics of IMF (2007), cited bythe Financial Standards Foundation, the per
capita income of Ethiopia is estimated 207 USD. About 45 percent of the population in Ethiopia
live below the absolute poverty line (47 percent ofthe rural and 33 percent of the urban
population), unable to fulfil the minimum livelihood standard. According to MEDaC (1999), as
cited in Wolday (2000), agricultural sector is the mainstay of the economy, which forms the
basis for livelihood of 85 percent of the population. It accounts for about 50 percent of the GDP.
Performance of the agricultural sector is inadequate to feed the growing population. Repeated
drought, civil war, land degradation, limited uses of modern input, low level of investment as a
result of insignificant domestic savings are among the reasons for low performance of the sector
(ibid, 2000).

Currently the government of Ethiopia implements a development strategy called Agricultural

Development Led Industrialization (ADLI) which includes cooperative establishment and
strengthening as a component to alleviate the chronic poverty problem and prompting
investment. Based on these saving and credit cooperatives strive to satisfy the requirements of its
members’ financial service without any complications. Saving and credit cooperatives help to
prevent or overcome poverty, facilitate members' education, and they develop a spirit of mutual
aid and self-reliance. This form of cooperative also encourages productivity of its members by
providing credit and leads to adopt democratizationprocess at a significant level in SACCO
members.

The aims of saving and credit co-operative have always been to mobilize savings from middle
and low income groups and supply credit to its members (Sharma, 2003). Saving and credit co-
operatives have their origin mainly in agriculturalsector. Germany land reforms andemancipation
of the Jewish population in terms of rights and religion had created an impoverished peasantry in
Germany which led to somefarms being overextended with mortgage debt. Responding to these
conditions, Schulze-Delitzsch founded a number of cooperative credit associations during the
1840s and 1850s (Herrick and Ingalls, 1915), and will followed by Raiffeisen, who founded his
first in 1864. Raiffeisen’s co-operatives were modeled according to the Schulze-Delitzsch bank;
with the exception thatthey did not focus mainly on small urban artisans and “hand workers”, but
instead were primarily rural based (Guinnane, 2001).

With European immigration the idea of financial self-reliance disseminated to other countries,
and soon Austria, Italy, France, England and other European countries all found the importance
of saving and credit co-operatives present in theirfinancial sectors (Guinnane , 1997). Today,
Canada, the United States, Ireland and Australia have the most established movements. In many
of these countries credit unions have a much larger presence than commercial banks (Saccol,
2006). Even if the history of SACCO Societies shows that they were established initially for the
relief of poverty among the poorer economic classes in Europe, United States and India, they
were not that much promoted in developing countries including Ethiopia. In recent years the
potential of member owned saving and credit cooperatives as a tool for poverty alleviation will
be increasingly recognized in developing countries. As stated by FAO (2001), a system of
financial intermediation is necessary to channel the flow of funds from suppliers to users. An
effective and smoothly functioning financial system will increase the mobilization of savings,
lower transaction costs, disperse risks and direct the allocation of resources to the most
productive use.

In Ethiopia the delivery of financial products and services through micro-finance institutions is
one of the policy instruments used to enable rural and urban households to increase their output
and productivity, induce technology adoption, increase input supply, increase income thereby
helping them reduce their poverty and attain food security (Wolday, 2002). The study area,
Boricha, have 12 saving and credit cooperatives, which gives a service to the public and private
organization employees. Their presence still have encouraging effect to its members and the
financial activity as a whole, but as compared with its long establishment year they are not fully
benefited from the financial market due to various factors which limits its operational
performance. Therefore to assist poverty eradication program of the country and to assure
national development at macro level, it is necessary to give much attention for community based
financial intermediaries’ expansion at a grass root level. Thus, the study aims to identify the
determinant factors for SACCOs operational performance and their success .

1.2. Statement of the problem

SACCOs have multiple functions but two of them are fundamental. These are financial
intermediation and investment (Pelrine, 2001).

The most basic function of a SACCO is financial intermediation. That is bringing savers and
borrowers together in a system that covers all of the costs of doing business and is useful to both
parties. Specifically the financial intermediation function of a SACCO is to take members
savings in the appropriate amounts and at the appropriate times; lend them back to the members
for use in their businesses, with appropriate management; recover all of the loans on time and
with interest; cover all costs to the SACCO from the interest; and pay the members a premium
on their savings from the profit remaining from the interest after all costs will be paid.

The other essential function of a SACCO is investment. That is to allow members to form a
business by placing their capital at risk and to receive a return (profit) on that investment.
Specifically, the investment function of a SACCO is selling shares tomembers in the
appropriateamounts and at the appropriate times; using those shares to guarantee the savings and
loans of the members, by providing the correct amount of liquidity in the SACCO to manage risk
of withdrawal or late repayment; retaining some profitfrom interest earned on the lending
operation to pay dividend to the members on the basis of the shares owned; redistribute the
profits to the members as dividend on the basis of shares owned.

Management skills and decisions within savings and credit-cooperatives must reflect sound
financial risk management strategies i.e. managing liquidity risk, default risk and interest rate
risk is far different from managing a stock of goods; machinery or even goods on credit. Money
is, by definition, the most liquid of assets. The management of money, because it is so liquid,
subject to easy conversion into other assets, fungible and capable of being embezzled, requires
uniquely skilled management and systems of control.While there are some similarities between
managing money and other assets, historically the task of savings and credit management has
been left to trained experts (ibid, 2001).

Therefore, this research has make an attempt to answer the following questions; what are the
main factors that determine operational performanceof savings and credit cooperatives
(SACCOs)? What relations have the financial performance of SACCOs in relation with
recognized standards? What are the products of SACCOs? What are the institutional and
governance status of SACCOs? What constraints are faced by the savings and credit
cooperatives? What are the opinion and suggestion of respondents about the challenges
andaprospects of SACCOs to improve their operational performance? These all important
questions will get answer from study area which is BorichaWoreda.

1.3. Objective of the Study

General Objective

The overall objective of this study is to investigate determinants of saving and credit
cooperatives operational performance in BorichaWoredaSidama Region, Ethiopia.

Specific objectives

1. To understand nature of SACCOs and their operational performance in the study areas,

2. To explore factors that determinant the operationalperformance of SACCOs in the study areas

3. To study challenges and prospects for the developments of SACCOs in Boricha Woreda
1.4. Research question

1.What are the understand nature of SACCOs and their operational performance in the study
areas?

2. What are the determinant factors for the operational performance of SACCOs?

3. What are the challenges and prospects for the development of SACCOs?

1.5. Significance of the study

This study has a supreme importance through providing adequate information for policy makers,
for saving and credit societies, cooperative promoters’, development workers and other
stakeholders about how to make SACCOs operationally efficient.

This will enables them to design appropriate policies and programs on SACCOs successful
establishment and strengthening to have speedy economic contribution in poverty elimination
and encouraging investment at micro business level. Moreover, it furnishes information on the
factors to be considered for SACCOs success as competent and sustainable financial institutions.

1.6. Scope of the study

This study will geographically limit to BorichaWoreda and also only covers saving and credit
cooperatives challenging factors to become operationally effective and their future prospects for
development. However, this area specific study maynot be a guarantee to generalize beyond this
study area. Moreover, getting reliable data were been difficult due to unavailability of well
documented and organized secondary data. But great effort will be make convince the sample
respondents about the objective of the studyand give promises to keep the information given
confidential.

1.7. Limitation of thestudy

This study limited space and objective because of from of study area is limited the case of
financial and time constraints were limits on the scope of the study.
1.8. Organization of paper

This study is divided in to three chapters. The first chapter includes introductory parts of the
study (background of the study, statement of the problem, research objectives, research
questions, and significance of the study, scope of the study and organization of the paper). The
second chapter deals with review of related literature, scholar’s perspectives and theoretical
background and empirical studies of the issue understudy. The third chapter deals with research
methodology. Finally, lists of reference materials and papers are annexed in the appendices.
 CHAPTER TWO

2.LITERATURE REVIEW

2.1 Definition

Savings and Credit Cooperativesare user-owned financial intermediaries. They havemany names
around the world, including credit unions, SACCOs, COOPECs, etc. Members typically share a
“common bond” based on a geographic area, employer, community, or other affiliation.
Members have equal voting rights, regardless of howmany shares they own. Savings and credit
are their principal services, although many offer money transfers, payment, and insurance
services. Sometimes savings and credit cooperativesjoin together to form second -tier
associations for the purposes of building capacity,liquidity management, and refinancing.
Second-tier associations also play a useful monitoring role (CGAP, 2005).

The fundamental objective of a cooperative is not "to maximize the profits” as in a

capitalistcompany, nor to act initially like "actor of a social change” as in the non-profit-making
associations, but "to maximize the benefit which the member users can obtain from their
commercial transactions with the cooperative" (Birchall, 2004). In fact, with their cooperative,
the members try to obtain the maximum of individualbenefit through the particular type of
commercial transactions which they carry out with it. It is thus for example, that a SACCO could
promote by the mutual aid, the economic and social welfare of its members in their granting
loans to cover their economic needs, by supporting the spirit of initiative and agricultural or
industrial local work, by the careful use of the saving produced locally. Financial institution is
private (shareholder-owned) or public (government-owned) organizations that, broadly speaking,
act as a channel between savers and borrowers of funds (suppliers and consumers of capital).
Two main types of financial institutions (with increasingly blurred dividing line) are: (1)
Depository banks and credit unions which pay interest on deposits from the interest earned on
the loans, and (2) Non-depository insurance companies and mutual funds (unit trusts) which
collect funds by selling their policies or shares (units) to the public and provide returns in the
form periodic benefits and profit payouts (www.businessdictionary.com).
Operational performance is firm’s performance measured against standard or prescribed
indicators of effectiveness, efficiency, and environmental responsibility such as, cycle time,
productivity, waste reduction, and regulatory compliance (www.businessdictionary.com).
Operational performanceis viewed in both the Industrial Organization and Strategic Management
literatures as the product of firm-specific factors such as: management skill, innovation, cost
control, and market share, which determine current firm performance, and critically, the
sustainability of this level of performance (McWilliams and Smart, 1993). Performance, in
general, is considered as a “survival condition” for firms that function in competitive
environments (Färe, Grosskopf, and Lovell, 1985).

Afriat (1988) loosely defines “performance” as the relation between ends and means and its
measure as “the extent to which they are matched”. Standards is Written definition, limit, or rule,
approved andmonitored for compliance by an authoritative agency or professional or recognized
body as a minimum acceptable benchmark. Standards may be classified as (1) government or
statutory agency standards and specifications enforced by law, (2) proprietary standards
developed by a firm or organization and placed in public domain to encourage their widespread
use, and (3) voluntary standards established by consultation and consensus and available for use
byany person, organization, or industry. Once established, standards (like bureaucracies) are very
difficult to change or dislodge. For example, the world standard for broad gauge railway line is
4 feet and 8½ inches between the parallel tracks. This odd figure has its origin in the axle-width
of Roman army chariots designed to accommodate the rear ends of two horses yoked side-by-
side (www.businessdictionary.com).

2.1.1. Theoretical overviews of saving and Credit Cooperative

Saving and credit cooperatives (SACCOs) have been referred to as the ``engine of growth and
development`` of a communities by striving to make available financial resources based on the
community`s own resources (i.e. member saving) and the safe recycling of this money (member
loans) in to the community`s activities there by make a significant contribution to the
development of the societies and the well being of the population in general. It contributes not
only to an improved standard of living and quality of life but also in reducing poverty and brings
about subsential capital formation to low income households who for economic reasons cannot
be concerned by the activities of formal financial institutions (Ketilson, 2009).
SACCOs are user-owned financial institutions that offer both saving and credit services to their
members at reasonable rate of interest. Member of financial institution can be both net savers and
net borrowers (Sustainable SACCOs Development Report, 2006). Saving and Credit
Cooperatives are cooperatives organizations which are guided by the practices, philosophy,
principles and values of cooperative movement. The differ from the rest of other cooperatives
because they are financial cooperatives established by voluntary people based on the philosophy
of building self help society or people helping people to have their own efficient financial service
giving institutions that empowers themselves in building asset by teaching thrift culture and
make themselves assessable to credit in sustainable way (Masuku, 2010).

2.1.2. Concepts, characteristics and role of SACCOs

SACCOs are user-owned financial institutions that offer both savings and credit services to their
members. Members of these financial institutions can be both net savers and net borrowers.
Depending on a country’s legal framework, SACCOs may be authorized to mobilize member
savings and non-members savings or member savings only. They are established by voluntary
people based on the philosophy of building self-help society or “people helping people”. They
are owned, managed, controlled by members. Members have the right to decide on its issues and
to benefit from its service. SACCO Society is formed initially for the poorer toprovide financial
services such as safe place for savings and providing easy accessible loans to members. They
organise “not for profit or for charity” but serve members at fair profit margins. In these
organisations once overhead and other expenses are paid, reserve for cushion against any loss,
and for expansion of services set aside, the remaining income from loans is returned back
tomembers in the form of dividend on savings, share or both. The basic structure of the SACCOs
and credit unions is what differentiates them from banks. They are user-owned financial
intermediaries. Members typically have a “common bond” based on geographic area, employer,
community, industry or other affiliation. Each member has equal voting rights regardless of their
deposit amount orhow many shares they own. Their principal products are savings and credit,
however some offer money transfers, payment services and insurance. SACCOs sometimes join
together to create second-tier associations for the purposes of building capacity, liquidity
management and refinancing; these second-tier associations can play a useful role in monitoring
(CGAP, 2005) associations.
It is commonly agreed that poor people have a significant capacity to save, proven by the
existence of various informal savings mechanisms found throughout the world and by a few
recent empirical studies. It is further understood that many people, particularly in rural
households, are obliged to save during certain times of year, such as harvest, in order to
compensate for periods when their income is drastically reduced, such as the dry season. Finally,
it is widely accepted that though only a certain number of people will need credit at any given
time, virtually all people need to save at any given time. We can therefore conclude that poor
people will deposit their savings in a financial institution if an appropriate institutional
structureand appropriate savings products exist to the depositor’s mix of savings needs. SACCOs
reach out to low savings and income individuals by offering products geared towards their
unique needs within a secure and accessible structure. In order to ensure appropriatefinancial
intermediaries for the poor to exist, appropriate external and internal incentives must exist.

High performance standards required by regulatory authorities and effective supervision will
necessarily translate into higher management capabilities, especially with regard to cost, liquidity
and risk management. Access to secondary structures is another key issuefor all financial
institutions under consideration. SACCOs need to be strongly supportedin political terms by
secondary structures such as the Ministry of Commerce and the Ministry of Local Government.
In addition, government need to facilitate alliance formation between SACCOs and MFIs so
SACCOs are able to delegate functions to their respective secondary structures in order to benefit
from economies of scale and scope also provide their clients with the opportunity to upgrade in
order to access larger loans (Robinson, 2004). The role and characteristics of SACCOs are to
(Rural SPEED, 2006):-

1. Allow and encourage members to develop formal business and investment, facilitate them
with sustainable loan services,

2. Encourage members to buy shares in the appropriate amounts by leveraging with their
savings at the appropriate times; using those shares guarantee the savings and loans of the
members, by providing the correct amount of liquidity in the SACCO Society to manage risk of
withdrawal or late repayment;
3. Retaining some profit from interest earned on the lending operation to pay dividend to the
members on the basis of the shares owned; redistribute the profits to the members as dividend on
the basis of shares owned.

In general SACCO Societies are financial institutions designed for people, to have their own
efficient financial service giving institutions that empowers themselves in building asset by
teaching thrift culture and make themselves accessible to credit in sustainable way. Therefore, to
be successful and sustainable the SACCO Society should function similar to banks as a market
for money in a group sharing a common bond. SACCO Society is a financial institution that
purely deals with mobilizing moneyfrom members as savings, shares and providing easy
accessible loans to members on time.Since SACCO Society deals with cash (the most liquid
asset) that can be easily lost, it needs high quality management and special attention to minimize
the risk. Therefore, to minimize the risk the function of the SACCO Society should not be mixed
with other functions.

2.1.3 Cooperatives Movement in Ethiopia

2.1.3.1 Cooperative Movement during the Feudal Regime (1932-1974s)

Cooperatives movement began around the beginning of 1960, during ruling era of Emperor Haile
selassie I. In 1960 the first Legislative called `` Farm Workers Cooperatives Decree`` was
declared as Decree No.44/1960 and proclamation 241/1966 provided the legal ground for the
development of cooperatives in Ethiopia in that period (Alemayehu, 1984). The decree was
enacted to accelerate to development of the agricultural economy of the country and to promote
economic interest of their members through efficient cultivation and development of land made
available to them. Some documents revealed that Ethiopian Air Line Workers Saving and Credit
Cooperative were established in 1956. It was also believed that this SACCOs has come to
exisistence with the experience of foreign workers in organization. Decree No.44/1960 had no
full version cooperative proclamation and only limited to agricultural cooperatives that did not
incorporate cooperatives that were emerging in the country like SACCOs (VeeraKumaran,
2007).

The cooperative that was started with the implementation of the above mentioned objectives in
legal basis had its own short comings; 1] Lack of awareness by different government institution.
Although the support given by the government was very low, since there was no other supportive
law to cooperatives’, it was difficult to solve horizontal problems faced by the cooperatives.
2]The existing land tenure system was the main hindering factor for stunted cooperatives
development(especial for the poor peasant farmers).As the result of the above problems, a
cooperative society proclamation No.241/1966 was to come to effective with consideration of
previous Decree short comings.

2.1.3.2 The Post Revolution Cooperative Movement (1975-1991)

After the over throw of feudal regime, the military junta has got the chance to come to the power
in 1974 (Asefa, 2005 cited in Belay 2006). In 1974 legislative called`` the peasant association
decree`` was declared as decree No.71/1975. In this proclamation the objectives, powers and
duties of peasants association, service cooperatives and agricultural producer cooperatives were
clearly started. It was during this time that a number of ``YeirshaMahber`` was un willingly
organized in quota basis in most of them provinces (VeeraKumaran, 2007).

The cooperative Societies Proclamation No. 138/1978 was issued later in order to include other
type of cooperatives like Housing, Thrift and credit and Hand crafts etc. All the efforts made to
restructure the cooperative movement based on this proclamations were essentially geared
towards direct control of cooperatives and turning them in to government and political rather
than socio economic development instruments (Zeuli and Cropp, 2007).

Cooperatives were administered by the government cadres and untrained man power. In general,
the regime misused cooperatives for its political ends violating the underlying principles of
cooperative.

However, during the Derg Regime, there were some positive contributions to the cooperative
development of Ethiopia. Introduction of distribution of consumer goods and extending
agricultural credits (inputs, oxen, tractors, machinery, etc) through cooperatives (Subramani,
2005).

2.1.3.3 Cooperative Movement in Ethiopia (Post, 1991)

With the dawn fall of Derg regime, most rural based cooperatives were abolished by members
and their resource were looted and misused. After the down fall of Derg regime, there was the
gap between ``1991-1995`` in cooperative movement of the Ethiopia.

As indicated by Subramani (2005), transition government gave no attention to cooperatives

movement meaning that cooperatives were relatively stagnant during this period. During
transition period, bad track record of the problems of the Derg regime couldn`t rid of the mind of
the people. Some of the problems of the Derg regime were repeated in this transition period
cooperatives were administered by untrained man power. There were corruptive practices due to
poor record keeping system (Veerekumarn, 2007).

It was after the proclamation147/1998 (FederalitNegartGazeta, 1998) that people centered

cooperatives come in to existence; the cooperative proclamation No.147/1998 identified clear
goals and authorities, which supported a more conducive legal environment for the formation
and development and Ethiopian cooperatives. This goal includes social, economic and other
motives that require joint action for attaining common target. To speed up the cooperative
movement in the country, the government established the federal cooperative commission by the
proclamationNo.147/2007(Federal NegaritGazeta, 2002).

2.1.4 Objectives of Saving and Credits (SACCOs)

According to the Frank Bernanke (2001), the objectives of SACCOs are encouraging and
promoting to develop thrift culture within the members as well as the community by teaching
wise use of their money and efficient management of their limited resources, since savings have
a close relationship with wealth. The other Objectives of SACCOs are to promote the economic
interest of their members and in particular to;

i.Promote thrift among its members by affording them on opportunity for accumulating savings
and paying reasonable interest without risk and such savings.

ii. Create a source of funds from which it can afford relief to its members in need by making
loans to them for productive and provident purposes at fair and reasonable rates of interest and
with easy term of repayment.
iii. Continuously educated members and how savings can make on regular basis and the wise
use their savings.

iv. Provide service to its members such as financial counsels so that the members can solve
most of their financial problems and the risk of management service to ensure the safety of
member’s savings and loans.

v. To fight poverty through improving members economic and social conditions by

enabling the access financial services.

vi. To fight exploitation of powerless individuals or institutions, by pooling their own

resources to meet their needs.

vii. Developing linkage between the rural people and urban banks in order to have broader
financial flows in to the community.

2.1.5. Financial products

I/ Saving

Saving can be defined simply as holding something back from today’s consumption. Saving
means withholding something valuable for future use. This simple phrase describes two key
elements of any saving activity (FAO, 2002). Savingis:

1. A Discipline - because it teaches people to use their resource in a wise manner and develop
an Asset in the future.

2. A Sacrifice, Planning for tomorrow (future), because it teaches people to give up today’s
expenses and to with hold valuable resource for future possible out coming instead of consuming
immediately.

Saving teaches people to anticipating, forecast andpreparing for possible risks and emergencies
(bad harvest, sickness and death) saving teaches people to think on starting a new business or
expanding existing once. Saving teaches people to anticipating and preparingfor upcoming
events and expenditures (School fees, Marriage, Old age, retirements etc). Therefore, saving is
everything, which can empower human being to have bargaining power, makes himself secured
and person with full confidence.

In the SACCO society, saving is an asset to members, and a liability to the SACCO society.
Saving is collected from member to lend to members.Saving is sources of income to the SACCO
society because it lends to members with interest. This loan interest is the main source of income
of the SACCO society. For a SACCO society, it is a must to have a regularsaving flow from
members and to promote efficient financial services to members. SACCO societies have three
kinds of savings:

 Compulsory Savings
 Voluntary Savings
 Contract Savings (Time Deposits)
 Compulsory savings

1. Compulsory saving is a saving that a member forced to save on regular basis; it is a

membership saving i.e. must be saved on monthly basis.

2. This compulsory saving is collected to lend to members. If members fail to save on time they
will get penalized based on the saving policy of the society. Unless the member quits from
membership, he should save on regular basis.

3. If a member wants to withdraw from the SACCO society, he has the right to take this
compulsory saving with one-mouth priors notes to the Board of Directors.

4. The society will provide interest for this savings.Voluntary savings if the potential SACCO
members are farmers and onlyreceive income once or twice a year, how can they save the
appropriate amount at the appropriate time?

1. This kind of saving is very important to farmers since they do not have regular income they
can save as voluntary saving during harvest time, and transfer monthly to their compulsory
saving accounts. Voluntary savings are deposited and withdrawn as the member sees fit.
Farmers, and other individuals, can save the full amount for the coming year's compulsory
savings in advance with the SACCOby depositing 12 months worth of saving in a voluntary
account. Following that, eachmonth on the appropriate day the member will come to the SACCO
to withdraw the amount of one month's compulsory saving from the voluntary saving account
and deposit it in the compulsory saving account. This maintains the fundamental function ofthe
SACCO and allows individuals with seasonal incomes to be members.

2. This ensures regular flow of cash to the SACCO society and promotes members participation.

3. This kind of saving can be withdrawn at any time when the owner needs it.

4. The SACCO society may or may not provide saving interest for this voluntary savings.
Contract savings (time deposits) or fixed deposit. This kind of saving will not be invited unless
the SACCO society acquires good experience in managing their savings and loans properly. This
kind of saving will invited in the future when the SACCO society is in a good capacity and
position of managing its savings and loans properly and if there is a shortage of feasible financial
demand by members. It can be collected from members and none members but the amount,
period of collection and interest for this saving should be decided by the General Assembly of
members. Time deposit brings the opportunity of high interest rate on savings.

II/ Share

Share is the capital of the SACCO society and an asset to members. It is a risk protecting capital
that collected from members in proportion to compulsory Savings Since share is risk protecting
capital it should be saved in a bank. If a member wants to withdraw from the SACCO
membership they have the right to take it after 12 month or after Audit. This is to protect the
SACCO from any loss and to give the member the chance of having dividend for the period to
stays as a member within the society.

III/ Loan

Loan is having some one's money for productive, forschool fee, etc and that will pay back at
agreed period with additional interest. According FAO, (2002) having a loan (borrowing) can be
expensive, risky, difficult and stressful. Loan is expensive by nature because borrower will have
to pay the loan itself with additional interest more than or equal to what it produces. Itis risky
because it may be exposed to risks caused by weather, income fluctuations, disease anddeath,
that may create a problem for repayment. The poor has more difficulties in obtaining loans than
the rich. Local moneylenders, friends, even families and banks are unwilling to lend to people
they think will have problems to repay. It can be stressful because loan involves promise to repay
to the lender Failure to repay may mean losing of valuable possessions (jewellery,a cow, a plot
of land, etc) or losing well reputation. Therefore, loan (borrowing) must be examined and treated
carefully and honestly in the SACCO society.

2.1.6. Advantages of SACCO

SACCOs and credit unions hold some real advantages for microfinance outreach and
development (Birchall, 2004). An organized SACCO is:

a. An easy way of organizing a community to saveand recycle savings in a given locality;

b. Since the nature of a SACCO is local, it mobilizes savings locally, within the community, and
then the profits are returned to members in theform of loans. The money stays and works within
the membership and the area. This mutually achieved success helps to not only build a sense of
ownership and pride in an area, it createsa culture of saving and investing.

Reach

The reach of SACCOs is local, as mentioned above. SACCOS reach members and areas (i.e.
rural) that are unattractive to banks. They can provide access to members of the population who
would not normally save in the formal sector, nor be able to physically access a traditional
financial institution, especially commercial, due to locality and deposit restrictions.

Savings

One of the key elements of a SACCO is their savingsproduct. Unlike most micro-credit NGOs
and institutions they provide a savings product which offers interest and a return on their
deposits, which provides a new income stream for the individual and can either be reinvested or
withdrawn for use.

Ease :SACCOs can be started with relative ease. They are typically started by a group with a
common bond such as farmers, teachers, artisans or women and tend to have very little major
external support. They do not require donations from outsideresources to start-up since it is
funded through member’s deposits, which makes the process simpler and more straight forward.
Stability

Due to the nature of SACCOs they have a solid base of small savings accounts which creates a
stable and relatively low-cost funding source. Thisstability creates confidence in the institutions
and in the financial sector and as confidence growsso too does the use of financial products.

Low Overhead

Well-run SACCOs are known for having low overhead and low administrative costs, which
enables them to make loans at interest rates that are lower than those charged by other micro-
credit providers. Garber (1997) in a paper for the University of Miami recommends 7 Steps to
build sustainable credit and savings programs. These are as follows:

1. Choose a programme model

One specific programme model for financial servicesand microenterprise development cannot be
recommended for all situations. However, certainbasic technical and socio-economic criteria can
be employed - large scale, reaching the poor, providing easy access to savings and credit
services, mechanisms for cost recovery and financial sustainability. Combining credit and
savings, and credit with other socio-economic programmes also ensure better participation and
sustainability.

2. Build consensus

Building a consensus among the various stakeholders, whether project staff members, the
targetcommunity, or other individuals/organizations, is an important element in the success of
credit programmes. This is critical in facing the challenge of adjusting their values and roles as
new financial service models reduce the subsidy element, stress the rotation of funds and feature
partnerships.

3. Designate staff for economic development

Project staff members specifically designated to oversee development and implementation of

financial services, plays a critical role in facilitating an increased understanding and awareness,
and in transferring lessons learned. Experience in project design, implementation, management
and evaluation, and experience in working with poorwomen is essential for effective outreach.
4. Formalize national policies

Clear national/regional policies for microcredit and poverty lending permit greater scale,
specialization and sustainability. This avoids local programme design and budget decisions, as
well as enables sharing of best practices and high performance ideas.

5. Assess and choose financial institutions as partners

Dynamic partnership models are necessary to successfully promote sustainable financial

institutions. Partners typically take up the activities of managing funds or provide services to
poor clients; they may also monitor service delivery and socio-economic impact, and assist in
financial management and management information systems. As a result, both parties enhance
their understanding of effective development and become stronger organizations.

6. Create agreements with partners

Agreements with partners define common visions and spellout contents of the programme. Roles
and responsibilities, joint review, problem solving/mediation, and performance indicators are
also identified. Agreements specify reporting standards and forms that will be similar so that
performance measuring becomes easy. These include loan portfolio performance, cost-recovery,
progress toward sustainability, and socio-economic impact (overcoming gender inequities,
effects on children).

7. Manage partnership agreements

Managing partnership agreements requires an understanding of the broader programmatic,

institutional and financial issues associated with developing partner organizations. This may
require technical assistance, training and systems development etc. to make partnerships more
efficient. Measuring programme impact and institutional development of partners depends on
good information systems and monitoring instruments.

2.1.5.Challenges for SACCOs development

While SACCOs and credit unions have distinct advantages to banks regarding access, they face
challenges which banks would not normally encounter (CGAP, 2005). Some of the most major
problems are:-
Governance weakness

SACCOs are usually governed by a volunteer board ofdirectors elected by the

membership;small, young SACCOs are also often staffed entirelyby volunteers. As they grow
and perform more risky operations they require more professional managers, it is at this point
problems occur when volunteer board members continue to make operational decisions after
professional managers have been recruited when they should be focusing on the monitoring of
operations. It is difficult for board members to balance the contradictory interests of net
borrowers and savers. Borrower domination is unhealthy for SACCOsbecause they have few
incentives to ensure prudential discipline or profitability; whereas, net savers are most interested
in protecting their deposits and earning an attractive rate of return. The “one person, one vote”
decision-making system is meant to ensure equality of interests, but many people do not exercise
their right because of they feel they wield very little influence as an individual; as a result, in
some cases, community elites or net borrowers dominate the structure for their own gain (Ibid,
2005).

Inadequate regulation and supervision

Competent external regulation and supervision can identify, avoid and resolve many
commonproblems experienced by SACCOs and credit unions. In many countries, SACCOs are
supervised by the same government agency that is responsible for all kinds of non-financial
cooperatives, including agricultural and marketing; such agencies do not have the financial skills
or political independence needed to oversee financial intermediaries effectively.

In Latin America, more bank superintendence are adding supervision departments for SACCOs
and in West Africa, central banks have designated adepartment, such as microfinance, to
supervise SACCOs. Delegated supervision to an outside body only works if that body is not
controlled by the SACCOs being supervised, but requires an understanding of their unique risk
profile and supervision must be adapted accordingly(CGAP, 2005).

Limited Menu of Products

As stated in CGAP (2006) , traditionally SACCOs offer only one type of loan a 3:1 or 5:1
multiple of a member’s savings balance, with no variations to risk levels (borrower repayment
capacity, type of activity financed etc…). These types of loans are not flexible enough to meet
member’s diverse credit needs, including short-term working capital for micro-entrepreneurs and
agricultural inputs for small-holder farmers. Many SACCOs are introducing a greater variety of
products, such as housing loans and use better tools to assess and manage loan risk. SACCOs in
Mexico and Ecuador apply credit scoring tools for risk analysis and offer flexible lines of credit
to find working capital needs (ibid,2006).

Damage done by external credit

Donors have channelled funds through SACCOs to target specific types of clients. Experience
has shown that this practice tends to harm participating SACCOs; external funds decrease the
incentive to mobilize deposits, skew incentives toward net borrowers, and are not managed as
carefully as the member’s own money. External funding does have the advantage of being
resources for longer-term loans, but it should be limited in relations to member’s deposits and the
internal capacity for managing a larger loan portfolio. In Benin (CGAP, 2005), FECECAM, a
federation of cooperatives, suffered loan quality and asset deterioration when donor-driven credit
increased and was channelled through cooperatives that did not meet prudential standards.

2.1.7. The SACCO Model

Despite the challenges faced by SACCOs they can be an effective tool if governed, regulated and
held to best practices, and if guided by the core values of self-help, self-responsibility,
democracy, equity, solidarity, honesty, openness, social responsibility and caring for others.
There are a variety of SACCO models throughout the world and there is not one model which
applies to every country or group of people, but there are some best practices and standards. The
International Cooperative Alliance (ICA) stresses that SACCOs are essentially cooperatives.
Cooperatives are democratic organizations controlled by their members who set their own
policies. Therefore, SACCOs are self-determined andself monitored; theirs policies must be set
by members and should not be externally managed (WOCCU, 2002).

2.7.1. Education is the key to success

Due to the nature of democracy within SACCOs, it isimportant to have an informed

membership; an uninformed membership the ICA says is the greatest threat to any SACCO. The
ICA stresses that cooperatives and SACCOs in return, should provide education and training for
their members, elected representatives, managers and employees so they can contribute
effectively to the development of their cooperatives. The education of SACCO members is an
absolute must for maintaining democracy, member control and transparency within the SACCO
or once aSACCO is badly managed to benefit a limited few, it is very difficult to bring the
institution back to the fundamentals; this is where greater regulation has a role.

2.7.1. Best Practices and Regulation

Cooperative legislation should provide promotion, registration and governance supervision to

SACCOs and credit unions; whereas, financial sectorlegislation is meant for the protection of
savings and prudential supervision of the industry.The WOCCU recommends credit union laws
which create financial management disciplines, controls and supervision. The licensing of
SACCOs and credit unions is an instant way in creating confidence and should be done by the
government to ensure best practices. In Rwanda, according to CGAP (2005), SACCOs as other
financial institutions are licensed and supervised by the Central Bank. The basic standards which
should be applied to achieve a license according to WOCCU are the following:

 Standardized accounting reporting

 External audit
 Capital Adequacy (capital reserves/assets)
 Fully funded provisions for loan losses
 Loan Loss provisions
 Liquidity standards
 Liquidity reserves
 Limits on non earning assets
 Internal controls
 Borrowing/leverage limits
 Loan concentration limits
 Policies: credit, collections, savings

Below are the WOCCU international standards for financial performance monitoring, which was
developed for monitoring and managing credit unions (WOCCU, 2002). “PEARLS” financial
standards.Each letter of the word PEARLS measures key areas of credit union operations:
Protection of asset, Effective financial structure, Asset quality, Rates of return and cost,
Liquidity and Signs of growth. A PEARL is a financial performance monitoring system designed
to offer management guidance for credit unions and other savings institutions. A PEARL is also
a supervisory tool for regulators. PEARLS can be used to compare and rank institutions; it can
provide comparisons among peer institutions in one country or across countries. PEARLS are a
set of financial ratios or indicators that help to standardize terminology between institutions. In
total, there are 44 quantitative financial indicators (see Annex I) that facilitate an integral
analysis of the financial condition of anyfinancial institution. The purpose for including a myriad
of indicators is to illustrate how change in one ratio has ramifications for numerous other
indicators. Each indicator has a prudential norm or associated goal. The target goal, or standard
of excellence for each indicator is put forth by the World Council of Credit Unions, Inc.
(WOCCU) based on its field experience working to strengthenand modernize credit unions and
promote savings-based growth. Depositors can have confidence that savings institutions that
meet the standards of excellence are safe and sound. PEARLS, primarily a management tool for
institutions, can also be used as a supervisory tool by regulators. As a management tool,
PEARLS signals problems to managers before the problems become detrimental. For boards of
directors, PEARLSprovides a tool to monitor management’s progress toward financial goals. For
regulators, PEARLS offers indicators and standards to supervise the performance of savings
institutions. Protection-The primary goal of evaluating the Protection indicators, as the heading
implies, is to ensure that the financial institution provides depositors a safe place to save their
money. Provisions for loan losses are the first line of defence against unexpected losses to the
institution.Allowances for loan losses are essential, since delinquency signals that loans are at
risk; thus, the institution must set aside earnings to cover those possible losses so that member-
client savings remain protected. When financial intermediaries do not recognize loan losses:

• Asset values are inflated;

• Reported net income is overstated;

• Provisions for loans losses are lacking;

• Member-client savings are not secure; and

• Dividends are overstated and erroneously paid out.

Effective financial structure- The financial structure is the most important variable that affects
growth, profitability and performance. Credit unions that maintain most (70-80%) of their total
assets in the loan portfolio have the greatest opportunity to maximize returns on these productive
assets while providing their member- clients with the credit services they seek. Similarly,
institutions that fund their assets primarily (70-80%) with member-client deposits are
independent from the fluctuating price of external funds. Financial structure is always changing
and requirescareful management, especially in cases of rapid growth. The Effective Financial
Structure area of PEARLS focuses on an institution’s sources of funds (savings, shares, external
credit and institutionalcapital) and its uses of funds (loans, liquid investments,
financialinvestments and non-earning assets). The PEARLS system provides information over
time; therefore, managers, directors and regulators can observe the structural evolution of both
the sources of funds and the uses of funds. An institution has an effective financial structure
when assets, financedby savings deposits, generate sufficient income to pay market rates on
savings, cover operating costs and maintain capital adequacy Asset Quality- is the main variable
that affects institutional profitability. An excess of defaulted or delayed repayment of loans and
high percentages of other non-earning assets have negative effects on credit union earnings
because these assets are not earning income. As mentioned in the protection discussion, it is
essential that delinquency be measured correctly and minimized.

In the context of globalization, cooperatives are particularly well-equipped to combine the

advantage of local activities with regional and national networking within the system, provided
they adapt their structures and operations accordingly, thus contributing considerably not just to
strengthening their members but the local/regional economic structure in which they are
operating. “Microcredit programmes have successfully contributed to lifting people out of
poverty in many countries around the world”, notes the UN resolution of 15 December 1998. In
his speech launching the “Year of Microcredit” on 18-11-2004, Kofi Annan emphasized the fact
that sustained access to microcredit has contributed to poverty reduction by generating income
and employment, enabling children to attend school, families to receive medical care and by
offering individuals the opportunity for taking the best possible decisions for themselves. The
fact that cooperative financial institutions inaddition to municipal saving banks (Sparkassen)
have had the most prolonged and successful experience in the mobilization of microsavings and
microlending is uncontroversial both decisive factors for income generation (ibid, 2006).

2.2. Empirical Studies Financial Performance of SACCOs

2.2.1 Studies in Panel Countries

Savings play a critical role in financial management strategies of poor people. Deposit facilities
make it easier for poor clients to turn small amounts of money into “useful lump sums,” enabling
them to smooth consumption and mitigate the effects of economic shocks (Rutherford 2001).

Secure savings also can provide a measure of independence to socially and economically
vulnerable individuals, notably women and children. And, unlike credit, the benefits of savings
are not limited to the economically active. Although significant research has documented the
benefits of saving to the poor, the microfinance sector remains focused largely on credit delivery.

According to World Bank (2006) and UNDP (2006), perhaps the most important factor that
determines the success of financial cooperatives is the quality of internal governance. The
governance structures of SACCOs have typically 3 tiers: the general assembly of all members, a
board of directors elected by the general assembly, and a management team appointed by the
lowest organizational structure in the administrative level of the government. Penetration rate is
calculated by dividing the total number of reported credit union members by the economically
active population board.

The boards’ role is to establish strategic direction, make policies, and hire, supervise and fire
managers. Management takes care of the day-to-day operations of the cooperative with in the
powers delegated to it by the board. Financial services integrate markets, encourage savers to
hold larger production of their wealth in the form of financial assets than unproductive inflation
hedges, and allocate ingestible resources more efficiently. Financial deepening is achieved by
reducing risks and minimizing transaction costs through exploitation of economies of scale and
scope, professional portfolio management and diversification, systematic collection of
information, and fostering a better lender - borrower relationship (Padmanabhan, 2002).

Formal microfinance institutions are regulated by the financial authorities of a country with
special microfinance windows, semi formal microfinance institutions (savings and credit
cooperatives, village banks, etc.) are under the control of non-financial authorities and informal
micro financial institutions are controlled by customary law and peer pressure (Rajaram, 2001).

According to FAO studies (2001), on average, rapidly growing countries have higher savings
rates than slower-growing countries. These rates are influenced by many factors: the level of
income per capita, the rate of income growth, the age composition of the population and attitude
toward thrift. The results of the study conducted by Muradoglu and Taskin et al. (1996) indicated
that demographic variables such as age groups, birth rates, dependency ratio and financial
variables such as interest rates, inflation rates, available financial instruments and initial wealth
levels affected the decision of household savings significantly. There are different types of
financial institutions in the world. A single institution model suitable to all countries does not
exist, no one structure could say to be clearly preferable to others (Orazio and Miguel, 2000).

What is important is that these institutions should be able to adapt to local conditions and
financial flow. As a short-term solution to the lack of savings by the households, governments of
developing countries are embarking on micro financing schemes to enable the households to
venture in to small business activities. However, these measures are not only costly but also not
sustainable in the longer run if the societies are not empowered to save by themselves (ibid,
2000).

The major problems of cooperatives in Africa are absence of experienced management,

uneconomic base level units, lack of supporting infrastructure like extension, training etc., poor
member participation, insufficient supervision and auditing of cooperatives, and too much
political disturbance (SACCOL, 2003).

The existence of functioning cooperative societies leaves a positive mark on the economic and
social structure of a country since cooperatives develop on the basis of local initiative and local
economic strength; decentralized cooperative systems can operate in close proximity to markets
and target groups. (ZviGalor, 2006).

In the context of globalization, cooperatives are particularly well-equipped to combine the

advantage of local activities with regional and national networking within the system, provided
they adapt their structures and operations accordingly, thus contributing considerably not just to
strengthening their members but the local/regional economic structure in which they are
operating. “Microcredit programmers have successfully contributed to lifting people out of
poverty in many countries around the world”, notes the UN resolution of 15 December 1998.

2.2.2. Conceptual frame works

A good performance framework focuses on the members and measures the right things.
Performance measures must be meaningful, unambiguous and widely understood; owned and
managed by members with in SACCOs. The data collection is with in normal procedures; able to
drive improvement; and like to critical goals and key drivers of the society.
G
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2.1. Conceptual frame works for determinants of Sacco’s operational performance.
Figure
 CHAPTER THREE

3. ResearchMethodology

3.1. Descriptions of the study area

BorichaWoreda Determinants of Saving and Credit Cooperatives (saccos) Operational

Performance in situated in Sidama Region, Ethiopia”. Determinants of saving and Credit
Cooperatives (saccos) Operational Performance was established in 1990. Before this year, the
Determinants of Saving and Credit Cooperatives (saccos) will be categorize under theboricha
them.

3.1.1. Location

The Yirbatown is capital city of Boricha and Boricha is located at 31Km far from
Hawassaand306kmfrom Addis Ababa, which iscapitalcityofthe Ethiopia.Thetotalarea of
theselectedworedais10square kilometres
(CSA,2006)anddividedinto13ruralkebelesand1urbankebeleadmirationsandtotal14kebeles.accordi
ngtotheworeda a finance
anddevelopmentofficeof(2019),thetotalpopulationoftheworedis103068.Outofwhich61534aremale
sand41534arefemales.Theaveragepopulationsizeoftheworedais5personsperhouseholds.Thewored
aisborderedwithlokkaabayaworedainthesouth,daleworedintheeast,Hawassazuriaworedainthenorth
,wolayitazoneandoromiyaregioninthewest.Borichaworedawas foundedin1993E.C from
shebedinoworedaanditcontainsalmost80% countries diversity.Theeconomicactivity
ismixedfarmingand agricultureisthemainsource ofincomeforthepopulation.
Tradeandservicesactivitiesaregoingonatthecentreofthe1 urban kebeles as wellas in ruralkebeles
smalltown.

Sidama is generally a fertile area; vary from flat land (warm to hot) to highland (warm to cold).
Sidama has geographic coordinates of latitude, North: 5” 45” and 6”45” and longitude, East 38”
and 39”. It has a total area of 2,000 KM 2of which 97.71% is land and 2.29% is covered by water.
The elevation of the town ranges between 1,500 to 1,700 meters above sea level.
(BorichaWoreda FED, 2011).
BorichaWoreda from the time of its establishment, as the BorichaWoreda, the population is
increases from time to time. The major components of the BorichaWoreda inhabitants are small

3.1.2. Socio – economic features of the study area

BorichaWoreda has 24 governmental and 2 private primary schools, 1secondary public school.
Also have 2 kindergartens, and a number of privately owned colleges. The town delivers health
service with one public hospital, 1 health station, and 3 clinics to the residents of the woreda and
the surrounding community. In the woreda there are 1 publicbanks and also different agro
business industries and hotel service.

3.1.3. SACCOs in Boricha Woreda

The first SACCO will be established in Boricha before 15 years in 1990. The current profile of
SACCOs in Boricha Woredashows that 12 SACCOs provide their service to 1074 members, out
of which 720 are males and 354 females. The financial status indicates the presence of a total
asset of Birr 365,605. Collected from members in the form of share capital and saving account.
Each members save monthly within a range of Birr 10 to 300. Currently these organizations
extend credit amount of Birr 157,121 dispersed to 2019 members for different purposes.

3.2 Research Approach

According to Creswel (2009) there are three research approaches, quantitative research
approach, qualitative research approach and mixed research approach. In light of the research
objective, this study will be adopting quantitative type of research approach to assess the
financial performance of SACCOs. A quantitative type of data will be has use based on
measurement of quantity or amount. For this study, the researcher will be used descriptive
research design because it enabled the researcher to conduct data pertaining financial
performance saving and credits of cooperatives in BorichaWoreda. Both quantitative and
qualitative research approaches will be use.
3.2.1 Target population

Sekaran (2011) refers to a population as the entire group of people, events or things of interest
that the researcher wishes to investigate. The populations of this study are five SACCO

No, Names of SACCOs Established Years

1 KAAYYO 1996
2 HULEGEB 2001
3 MITTIMMA 2003
4 LOPO 2003
5 AJUUJA 2005
Table 3.1.BorichaWoreda Selected SACCOS

3.3. Data sources and collection method

This study will be design to identify socio-economic factors which are determining on saving
and credit cooperatives operational performance and to determine the relative importance of the
factors. In this study both primary and secondary data will collect. Primary data will collect from
both samples SACCO members and officials by use a structure interview schedule. On the other
hand, secondary data will collect from SACCO records, financial reports, government office, and
other reliable sources.

3.4. Sampling technique

BorichaWoreda will beselect purposively for this studybecause it has long established SACOOs
and considerable amount of liquid asset. There were12 SACCOs in the BorichaWoreda. For this
study, five SACCOs will be select by simple random probability method based on availability of
data and completeness of records. The member are male 720 and female 354, the members are
1074.By using simple random sampling techniques which represent 20 present total numbersof
SACCOs in the study area.

The sample size for this study is determined by a simplified formula suggested by Yamane
(1967).

n= N /1+N (e2)
Where: n: the sample size;

N: The total population size, which is cooperative members in the study area at 95% of the
confidence level and e,: is the level of precision assumed to be 8%.

n= N /1+N (e2)

n= 1074/1+ 1074(0.08)

n= 136

Table 3. 2: Sample size

No Name of SACCO Total Member Sample size

.
1 Kaayyo 254 31
2 Hulegeb 192 25

3 Mittimma 228 29
4 Lopho 206 25

5 Ajuuja 194 26
Total 1074 136
Source: Boricha Cooperative Office.

3.5. Methods of Data Collection

The Primary data will be collected from (136) respondents in which all of them were members,
leaders (committee members) and member of Board of Directors of select SACCOs in the study
area. Out of the 136respondents, 95 members, 38 committee members and 3 were Board of
Directors. These necessary data will be collects from respondents directly by using structured
questionnaire, Focus Group Discussion and interview methods from the members and leaders.
The secondary data will be collects from documents of sample Saving and Credit cooperative
societies such as annual reports, journals, thesis, internet access, published and unpublished
documents and minutes of the SACCOs committees of the Borichaworedaworeda cooperatives.

3.6. Technique of data analysis

The data will be entered into computer and analyzed using statistical software (SPSS version
17).The findings on the operational performance of SACCOs explained in the form of Tables,
percentages, graphs and charts to describe the present nature of SACCOs and also the saving
profile, loan provision and loan repayment procedure of members. In general, the socio-
economic profile of the respondents in Boricha Woreda will be used to examine the performance
of SACCO in service provision to members. The descriptive analysis made use of tools such as
mean, standard deviation, ratios, X2test, correlation and summarizing the challenges and
prospects of SACCOs through SWOT analysis. To detect the operational performance of
SACCOs, standards were calculated using PEARLS formula (see annex II).

3.6.1. Definition of variable of conceptual framework

Age :- earned age for save
Income;- The average of amount of birr
Family size:- Contribution for livelihood
Educational level ;- Knowledge of about SACCOs
4. Financial Budget and Time

4.1. The proposed budget breakdown

Items Quantity Price/quantity Total

1.stationary
1.1 duplicating paper 4 pack 150.00 600.00
1.2 writing pad 1 50.00 50.00
1.3 pen ½ pack 125.00 125.00
1.4 typing 150 pages 4.00 600.00
1.5 printing 150 pages x 5 1.00 750.00
1.6 photocopying and ….. 970.00 970.00
photo print
1.7 binding 3 200.00 600.00
2.equipment
2.1 CDs 2 25.00 50.00
2.2 audio cassette 2 10.00 20.00
2.3 extra cathode 4 in pair 15.00 60.00
batteries
2.4 extra hard 1(8GB) 250.00 250.00
drive(flash disk)
3. accommodation
3.1 travel cost …… 1000.00 1,000.00
3.2 food cost 50 days 80.00 4500.00
3.3 bed cost 50 days 70.00 3500.00
3.4 costs during 30 days 100.00 3,000.00
interview and
discussion
Total 16,075.00
4.2. Time schedule

Novem
October

January

March

may
ber janDecem
No

ber
Type work

1 Research question preparation 

2 Distribute the question paper


3 Follow up question paper 

4 Date collect 

5 Organize data 
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Website Http://www.woccu.org

www.cgapdirect.org, Working with Savings & Credit Cooperatives

http://www.coop.org – http://www.ica.coop

CIA World Fact Book:https://www.cia.gov/library/publications/theworldfactbook/geos/et.html

www.businessdictionary.com