The Role of Saving and Credit Cooperatives in Improving Rural Micro Financing: The Case of Bench Maji, Kaffa, Shaka Zones

Abstract

Microfinance is the provision of microloans to poor entrepreneurs and small businesses lacking access to banking and related services. Saving and Credit Cooperative are the main source of finance for people who have low income level. In this study the role of saving and credit cooperatives in improving rural micro financing in Bench Maji, Kaffa, and Shaka Zones was examined. Methodologically descriptive survey research was applied. Ideological preparedness of community on saving, tool to improve members saving culture, members’ actual deposit, and loan facilities performed by cooperatives were the focuses in this study. The findings show that there is a contribution in changing the saving culture of the members, monthly deposit, and loan disbursement capacity. The challenges are shortage of finance for loan, irregularity in saving, weak collection of loan receivables, no collaboration with other financial institutions, limitation in awareness creation, and limited support of government to lower administrative level. Therefore, to fulfil the members’ financial need cooperatives have to increase the number of members, the Government should establish strong education, training, and information unit at Zone and Woreda level, without abiding cooperative rules should arrange capital injection and collaboration with Micro financial Institutions, private and public banks.