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Title Page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Table of contents vi-vii
1.0 Introduction 1
1.1 Background of the study 3
1.2 Statement of the problem 5
1.3 Objectives of the study 7
1.4 Significance of the study 8
1.5 Research Questions 9
1.6 Research Hypothesis 10
1.7 Scope of the study 10
1.8 Limitation of the study 11
2.1 Introduction 12
2.2 Meaning and Nature of Cooperative Societies 13
2.3 What is Finance? 15
2.4 The roles of finance in cooperative business 16
2.5 Sources of cooperatives finance 18-26
2.6 Constraints to proper funding of co-operatives 27-31
2.7 Measures of improving co-operative financing 31-35
2.8 Empirical literature on determinants of loan repayment in Nigeria. 35-39
3.1 Introduction 40
3.2 Description of the study area 40
3.3 Method of data collection 41
3.4 Population of the study 42
3.5 Sources of Data 42
3.6 Sampling Method 43
3.7 Method of Data Analysis 44
3.8.1 Model specification 44
3.8.2 Statistical criteria 46
4.0 Data Presentation and Analysis 47
4.1 Introduction 47
4.2 Presentation and Interpretation of Results. 47-64
5.0 Summary of findings/Recommendation/Conclusion 65
5.1 Introduction 65
5.2 Summary of findings 65-67
5.3 Conclusion 68
5.4 Recommendations 68-70
Bibliography 71-73
Appendix A 74
Appendix B 75
Questionnaire 75-77
The importance of funds to any business enterprise, be it
private or public, cannot be over-emphasized. Cooperative societies need funds to finance their fixed and
working capital, to pay for services and for making
interest-yielding investments. Lack of funds had featured
prominently among the key constraints to co-operative
business enterprise in Nigeria even at normal times. We
can then imagine, or rather, we are all aware of the
situation under the prevailing excruciating business
climate in Nigeria. (Chukwuemeka, 2001).
The issue of funds has become critical, as expectations,
opportunities for small-scale enterprise cannot be seized
due to a general lack of investible funds. Added to the
abolition of subsidies, the results is fewer resources,
tougher competition, higher capital cost and reduced
access to credit. This is more so because cheap
government credit on which co-operatives relied heavily
in the 1980s has since dried up, many banks have gone
from distress to bankruptcy, and the surviving ones have
constricted their lending. Many people and organizations
including co-operative lost their deposits in collapsed
banks and finance houses during 1990s. Indeed, the
‘banking culture’, the cultivation of which has been seen
as one of the necessary conditions for savings
mobilization among small and medium enterprises
operators has worn off considerably in view of the
aforementioned travails of the financial sector in Nigeria.
Worse still, donors in Europe and America, especially the
United States, that great watershed of bilateral and
multi-lateral aid funds for various assistance program
are suffering donor fatigue. Thus small and medium
enterprises general are severally hit. But co-operatives
which have always been the least able to raise finance
capital, appears to be worst affected.
Today, many co-operative are hobbled by a weak capital
base, limited credit worthiness and are therefore not in a
position to compete effectively with rival business
interests. It is on this background that the research
tends to review the source of funds available to cooperative society and identify inherent constraints to
proper funding of co-operative business enterprises; with
a view to stimulating thoughts as to ways and means of
deepening and extending them.
1.1 Background of the study
In the mid to late 1970s, it was relatively easy for
cooperative societies to raise investment funds. A lot of
funds were available on concessionary terms from
specialized credit institutions such as the Nigerian
Agricultural and cooperative Bank and the Central Bank
(NACB) managed Agricultural Credit Guarantee Scheme
Funds (ACGSF), which encouraged lending practices
through Sundry Channels. In 1977 the Rural Banking
programme further boosted the pool of funds, which
cooperatives could source for investment. In addition to
these opportunities, special government food production
and rural development programmes like the National
Accelerated Food Production Programme (NAFPP:1973),
the Green Revolution (1980-1983), the Operation Feed
the Nation (1976-1979) provided opportunities for rapid
expansion of credit to cooperative societies. All these
institutions and programmes operated from the praxis of
the old theory of rural credit in which it was assumed
that rural production enterprises (including cooperatives)
were poor and helpless and needed cheap supply-leading
government credit to remain active.
However, the combined effect of the oil price crises, global
recession, Austerity measures of 1982 and the Structural
Adjustment programme (SAP) Since 1986 drastically
rolled back all those opportunities. Many cooperative
societies that could not adapt to the new climate had
since either wound up or gone moribund. When
government took bold steps to mitigate the harsh effects
of its adjustment measures by establishing such
institutions and funds small and Medium Enterprises
(SME) Funds, Peoples’ Bank (PB), Better Life For Rural
Women Programme, Family Support Programme, the
Directorate for Food, Roads and Rural Infrastructures
and the Directorate for Social Mobilization (MAMSER) all
of which had special recognition for cooperatives as
avenues for channeling funds to productive activities, we
expected a brighter prospect for cooperatives.
However, not many of them took advantage of such
1.2 Statement of the Problem
Most co-operative societies are under funded, thereby
making the diversification of projects slow. This arises
from the fact that financial structure of the co-operative
does not provide enough finance, which results in
productivity. Many of co-operators in Nigeria, have quite
often lamented the impediments on their way as they try
to raise funds for the operations of their co-operative
However, co-operative are subject to frustrations of all
small and medium enterprises in Nigeria such as lack of
collateral, general lack of credit, worthiness in the
estimation of potential lenders, and high interest rate
structure and so on. In this regard, both government and
finance houses have not lived up to expectation. At times
government does not give grants and loans to the cooperatives.
Besides, co-operatives are affected by the peculiarities
inherent in their nature and structure: the principle,
laws and regulations guiding them. Notably, share
contribution is not combined with higher direct influence
in the society’s affairs according to the principle of one
member, and vote, therefore, member are often reluctant
to contribute more than the minimum. In most cooperative societies, the amount of money that can be
raised through issue of shares in too low as directed
consequence of low membership size and general poverty
of the members.
Managers and leaders of co-operative societies in Nigeria
on their part, have become too used to easy hand outs
from government to be innovative in their fund raising
activities. Besides, they often are not able to conceive
bankable projects.
These unfavorable financial constraints therefore lead to
poor performance of the co-operative movement. Finding
ways to overcome these and other obstacles is a major
challenge of the co-operative movement in Nigeria.
1.3 Objectives of the study
The broad objective of the study is to examine the
challenges in the financing of co-operative enterprises- A
case study of some selected co-operatives in Asaba,
Oshimili South Local Government Area of Delta State.
Specifically, the study aims to:-
i) Examine the socio-economic characteristics of the
ii) Identify the internal and external sources of funds
open to the co-operative enterprise;
iii) Examine the inherent constraints to the proper
funding of co-operative enterprise;
iv) Ascertain the income raised internally by the
cooperative societies.
v) Examine the amount of loan requested, disbursed,
and repaid.
vi) Ascertain the impact of some variables on loan
vii) Make recommendations based on the findings.
1.4 Significance of the Study
This research work intends to empirically investigate the
determinants of loan repayment under the indigenous
financial system. Considering the fact, that low
repayment of loans by cooperative enterprises in turn
affects the amount of credit given to cooperative by
commercial banks.
The importance of this study lies on the fact that no
project could be executed without a functional financial
structure. If co-operative societies do not have access to
an input that is most essential for their development
such as finance, their situation is critical. This is because
project execution cannot be successful without funds
just as it is impossible for individual to live in the
absence of all needs and necessity of life such as food,
shelter and clothes among others. Therefore, the
business organization needs finance as the life wire and
blood for its survival.

1.5 Research Questions
1. What are the Socio-economic profiles of the
2. What are the sources of funds open to the cooperative business?
3. Which of the major sources of finance is more
convenient and reliable to the society
4. What is the major problem encountered in the
operation of the co-operative enterprise?
5. What are the factors militating against co-operative
enterprise in raising funds?
6. What are the variables influencing loan repayment
by cooperative enterprises?
1.6 Research Hypotheses
Ho: Socio-economic variables do not significantly affect
loan repayment by cooperative societies.
Hi: Socio-economic variables significantly affect loan
repayment by cooperative societies.
1.7 Scope of the study
The scope of any study examines or views the areas,
which the study intends to cover. The study covers co-
operative enterprises operating in Asaba, Oshimili South
Local Government Area of Delta State.
This research work, focuses extensively on how cooperative enterprises are financed with more attention on
the determinants of loan repayment, as well as
challenges encountered in the proper funding of cooperative enterprises. Possible measures to be taken to
improve on the financing of co-operative enterprises were
also identified.
1.8 Limitation of the Study
The uncooperative attitude of members of the various cooperation societies covered posed a major constraint.
This is because after assurance, most of them still believe
that the study will in one way or the other jeopardizes
their business and therefore withheld vital information
relevant for the study. Also, financial constraints and
time frame for the completion of this research work are
as well limiting Factors.


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