Research Paper entitled “Determinants of the Financial Performance ...
Transcript of Research Paper entitled “Determinants of the Financial Performance ...
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, 2015.
Presented by:
Ergetew Temeche Molla
Email: [email protected] /+251910852351
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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
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Cont..1. Background of the study
1st 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),
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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
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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.
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.
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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
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
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.
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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.
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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.
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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.
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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.
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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.
3.4. 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 unions14
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.
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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
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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
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
“Saving is not only placing some thingfrom the remain of the basicconsumption but also sacrificing something from what you have”.
ቁጠባ ማለት ሲተርፈን ብቻ ማስቀመጥ ሳይሆን ዛሬ ካለንነገር ለነገዉ መሥዋዕነት መክፈል ማለት ነወ፡፡
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