PROBLEMS AND PROSPECTS OF RURAL SAVING AND CREDIT COOPERATIVES (RuSACCOs) IN THE CONTEXT OF CHRONICALLY FOOD INSECURE AREAS: THE CASE OF MESKAN DISTRICT, GURAGE ZONE, SOUTHERN NATIONS, NATIONALITIES AND PEOPLE REGION (SNNPR)

Abstract

Member based financial institutions such as Rural Saving and Credit Cooperatives (RuACCOs) are being recognized both by the government of Ethiopia and development partners’ as one of the key players in the provision of rural financial services to the chronically food insecure population, thereby alleviating poverty, famine and hunger. RuSACCOs are confronted with a number of problems which constrain their capacity to deliver adequate and appropriate services to their clients and to become effective and sustainable in their business. The problems that RuSACCOs operating in chronically food insecure areas, like Meskan district, can be categorized into: institutional constraints, operational problems and, socioeconomic constraints. The institutional constraints refer to the limitation of external supports they are getting and the inefficiency of regulatory system in place. The capacity of cooperative offices, which aremandated by the government to organize and promote RuSACCOs, are often constrained by shortage of budgetary resources and inadequate capacity of human resources both in quality and quantity to effectively promote, regulate and supervise RuSACCOs. The support from NGOs and donors is not adequate enough to address institutional and organizational problems that RuSACCOs in the study area are struggling with. With regard to operational problems, shortage of credit fund, small size of individual loan and short repayment period of credit disbursed through RuSACCO are some of the common constraints impacting the effectiveness of RuSACCOs in the study area. Poor accounting and recording system, because of lack of qualified personnel at RuSACCOs office, is another vi operational problem commonly observed. The socio-economic features of chronically food insecure areas, such as, limited awareness and understanding level of rural people, extensive poverty situation, limited natural resource available in the area and limited livelihoods and business opportunities at the disposal of RuSACCO members are also affecting the performance and growth of RuSACCOs Even in the abundance of all these multi-faceted constraints, RUSACOOs are considered the most appropriate financial service providers to the underserved category of the rural poor. According to the findings of this thesis research, the future prospect of RUSACCOs in the study area in particular and CFI areas in general is found to be promising. This has been confirmed by all categories of respondents and also through a review of secondary sources referenced in the thesis report. The main purpose of this thesis research is to examine the status of RuSACCOs operating in one of the Chronically Food Insecure (CFI) woredas of Ethiopia, pertaining to their visions, missions and objectives stipulated in relevant policy and regulatory directives issued by government and stated in their by-laws. The finding of this study will provide first-hand information to government and non-government organizations about the status of RuSACCOs, existing gaps, and their major constraints which prevent them to operate effectively in the context of chronically food insecure areas. However, the study has limitations of coverage of area and population, due to the obvious constraints of time and resource. Hence, this research is by no means exhaustive and representative, as it is a piece of effort to identify realities regarding problems and prospects of RuSACCOs operating in all CFI woredas of a huge country like Ethiopia.