Presented by: Ergetew Temeche Molla /

Transcription

1 Research Paper entitled Determinants of the Financial Performance of saving and Credit Cooperative Unions in South Wollo Zone which is presented in the Ethiopian Cooperative Development Conference organized by Federal Cooperative Agency & Hawasa University, held from May 7-8, Presented by: Ergetew Temeche Molla /

2 Contents of the presentation 1. Background of the study 2. Statement of the problem 3. Objective of the study 4. Research Questions 5. Methodology 6. Findings 7. Conclusions and 8. Recommendations 2

3 Cont.. 1. Background of the study 1 st SACCO in world German(1846) in Africa Ghana (1959) and In Ethiopia by procl No 44/1961 in. High rates of investments depend on high rates of saving (Pelrine & Kabatalya, 2005), SACCOs link borrowers and savers (Tache, 2006), SACCOs maximize wealth(exactness, quality of benefits and the time value of money) (Kyendo, 2011), 3

4 2. Statement of the problem The two fundamental functions of SACCOs are financial intermediation and investment. The most basic one is financial intermediation. That is bringing savers and borrowers together (Pelrine, 2001). But different problems have retarded the growth of SACCOs 4

5 Previous studies about the determinant the financial performance of SACCOs: 1. Zerfesha(2010) focused on the nature of SACCOs 2. Kifle Tesfa Mariam(2012) emphasized on gender, household income; amount of loan borrowed and year of cooperative membership 3. Dr.Sambasivam (2013) emphasized on the financial health, sign of growth, efficiency of saving mobilization and the loan services strategies.

6 Therefore, the above studies have not identified: - the internal determinants of financial performance and - the financial position growth trend of the SACCO unions. - This study will fill the gap by assessing the above two points. 3. Objectives of the Study 3.1. General Objective The general objective of the study is to assess the determinants of financial performance of saving and credit cooperative unions in South Wollo Zone. 6

7 3.2. The Specific Objectives To assess the main internal financial performance determinants of SWSACCOUs, To analyze the growth trend of the overall financial position of the unions and to provide Recommendations. 4. Research Questions What are the main internal factors determining the financial performance of SWSACCOUs? What seems like the financial position growth trend of SACCO unions? 7

8 5. Methodology:- Research Design: Cross sectional Descriptive research, Population: 4 SACCO unions, Sample size: 3 SACCO unions, Sampling Technique: purposive Sources of data: secondary Data Collection Methods: Survey Method of data analysis: frequency, percentage, tables, and ratio analysis. 8

9 6. Findings: Internal Determinant of the Financial Performances of SACCO Unions (Ratio Analysis) 1. Liquidity Ratio Analysis: current Ratio is employed(ca/ CL). Standard 2:1 to other businesses but 1.2:1 to SACCOs - All SACCO unions considered in the study have been found in a better position to pay their current obligations. 9

10 This implies that the financial position of the unions were satisfactory to fulfill their short term obligation in the respective years but the trend is erratic. 2. Leverage Ratio: 2.1. Debt Ration(standard>50%) the table 3 shows that except Dessie Amba SACCO union all the unions have a total debt ratio above the required standard. 10

11 2.2. Debt Equity Ratio(standard>1x<=3:1: ) table3 shows that except Dessie Amba, the two SACCO unions have used more borrowings and members are borrowing to finance their operation than equity financing. 2.3.Capital Adequacy Ratio(standard 50%): Table3 shows that the capital adequacy ratio of all the selected unions is below the given standard and implies that the unions member patrons own less of their SACCOs assets. 11

12 3. Profitability Ratio Analysis 3.1. Return on As set (ROA)( standard 5%): Table5 shows that the return on asset ratio of all SACCO unions of this study was below the known standard This implies that the unions have not got a return which is equal or better than the interest rate of the money they borrowed. 12

13 3.2. Return on Equity (ROE)(standard 20%): Table5 that owner members own less proportion of the union s assets. Most of the selected SACCO unions have not a better financial performance on return on equity. 13

14 3.3. Operating self sufficiency Table5 shows that the operating self sufficiency trend of Dessie Amba is improved, Mekaneselam and Wubaye SACCO Unions operating self sufficiency ratio is erratic Net profit Margin Table5 shows that the NPM ratio of most of the unions is found in a fluctuating trend due to the fluctuating performance of the unions 14

15 4. The Financial Position Growth Trend of the Three SACCO Unions the financial growth trend of most of the unions is good they are in a position to expand their activities and the social fund from profit earning and they could pay the dividend fund to their members. 15

16 7. Conclusions The main purpose of this research is to study the determinants of the financial performance of SACCO Unions in South Wollo Zone Amhara regional state. The research is descriptive and analytical in nature. The data used for the study was secondary. The collected data were analyzed by using simple statistical analysis like percentages, tables, and financial ratios. The three years auditing report and the financial analysis tools such as liquidity ratios, leverage ratios, profitability ratios, and trend analysis of balance sheets from the period of 2004 to 2006 E.C. were used 16

17 the Result revealed that liquidity level of the SACCO union is fairly high but in a decreasing rate. The leverage ratio of SACCO unions are highly leveraged Their profitability rate is below the minimum required rate The financial growth trend of most of the unions also good and they are in a position to expand their activities and the social fund from profit earning and they could pay the dividend fund to their members. 17

18 8. Recommendations Increasing the financial liquidity and profitability, Reducing the leverage by enhancing loan provision and collection efforts, Selling additional shares, Minimizing periodic expenses and developing organizational culture by using financial ratios to effectively manage their assets are the possible recommendations. 18

19 Saving is not only placing some thing from the remain of the basic consumption but also sacrificing some thing from what you have. ቁጠባ ማለት ሲተርፈን ብቻ ማስቀመጥ ሳይሆን ዛሬ ካለን ነገር ለነገዉ መሥዋዕነት መክፈል ማለት ነወ 19

20 Thank You!! 20