Financial sustainability and outreach performance of saving and credit cooperatives: The case of Eastern Ethiopia

Abstract

Financial cooperatives and microfinance institutions are typical models that disprove the traditional assumption that the poor are neither creditworthy nor able to save. The principal objective of Savings and Credit Cooperative Societies are accumulating savings and creating a source of credit to members at a fair and reasonable interest rate. SACCOs need to be financially sustainable and accessible in order to provide sustainable financial products and effectively serving the poor. The main objective of this study is to examine the sustainability and outreach performance of SACCOs in Eastern Ethiopia. The study employed both descriptive and causal research design. 46 SACCOs that have been operating at least for three years with audited financial reports were selected for the study. The study used secondary data sources mainly audited financial statement of the society for the year 2016. The study found that SACCOs in Eastern Ethiopia are financially sustainable and their outreach performance is at moderate level. Return on asset, operational efficiency, debt equity ratio, donation, and deposit mobilization are statistically significant predictor variables in determining the financial self-sufficiency of SACCOs. Similarly, financial self-sufficiency, size, debt equity ratio and donation are statistically significant predictor variables in determining the outreach performance of SACCOs.