The Effect of Financial outreach, on the Financial Sustainability of Saving and credit cooperative Unions: The case of Oromia National Regional State of Ethiopia

Abstract

The objective of this study is h to analyse the effect of financial outreach, on financial sustainability of SACCO Unions in Oromia national regional state of Ethiopia. Descriptive research design applied in which involved the collection of longitudinal audited financial and administration data of sampled unions for the period of ten years from 2008 to 2017. The Number of Primary Members (NPM) and the Total Saving Mobilized (TSM) independent variables were used to analyze the effect of breadth of outreach on financial sustainability of unions in the region. Both independent variables have significant effect on the financial sustainability of Unions in the region. The data collected was analyzed using descriptive statistics and multiple regressions model to evaluate the effect of independent variables on dependent variables. Both the number of primary societies and total saving mobilization has significant on financial sustainabilties of unions. However, the number of primary Saccos emanated to membership and total saving mobilized by unions were insignificant as compared to total primary societies and potential in the region. Most unions have limited outreach, dependent to external sources of fund rather than internal resource mobilization, high cost of funds; unions are not open for new Sacco’s membership, imbalanced demand of loan seekers and savers. As a result, the sustainability status of the SACCO unions in the region indicates 48%. While the rest 52% of them are in danger to failure. By this study, we recommend that the Unions should open their door to accept the membership of primary Saccos and prepare strategy for saving mobilization rather than dependent on external financial sources. The cooperative promotion office needs to have strong financial and operational regulations that guides the outreach and financial sustainability of the unions accordingly.