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markets, dominance of urban based commercial banks, deposit taking institutions, and non-regulated micro finance institutions in the financial markets as vehicles for savings. Hence Savings and Credit Cooperatives (SACCOs) are intended to offer an alternative to improve the above undesirable situation in low income countries especially helping members who in most cases are farmers (Dagnew, 2004). The rural economy and the urban economy in Ethiopia are largely disconnected .While urban banks have excess liquidity, which costs them money to manage, and some rural people have opportunities requiring credit to be profitable that have low risk, there is no mechanism to bring this liquidity from urban banks to rural businesses. Saving and Credit Cooperatives (SACCOs) can be the link that will give urban banks low risk loan opportunities in rural areas and give rural businesses access to credit at costs for lower than interest rates currently charged by moneylenders. Although the Government formulated the SACCOs as a basis of poverty reduction in the rural/urban areas having low income households, they have encountered various challenges such as: shortage of funds for necessary
4 investments in education and technological resources, building offices, knowledge in operation the SACCOs, and financing savings differs among SACCOs (Vaclav, 1977). According to Ankesha Guagusa Wordera Cooperative Promotion office Report (2017), poor internal control which is a result of the system failure to prevent and detect fraud, corruption, and nepotism caused by granting loans to unworthy borrowers (members), risky investment done without making the fully required analysis, lack of members‟ and management committees‟ training, and lack of the decentralized financial system which can provide financial services to the SACCOs. Hence, this study tried to explore the challenges and prospects of SACCOs to introduce feasible SACCOs to Awi zone SACCOs. Ankesha Guagusa Wordera is found in Amhara Regional state of Awi zone. There are 16 saving and credit cooperative societies and this study is going to be conducted on those cooperatives. 1.2.Statement of the problem Lack of awareness and poor saving culture, weak governance, policy and regulatory environment, weak institutional capacity, low capital base, and inappropriate loan security requirements were among the challenges affecting the outreach and sustainability of SACCOs (Tesfamariam, 2011). Internally, SACCOs face poor members‟ participation and the severe shortage of capital misuse by selected committees, misappropriation by leaders, poor administrative skills, and irresponsible lending to members, and limited access to banking services too long periods between audits (UN, 2011). The challenges that SACCOs face in their development are immense such as tension exists between the growing roles & responsibilities of cooperatives in Ethiopia‟s economy, weak exploitation of the existing human resource, general changes in Ethiopia‟s wider socio-economic conditions, the