Kifle tesfemariam saving and credit coopratives in ethiopa.pdf

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.