AN ASSESSMENT OF SOCIO -ECONOMIC COMPONENTS AND ITS IMPACT ON LOAN REPAYMENT AMONG COOPERATIVES VENTURES IN CALABAR METROPOLIS
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- 1-5 Chapters
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- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
Background Of Study
It is impossible to overstate the importance of funds to any firm, whether private or public. Funds are needed for cooperative organizations to finance their fixed and operating capital, pay for services, and make interest-bearing investments. Even in normal times, a lack of funds was one of the most significant obstacles to co-operative business enterprise in Nigeria. We can thus picture, or rather, we are all aware of, the scenario in Nigeria, given the current abysmal business climate (Kohansal et. al.2009).
Because of a general lack of investible money, the issue of funding has become crucial, as expectations and potential for small-scale enterprise can not be realized. When subsidies are eliminated, the outcome is a reduction in resources, more competition, higher capital costs, and a reduction in credit availability. This is especially true because the cheap government financing on which co-operatives relied extensively in the 1980s has now dried up, many banks have gone bankrupt, and the ones that remain have tightened their lending (Oladeebo and Oladeebo 2008) . During the 1990s, many people and organizations, including cooperatives, lost money to failed banks and finance firms. Indeed, in light of the aforementioned financial sector woes in Nigeria, the ‘banking culture,' which was viewed as one of the fundamental conditions for savings mobilization among small and medium firm operators, has worn off dramatically. Worse, donors in Europe and America, particularly the United States, are experiencing donor fatigue as a result of the tremendous influx of bilateral and multilateral aid funding for various assistance programs. As a result, small and medium businesses in general have been hard hit. However, co-operatives, which have historically had the most difficult time raising financing, look to be the most affected. Many cooperatives today are hampered by a lack of finance and creditworthiness, making them unable to compete successfully with competitive commercial interests. On this background, the research aims to examine the sources of finance available to co-operative societies and to identify fundamental obstacles to adequate funding of co-operative economic operations, with the goal of provoking ideas about how to deepen and expand them.
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), and Operation Feed the Nation (1976-1979) provided opportunities for rapid expansion of credit to cooperative societies. All these institutions and programmes operated on the basis 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 crisis, 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 have since either wound up or gone moribund. When the government took bold steps to mitigate the harsh effects of its adjustment measures by establishing such institutions and funds as 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 Infrastructure, and the Directorate for Social Mobilization (MAMSER), all of which had special recognition for cooperatives as avenues 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 Problem
Most co-operative ventures are underfunded, and project diversification is delayed. This is due to the fact that the co-financial operative's structure does not supply enough funding, resulting in low output. Many co-operators in Nigeria have frequently criticized the obstacles in their path as they strive to acquire funds for their co-operative society's operations.
Co-operatives, on the other hand, face the same frustrations as all small and medium businesses in Nigeria: a lack of collateral, a general lack of credit, worthiness in the eyes of potential lenders, and a high interest rate structure, among other things. Both the government and the financial institutions have fallen short in this regard. The government does not always provide grants and loans to co-operatives.
Co-operatives are also influenced by the idiosyncrasies of their nature and structure, such as the guiding philosophy, statutes, and regulations. Because the idea of one member, one vote does not combine share participation with greater direct involvement in the activities of society, members are generally hesitant to give more than the minimum. Because of the small membership size and the overall poverty of the members, the amount of money that can be obtained through the issue of shares is too low in most co-operative organizations.
Managers and leaders of co-operative societies in Nigeria, on the other hand, have grown too accustomed to government handouts to be creative in their fund-raising efforts. Furthermore, they are frequently unable to conceive bankable initiatives.
As a result of these severe financial constraints, the cooperative movement performs poorly. The co-operative movement in Nigeria faces a huge task of overcoming these and other impediments.
1.3 Objective Of Study
The general aim of this study is to examine the socio-economic components and its impact on loan repayment among cooperatives ventures in Calabar metropolis. The following are primary objective of this study:
- To examine challenges in the financing of cooperative ventures.
- To identify the sources of funds open to cooperative ventures.
- To examine the inherent constraints to the proper funding of cooperative ventures.
1.4 Research Question
The following questions will guild this study
- What are the challenges in the financing of cooperative ventures?
- What are the internal and external sources of funds open to cooperative ventures?
- What are the inherent constraints to the proper funding of cooperative ventures?
1.5 Significance Of Study
The study intends to investigate the determinants of loan repayment in the context of the indigenous financial system. The fact that cooperative ventures repay their loans late has an impact on the quantity of credit offered to them by commercial banks.
The significance of this research stems from the fact that no project can be completed without a working financial structure. The condition of cooperative organizations is severe if they do not have access to an input that is vital to their development, such as finance. This is because project execution is impossible without funding, just as it is difficult for a human to exist without all of their basic wants and necessities, such as food, shelter, and clothing. As a result, finance serves as the lifeline and blood of a company's organization.
This study will contribute to the current literature in this field and will also serve as a resource for academics, researchers, and students who may want to do future research on this or a comparable topic.
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