LOAN PROVISION, DEGREE OF COLLECTABILITY AND REASONS FOR DEFAULT: THE CASE OF ETHIOPIAN INSURANCE CORPORATION EMPLOYEES SAVING AND CREDIT COOPERATIVE ASSOCIATION (EIC-ES&CCA)

Abstract

In recent years, the growth and expansion of saving and credit cooperatives is playing its significant contribution to poverty reduction strategy of developing countries including Ethiopia in solving the financial problem of urban and rural residents. The main objective of the study was to assess the loan provision, degree of collectability and reasons for default in the primary employee based SACCO in Addis Ababa City. The study area was selected purposively, due the presence of long established SACCO. Using purposive sampling method, 161 members were selected and of these 130 of them were taken as sample size. As key informants the manager and finance head of the association were also considered. Structured questionnaire was used to generate primary data from sample respondents. To analyze qualitative and quantitative data descriptive statistic tools were employed. Result of the study indicates that loan is approved timely, members get loan as they require and no attention for training and promotion, strong collection mechanism and due to this reason the minimal or no default rate was employed. Better formal education level of members and contributes to have successful operation for long years and minimize loan default risk. The study recommended the financial product diversification and improving collateral system, revision of interest rate, adequate supervision, provision of adequate education and training for members & employees. These recommendations should get the attention of the association.