EFFECTIVE ADMINISTRATION OF CREDIT IN COOPERATIVE ENTERPRISES
(A CASE STUDY OF UGWUAJI FMSC CO-OPERATIVE IN ENUGU SOUTH LOCAL GOVERNMENT AREA OF ENUGU STATE)
This project is written to be useful to all who are interested in Co-operative Organizations, Management, students and the general public.
1.1 BACKGROUND OF STUDY
Agricultural Credit in Nigeria dates back to the 1030’s but organized Credit to farmers did not start until 1972 when the Nigerian Agricultural and Co-operative Bank (NACB) was established.
The awareness of the serious decline in Agricultural production was probably partly responsible for the establishment of the bank. The Nigerian Agricultural and Co-operative Bank (NACB) is not the only financial institution, which provides Agricultural Credit. Prior to the establishment of NACB, Agricultural Credit schemes were operated by some agencies such as the Ministry of Agricultures supervised Credit Scheme, Agricultural Credit Co-operations, Co-operative Thrift and Loan Schemes, Farmers’ Multi-purpose Co-operative Societies. Most of these institutions were not effective sources for strictly Agricultural Credit. There was a lot of evidence that creditors borrowed money for Agriculture but diverted it to other ventures.
Again, credit was often extended to only favourites 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 sources of credit.
from Cardoso, (1987, 18), a research carried out showed that 58% of farming related borrowings was from family and friends, 24% from private money tenders, 15% from merchants and only 8% from Institutional sources.
However, while family and friends charged little or no interest, private moneylenders charged exorbitant interest. Organised credit facilities for Nigeria’s rural farming population would reduce the dependence on sources other than the formal financial houses.
It is against this background that the researcher is to investigate how credit will effectively administered in co-operative enterprises. This will enable us to identify the major problems associated with credit administration and seek solution to these problems to ensure continued existence of developing co-operatives.
1.2 STATEMENT OF PROBLEM
In this sector, co-operative societies mobilize credit to their members through the saving, of members.
It has been observed that they are inefficient in mobilizing and utilization of credits. Many problems lead to this ineffective mobilization of credit. They are:
a. Inadequate funds for loan purposes.
b. Inefficient management of loan
c. Faulty loan policy, which may sometimes emphasize credit worthiness of borrowers and not viability of projects.
d. Credit operations are mart money activities without proper organisation procedure and planned systematic arrangement.
e. Absence of regular monitoring and supervision of loans.
The above problems need to be solved for effective performance of co-operatives.
1.3 OBJECTIVE OF STUDY
The situation of co-operatives is nothing to write home about, if co-operatives should continue at this rate, they will wind up, in view of the above, solutions has to be designed for these problems.
1. Therefore, the objective of the study is to find out the various societies existing in the area under review.
2. To find out various problems being encountered by these co-operatives which tend to hinder their effective and efficient performance as agents of credit.
3. Finally, to make recommendations and suggest probably solutions that will enable these societies over-come the problems so as to function effectively.
1.4 SIGNIFICANCE OF THE STUDY
This study will assist the loan-committed managers in their decision making, as it concerns credit policy and management of credit in form of proper assessment of loan, applications, proper supervisor of credit, and evaluation of project proposals.
It will help the management to see the need to employ professional staffs and lastly, this study or findings will be of educational importance to the various universities, polytechnics and students of co-operative departments in the various schools.
1.5 SCOPE AND LIMITATIONS
The researcher will limit this study to effective administration of credit in co-operative enterprises in Enugu-South Local Government Area.
The researcher intends to find out the available sources of fund to co-operatives as well as the financial problems of co-operatives. The researcher will also find out the process of credit administration and some factors militating against credit administration.
In the course of accomplishing this study, the researcher was faced with the following problems:
There was no fund to facilitate on the issue of traveling around for further research to the co-operative societies.
Besides, there was high cost of increment on fuel prices, which subjected scarcity of fuel and high rate of transportations. This resulted a barrier in research movement.
The researcher finds it difficult to combine the researching work with academic work such as assignments, etc. due to time constraints.
3. DIFFICULTIES IN COLLECTION OF DATA
The researcher has limited access to official records and statistical data relevant to this work.
1.6 DEFINITION OF TERMS
For clarity of purpose, elimination of confusion and kind and the proper understanding of this study, the following definitions of terms are necessary:
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 say, a Bank extends an overdraft facility to a customer who then uses it. It is indirect when a trader or producer supplies goods on credit.
Traditional savings and credit group is one of the common variants of informal
financial intermediaries in rural areas. (Ijere 1991).
MANAGEMENT : Administration or management is the art
of attempting to achieve stated objectives by directing human activities in the production of goods and services. Management utilizes the land, factory, offices, machinery and other facilities at the disposal of the enterprises in the most effective, efficient and profitable manner. Bob-Igwe (1993:39).
ENTERPRISE : Enterprise is an economic system in which
individuals are free, singly or collectively to own capital and undertake economic activity within a framework of social legislation designed to protect the interest of individuals. Hanson 1974: 218).
EFFECTIVE : Hornbby A. S. defines effective, in the Oxford
Advanced Learner’s Dictionary as having an effect, able to bring about the result intended powerful in effect i.e. efficient performance.
1.7 RESEARCH QUESTIONS
For the fact that credit is very important in every business activity, therefore, the study is focused on finding relevant solutions to the following research questions:
1. What is the purpose of credit administration in co-operative societies in Enugu South Local Government Area?
2. How effectively is credit administration to co-operative in Enugu South Local Government Area?
3. What problems are encountered in the administration of credit in co-operative societies and what are the solutions to these problems?