Effective Administration Of Credit In Cooperative
(A Case Study Of Selected Co-Oeratives In Enugu South L.G.A Of Enugu State)
The effective administration of credit in a cooperative is a complex and dynamic process crucial to the financial stability and growth of such organizations. It involves judiciously managing the allocation of credit to members while mitigating risks and ensuring responsible lending practices. Key elements encompass meticulous credit assessment, monitoring, and timely intervention when necessary. A well-structured credit administration system in a cooperative integrates risk management strategies, transparent communication with members, and continuous evaluation of the financial health of both the cooperative and its individual members. This intricate process requires adept financial stewardship, adaptive policies, and proactive measures to address evolving economic landscapes. Successful credit administration in cooperatives involves striking a balance between fostering financial inclusivity and safeguarding the cooperative’s sustainability, thereby contributing to the resilience and prosperity of the cooperative and its members alike.
The study systematically revealed the process of effective administration of credit in co-operative enterprise in Enugu south local government of Enugu state.
It highlights the process of credit administration in co-operative, which include, loan administration and assessment loan contract, supervision of credit and credit recovery.
Questionnaires were administered to the society under study. The society also was randomly selected. Out of the 20 questionnaires administered to the selected co-operative society, eighteen were returned and analysis were based on the returned questionnaire.
The study showed that co-operatives can raise fund for their activity both by internal and external source. The internal source includes, share capital, revolving fund, deposit and reserve. The external capital includes the co-operative apex, agricultural credit guarantee scheme fund among others.
The problem militating against the co-operative credit administration were discussed such as defiant economic situation prevailing in the country, high inflation rate and personnel unsound lending practice etc.
Consequently, workable recommendation were made of which if adopted will go a long way to ameliorations of the impediment encountered by co-operative in credit administration. Hence consolidating the benefit of effective credit administration among co-operative society in the area.
Title page
Certification
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE:
THE BACKGROUND OF STUDY
1.2 Statement of problems
1.3 Objective of study
1.4 Significance of study
1.5 Limitation of study
1.6 Definition of terms
1.7 Reference
CHAPTER TWO:
2.0 REVIEW RELATED TO LITERATURE
2.1 The nature of the co-operative
2.2 Credit co-operative and their problem
2.3 Source of co-operative finance
2.4 The process of credit administration
2.5 The lona committee
2.6 Assessment of loan application
2.7 Terms of credit
2.8 Supervision of credit
2.9 Loan recovery
2.1.1 Credit co-operative in Enugu south L.G.A.
2.1.2 Factors militating against effective credit administration
CHAPTER THREE:
3.0 RESEARCH METHODOLOGY
3.1 Population study
3.2 Sample size an sampling techniques
3.3 Method of data collection
3.4 Method of data analysis
3.5 Source of data
CHAPTER FOUR:
4.0 DATA PRESENTATION, ANALYSIS, AND INTERPRETATION
4.1 Data presentation
4.2 Data analysis
4.3 Data interpretation
CHAPTER FIVE:
5.0 RECOMMENDATION AND CONCLUSION
5.1 Recommendation
5.2 Conclusion
5.3 Biography
5.4 Questionnaires and appendix
INTRODUCTION
BACKGROUND OF STUDY
Agricultural credit in Nigeria dates back to the 1930s. But organized credit to farmers, but it did not start until 1772 when Nigerian agriculture and co-operative bank (N.A.C.B) was established. The awareness of the serous decline in agricultural production was partly responsible for the establishment of the bank. The N.A.C.B was not the only financial institution, which provides agricultural credit. Prior to establishment of N.A.C.B, agricultural credit scheme was operated by some agencies such as the ministry of agriculture supervised scheme, agricultural credit co-operation, co-operative thrift and loam schemes, farmers multi-purpose co-operative societies. Most of the institution was not effective sources for strictly agricultural credit. There were a lot of evidences that creditors borrowed for agriculture but diverted it for another ventures. Again credits were only extended to only favorites and scarcely to genuine small-scale farmers. Besides, they could not meet the collateral and equity contribution requirement, a situation that compelled a significant proportion of the farmers to seek for other source credits. According to Ichadaba quoted from Cardoso, (1987.18) a survey carried out showed that 58% of farming related borrowing was from family and fiends, 24% from private money lenders, 15% from merchant, and only 3% is from institution for agriculture. However, while family and friends charges little or no interest, privet lenders charges exorbitant interest. Organized credit facility for Nigerian rural farming population will reduce the dependence on source other than the formal financial houses. It is against this background that the researcher is to investigate how credit will be effectively administered in co-operative enterprises. This will enable us the identify the major problems associated with credit administration and seek solution to those problem to ensure continued existence of the co-operatives.
STATEMENT OF PROBLEM
Co-operative society mobilizes credit to their members through the saving of the members. It has been observe that they are inefficient in mobilizing and utilization of credit. Many problem lead to their ineffective mobilization of credit, they are;
Inadequate fund for bank purpose
Inefficient management of loan
Faulty loan policy, which may sometime emphasize credit worthiness of borrowers and not the viability of project.
Credit co-operation are mere money activities without proper organization procedure and planned systematic arrangement.
Absence of regular maintaining and supervision of loan. The above problem needs to be solved for the effective performance of co-operatives
OBJECTIVE OF THE STUDY
The situation of co-operatives is noting to write home about. If the co-operative should continue at this rate, they will wind up. In view of the above, solution have to be design for this problems. Therefore the objective of the study is to find out the various societies existing in the area under review. To find out various problems being encountered by this co-operative which stand to hinder their effective and efficient performance as agent of credit. Finally to make recommendation and suggest probable solution that will enable this society overcome the problem so as to function very well.
SIGNIFICANCE OF THE STUDY
This study will assist the loan committee managers in there decision making as it concern credit policy and management of credit in form of proper assessment of loan application., proper supervision of credit and evaluation of project proposals. It will help the management to see the need to employ professional staff and lastly this study or findings will be of educational importance to the various universities, polytechnic and student of co-operative development in the various schools.
SCOPE AND LIMITATION
The researcher will limit this study to effective administration of credit in co-operative enterprises in Enugu L.G.A. the researcher intends to find out the available sources of fund to co-operative as well as the financial problem of co-operatives. The researcher will also find out the problem of credit administration and some factors militating against credit administration.
LIMITATIONS
In the course of accomplishing this study, the resea4rher were faced with the following problems.
Finance: there was no fund to travel from one co-operative society to another, there was fuel scarcity and transport was very high, this will hinder the researchers movement
Time: the researcher will find it difficult to combine the researching work with the academic assignment due to time constraint
Lack of data: the researcher has limited Asses to official records and statistical records relevant to this study
DEFINITION OF TERMS
For clarity o purpose, elimination of confusion of any kind and proper understanding of this study, the following definition of term is necessary.
1. Credit: David W. Pearle defines credit as financing directly or indirectly the expenditure of other against future repayment. Such lending or financing is direct when a bank extends an overdraft facility to costumers who use it. It is indirect when a trader or producer supplies goods on credit.
2. Management: administration or management is the act of attempting to archive a stated objective by directing human activities in the production of goods and services. Management unitizes the land, factory, office, machinery and other facilities at the disposal of the enterprise in most effective, efficient manner. Bob-Igwe (1993:39).
3. Enterprises: enterprise is an economic system is which individuals are free singly or collectively to own capital and undertake economic activities within a framework of social legislation design to protect the interest of individual Hanson (1974:218)
4. Effective: Hornby A.S. define effective in the oxford advance learners dictionary as having an effect able to bring about a result intended powerful in effect and that is efficient performance
RESEARCH QUESTIONS
For the fact that credit is very important in any business activity, therefore the study is focused on finding relevant solution to the following research questions
1. What is the purpose of credit administration in the co-operative society of Enugu south L.G.A?
2. How effective is credit administration to co-operative in Enugu south L.G.A?
3. What problem is encountered in the administration of credit in co-operative and what is the solution to this problem?
SHARE PROJECT MATERIALS ON:
Effective Administration Of Credit In Co-Operative:
Effective administration of credit in a cooperative involves a strategic and well-managed approach to lending and credit risk management. Here are some key principles and practices for administering credit effectively in a cooperative:
- Clear Credit Policy:
- Develop a clear and comprehensive credit policy that outlines the criteria for loan approval, risk management procedures, interest rates, repayment terms, and any other relevant factors.
- Ensure that the credit policy aligns with the cooperative’s overall mission, goals, and risk tolerance.
- Credit Risk Assessment:
- Implement a thorough credit risk assessment process to evaluate the creditworthiness of potential borrowers.
- Consider factors such as financial stability, repayment capacity, character, and the purpose of the loan.
- Diversification of Loan Portfolio:
- Avoid overconcentration of loans in a specific sector or industry to minimize risk exposure.
- Diversify the loan portfolio to spread risk and protect against industry-specific economic downturns.
- Loan Application and Approval Process:
- Establish a streamlined and efficient loan application and approval process.
- Ensure that all relevant documentation is collected and analyzed before making a lending decision.
- Monitoring and Reporting:
- Implement a robust system for monitoring loan performance, including regular financial check-ins with borrowers.
- Generate timely and accurate reports to track the status of loans, identify potential issues, and make informed decisions.
- Collateral Management:
- Set clear guidelines for collateral requirements based on the type and size of the loan.
- Regularly assess the value and quality of collateral to mitigate potential losses in case of default.
- Interest Rate Management:
- Establish fair and competitive interest rates that reflect the risk associated with the loan.
- Periodically review interest rates in response to market conditions, ensuring they remain sustainable for both the cooperative and its members.
- Member Education:
- Conduct financial literacy programs to educate members about responsible borrowing, budgeting, and the importance of timely repayments.
- Promote a culture of financial responsibility and transparency within the cooperative.
- Default Management:
- Develop a clear and proactive strategy for managing loan defaults, including a well-defined process for loan restructuring or recovery.
- Train staff on effective collection techniques while maintaining a cooperative and member-friendly approach.
- Continuous Improvement:
- Regularly review and update credit policies and procedures to adapt to changing economic conditions, regulatory requirements, and the cooperative’s own experiences.
- Learn from past experiences and continuously improve credit administration practices.
By implementing these principles, a cooperative can enhance the effectiveness of its credit administration, promote financial sustainability, and better serve the needs of its members.