Kifle tesfemariam saving and credit coopratives in ethiopa.pdf

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International Journal of Cooperative Studies Vol. 4, No. 1, 2015, 1-8 DOI: 10.11634/216826311504617 ISSN 2168-2631 Print/ ISSN 2168-264X Online / © 2015 The Author(s) Published by World Scholars / Savings and Credit Cooperatives in Ethiopia: Development, Challenges and Proposed Intervention Kifle Tesfamariam Department of Cooperative Studies, Mekell University Savings and Credit Cooperatives (SACCOs) in Ethiopia are playing an active role both in rural and urban areas. Their number has increased from 5,437 in 2006 to 14,453 in May 2014 showing a compound growth rate of 28% per year. The aggregate number of membership during the same period increased from 0.38 million to 1.7million and their capital increased from one billion birr to 5.2 billion birr. These figures indicate that financial cooperatives have had the support of the people in undertaking activities contributing to their economic development. SACCOs are considered to have immense potential in financing short term loans for agricultural production technologies and undertake off-farm income generating activities in areas where both the state and the private sector have failed. Serious efforts are being made to strengthen capital resource of SACCO s base through incre asing members’ subscription and mobilization of savings in rural and urban areas. Therefore, the objective of this paper is to examine the current status and challenges of SACCOs in Ethiopia. The study is based on review of pertinent literature on SACCO operations, policy and regulatory framework documents as well as secondary data obtained from various sources. The paper identifies challenges such as, absence of financial cooperatives policy and regulatory environment, weak institutional capacity, narrow product range and inappropriate loan security requirements. Finally, it suggests that the establishment of cooperative bank is required to combat the problems. Key Words: Financial cooperative, savings, regulatory environment, cooperative bank Background of the study Cooperatives have played a significant role towards achieving the growth and poverty reduction strategy by promoting income generating activities and improving access to near banking services to rural and urban households. In response to the changing needs of farmers-members, the government instituted an overarching strategy of Agricultural Cooperative Sector Development Strategy 2012-2016 (ACSDS). One of ACSDS’s derivative features is to improve smallholder farmers` productivity and income by leveraging a cooperative sector; hence the promotion of cooperative movement is in line with the national strategy. Moreover, in the Growth and Transformation Plan (GTP) due emphasis was given for the cooperatives as the driving force for agricultural productivity and savings mobilization.

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