The Impact Of Socio- Economic Characteristics On Loan Repayment,Among Cooperative Enterprises In Oshimili South Local Government Area Of Delta State

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The Impact Of Socio- Economic Characteristics On Loan Repayment,Among Cooperative Enterprises In Oshimili South Local Government Area Of Delta State


This research study adopted an econometric analysis on The Impact of Socio-Economic Characteristics On Loan Repayment Among Cooperative Enterprises In Oshimili South Local Government Area of Delta State. Chapter one of this research work deals with the introduction and background study of the said topic, which also include the specific objectives of the study; and the hypotheses to be analyzed. Chapter two talks on the different sources of the financial structure of cooperatives societies. The review of problems facing cooperative enterprises in raising funds. The research methodology and design used in analyzing the data is discussed in chapter three. Besides, chapter four deals with data presentation and analysis using frequency tables, showing the percentage of responses and the ordinary least square (OLS) method of empirical analysis was used for the determinants of socio – economic variables on loan repayment. Chapter five of this work deals with the summary of findings, recommendation and conclusion. Consequently, recommendations, which will assist policy makers in Nigeria to make policies that will enhance the financing of cooperative enterprises in Nigeria, were made.



1.0 Introduction

1.1 Background of the study

1.2 Statement of the problem

1.3 Objectives of the study

1.4 Significance of the study

1.5 Research Questions

1.6 Research Hypothesis

1.7 Scope of the study

1.8 Limitation of the study



2.1 Introduction

2.2 Meaning and Nature of Cooperative Societies

2.3 What is Finance?

2.4 The roles of finance in cooperative business

2.5 Sources of cooperatives finance

2.6 Constraints to proper funding of co-operatives

2.7  Measures of improving co-operative financing

2.8 Empirical literature on determinants of loan repayment in Nigeria.



3.1 Introduction

3.2 Description of the study area

3.3 Method of data collection

3.4 Population of the study

3.5 Sources of Data

3.6 Sampling Method

3.7 Method of Data Analysis

3.8.1 Model specification

3.8.2 Statistical criteria


4.0 Data Presentation and Analysis

4.1 Introduction

4.2 Presentation and Interpretation of Results.


5.0 Summary of findings/Recommendation/Conclusion

5.1 Introduction

5.2 Summary of findings

5.3 Conclusion

5.4 Recommendations


Appendix A

Appendix B



The importance of funds to any business enterprise, be it private or public, cannot be over-emphasized. Co-operative societies need funds to finance their fixed and working capital, to pay for services and for making interest-yielding investments. Lack of funds had featured prominently among the key constraints to co-operative business enterprise in Nigeria even at normal times. We can then imagine, or rather, we are all aware of the situation under the prevailing excruciating business climate in Nigeria. (Chukwuemeka, 2001).

The issue of funds has become critical, as expectations, opportunities for small-scale enterprise cannot be seized due to a general lack of investible funds. Added to the abolition of subsidies, the results is fewer resources, tougher competition, higher capital cost and reduced access to credit. This is more so because cheap government credit on which co-operatives relied heavily in the 1980s has since dried up, many banks have gone  from distress to bankruptcy, and the surviving ones have constricted their lending. Many people and organizations including co-operative lost their deposits in collapsed banks and finance houses during 1990s. Indeed, the ‘banking culture’, the cultivation of which has been seen as one of the necessary conditions for savings mobilization among small and medium enterprises operators has worn off considerably in view of the aforementioned travails of the financial sector in Nigeria. Worse still, donors in Europe and America, especially the United States, that great watershed of bilateral and multi-lateral aid funds for various assistance program are suffering donor fatigue. Thus small and medium enterprises general are severally hit. But co-operatives which have always been the least able to raise finance capital, appears to be worst affected.

Today, many co-operative are hobbled by a weak capital base, limited credit worthiness and are therefore not in a position to compete effectively with rival business interests. It is on this background that the research tends to review the source of funds available to co-operative society and identify inherent constraints to

proper funding of co-operative business enterprises; with a view to stimulating thoughts as to ways and means of deepening and extending them.

1.1      Background of the study

In the mid to late 1970s, it was relatively easy for cooperative societies to raise investment funds. A lot of funds were available on concessionary terms from specialized credit institutions such as the Nigerian Agricultural and cooperative Bank and the Central Bank (NACB) managed Agricultural Credit Guarantee Scheme Funds (ACGSF), which encouraged lending practices through Sundry Channels. In 1977 the Rural Banking programme further boosted the pool of funds, which cooperatives could source for investment. In addition to these opportunities, special government food production and rural development programmes like the National Accelerated Food Production Programme (NAFPP:1973), the Green Revolution (1980-1983), the Operation Feed the Nation (1976-1979) provided opportunities for rapid expansion of credit to cooperative societies. All these institutions and programmes operated from the praxis of the old theory of rural credit in which it was assumed that rural production enterprises (including cooperatives) were poor and helpless and needed cheap supply-leading government credit to remain active.

However, the combined effect of the oil price crises, global recession, Austerity measures of 1982 and the Structural Adjustment programme (SAP) Since 1986 drastically rolled back all those opportunities. Many cooperative societies that could not adapt to the new climate had since either wound up or gone moribund. When government took bold steps to mitigate the harsh effects of its adjustment measures by establishing such institutions and funds small and Medium Enterprises (SME) Funds, Peoples’ Bank (PB), Better Life For Rural Women Programme, Family Support Programme, the Directorate for Food, Roads and Rural Infrastructures and the Directorate for Social Mobilization (MAMSER) all of which had special recognition for cooperatives as a venues for channeling funds to productive activities, we expected a brighter prospect for cooperatives.

 However, not many of them took advantage of such opportunities.

1.2  Statement of the Problem

Most co-operative societies are under funded, thereby making the diversification of projects slow. This arises from the fact that financial structure of the co-operative does not provide enough finance, which results in productivity. Many of co-operators in Nigeria, have quite often lamented the impediments on their way as they try to raise funds for the operations of their co-operative society.

However, co-operative are subject to frustrations of all small and medium enterprises in Nigeria such as lack of collateral, general lack of credit, worthiness in the estimation of potential lenders, and high interest rate structure and so on. In this regard, both government and finance houses have not lived up to expectation. At times government does not give grants and loans to the co-operatives.

Besides, co-operatives are affected by the peculiarities inherent in their nature and structure: the principle, laws and regulations guiding them. Notably, share contribution is not combined with higher direct influence in the society’s affairs according to the principle of one member, and vote, therefore, member are often reluctant to contribute more than the minimum. In most co-operative societies, the amount of money that can be raised through issue of shares in too low as directed consequence of low membership size and general poverty of the members.

Managers and leaders of co-operative societies in Nigeria on their part, have become too used to easy hand outs from government to be innovative in their fund raising activities. Besides, they often are not able to conceive bankable projects.

These unfavorable financial constraints therefore lead to poor performance of the co-operative movement. Finding ways to overcome these and other obstacles is a major challenge of the co-operative movement in Nigeria.

1.3      Objectives of the study

The broad objective of the study is to examine the challenges in the financing of co-operative enterprises- A case study of some selected co-operatives in Asaba, Oshimili South Local Government Area of Delta State. Specifically, the study aims to:-

i)            Examine the socio-economic characteristics of the members;

ii)          Identify the internal and external sources of funds open to the co-operative enterprise;

iii)           Examine the inherent constraints to the proper funding of co-operative enterprise;

iv)         Ascertain the income raised internally by the cooperative societies.

v)           Examine the amount of loan requested, disbursed, and repaid.

vi)         Ascertain the impact of some variables on loan repayment.

  vii)       Make recommendations based on the findings.

1.4      Significance of the Study

This research work intends to empirically investigate the determinants of loan repayment under the indigenous financial system. Considering the fact, that low repayment of loans by cooperative enterprises in turn affects the amount of credit given to cooperative by commercial banks.

The importance of this study lies on the fact that no project could be executed without a functional financial structure. If co-operative societies do not have access to an input that is most essential for their development such as finance, their situation is critical. This is because project execution cannot be successful without funds just as it is impossible for individual to live in the absence of all needs and necessity of life such as food, shelter and clothes among others. Therefore, the business organization needs finance as the life wire and blood for its survival.

 1.5      Research Questions

1.          What are the Socio-economic profiles of the members?

2.          What are the sources of funds open to the co-operative business?

3.          Which of the major sources of finance is more convenient and reliable to the society

4.          What is the major problem encountered in the operation of the co-operative enterprise?

5.          What are the factors militating against co-operative enterprise in raising funds?

6.          What are the variables influencing loan repayment by cooperative enterprises?

1.6      Research Hypotheses

Ho: Socio-economic variables do not significantly affect loan repayment by cooperative societies.

Hi: Socio-economic variables significantly affect loan repayment by cooperative societies.

1.7      Scope of the study

The scope of any study examines or views the areas, which the study intends to cover. The study covers co-operative enterprises operating in Asaba, Oshimili South Local Government Area of Delta State.

This research work, focuses extensively on how co-operative enterprises are financed with more attention on the determinants of loan repayment, as well as challenges encountered in the proper funding of co-operative enterprises. Possible measures to be taken to improve on the financing of co-operative enterprises were also identified.

1.8      Limitation of the Study

The uncooperative attitude of members of the various co-operation societies covered posed a major constraint. This is because after assurance, most of them still believe that the study will in one way or the other jeopardizes their business and therefore withheld vital information relevant for the study. Also, financial constraints and time frame for the completion of this research work are as well limiting Factors.

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