An Empirical Study of Cooperative Societies on Credit Delivery for Small and Medium Scale Businesses in Ondo State, Nigeria

This study evaluates the impact of loans given to small-scale businesses by the cooperative societies in Ondo State and the performance of small-scale business. Primary data were sourced using questionnaires and personal interview while the secondary data were obtained from unpublished book of accounts and old receipts of selected small-scale business entrepreneurs from Ondo State. A total of 142 small-scale businesses registered with the National Association of Small-Scale Industrialists (NASSI), Ondo State chapter were randomly selected. Data collected were analyzed using appropriate descriptive and inferential statistical techniques. Specifically, the Pooled Least Square (PLS) regression technique was used which took the heterogeneity of individual firms into account. This was believed to enrich empirical analysis in a way that might not be possible if only cross-section or time series data were used. Findings revealed a strong and statistically significant relationship (p<0.05) between loan facilities of cooperative societies and indices of performance of small-scale businesses in Ondo State. Loan facilities granted by cooperative societies in Ondo State enhance the performance of small-scale businesses. Current assets were also found to be more loan sensitive than fixed assets. This seems to agree with financial and conventional wisdom since most cooperative societies grant short term finance to business owners. However, the fact that fixed assets is not loan sensitive contradicts the hypothesis of this study. Arising from the analyses and findings, the study therefore recommends that cooperative societies should seek long term capital from pensions and insurance companies in the country to enable them grant more loans to small businesses thereby improving the growth of the small-scale businesses. It is also recommended that all cooperative societies must be registered with monetary regulatory authorities so that their performances can be periodically evaluated and contribution to economic development determined.