THE CONTRIBUTION OF CREDIT UNION OPERATIONS TO ITS MEMBERS’ DEVELOPMENT: A SURVEY FROM NKORANZA AREA TEACHERS CREDIT UNION

ABSTRACT
The role of Credit unions in Ghana cannot be overemphasized. This motivated the researcher to investigate and establish the impact of credit union operations on its members’ development. To achieve this, quantitative approach through the use of explanatory design was adopted. Questionnaires with reliability alpha coefficient of .806 were used to collect responses from selected respondents. The data were analysed with the help of the Statistical Package for Social Sciences (SPSS version 23) software. Two hundred (200) teachers were selected through the use of the simple random technique. The findings from the study revealed that among the challenges teachers face includes the poor location of the credit union; delay in given loans, lack of trust in the Credit Union services. Again, it was unravelled that that majority of the teachers are not satisfied with the benefit they derived from the Credit Union. Finally, the study revealed that an improvement in the quality of services rendered by credit union has a positive effect on the development of its members.


CHAPTER ONE
INTRODUCTION
This is the first chapter of the study, and it thus introduces the study to readers. The chapter has the background of the study, the problem statement, the research objectives, research questions, significance of the study, the scope of the study, limitations of the study and the organization of the study. The chapter gives the essence of the study.

Background to the Study
Co-operative associations are dispersed all over the world offering indispensable services which would otherwise be unachievable. In developing countries, cooperatives such as credit unions have been exceedingly effective in aiding person to provide for themselves in areas and communities where private and other corporate assets do not perceive large profitability and success (Gupta, 2006). Parthasarathy (2003) emphatically alluded to the fact that in 90 countries worldwide, over 700 million persons are members of co-operative establishments. Internationally, cooperatives have been able to promote and cement their status as influential economic models. In some countries, they are a considerable force within the national economy (Parthasarathy, 2003).

The goal of credit unions is to build robust social capital and support their customers (who are also members) and the local community in which they are based. In the view of Singh (2006) credit unions are dissimilar to banks in numerous ways. First, he stated that credit unions cannot do business with the general public due to limitations based on serving a membership that is characterized by a mutual connection; which are effectively the social glue which binds credit union members together (Singh, 2006). Secondly, he added that credit unions were often viewed as well positioned to provide financial services to those who were excluded by conventional financial organizations. Thirdly, he was of the view that credit unions in many countries were exempted from tax obligations with this status warranted by their role in providing financial services to those of modest means. The fourth point about credit unions posited by Singh (2006) was that they were not-for-profit establishments and it was not required of them to simultaneously satisfy shareholders, profit expectations and disparate customer needs.

The executives of credit unions were not given gratuities that were connected to shareholder value. Consequently, credit unions were unlikely to engage in risky investment and unsafe lending practices in order to optimize short-term returns (Singh, 2006). In 2013, there were 56,904 credit unions in 103 countries with 207.9 million members and $1,732.9 billion in assets (Singh, 2006). In certain nations, credit unions are minor volunteer-based establishments offering a basic savings account and unsecured personal loans. In other countries, they were managed by experts and delivered a complete variety of financial services.

In Ghana, most credit unions functioned principally in the rural areas where the residents are mostly into farming and others into small or micro scale businesses (Frimpong, 2011). Individuals found in this segment of the economy generally had comparatively little income. The credit unions in such rural areas helped the inhabitants to save and/or via education and forum, inculcated the practice of savings among them (Frimpong, 2011).

Most of the credit unions likewise functioned within the banner of religious bodies thus churches and educational or community institutions. This made the inhabitants in the rural areas enthusiastic to trust the operators with their funds. Other credit unions were also formed and operated at workplaces thus making the staff members of the said unions. An additional benefit that aided the credit unions in their function was the preparedness of its members to save locally and have the ability to obtain credit facilities at conditions that will favour them when the need arose (Frimpong, 2011).

Credit unions afforded their members and/or participants the opportunity to acquire loan facilities at reasonable rates of interest and improved conditions than that offered by banks and other financial institutions coupled with flexible reimbursements. Some credit unions also provided investment counselling to their members, poverty assuagement assistance and also gave training to members on credit management at little or no fees which will not be provided by some other financial institutions (Frimpong, 2011).

Micro-credit came in as an intervention against biting poverty. When banks deny credit to some people, credit unions are seen as tools against financial exclusion (McKillop, Glass, & Ferguson, 2002). The only requirement for accessing credit facility from a credit union is by being a member and having a guarantor who is also a member. In Ghana, after six months, a needy member can apply for a credit facility and the person would be offered a minimum interest rate payable within a period of time. The credit unions in Ghana have assisted members to construct or complete their houses, expand their businesses, educate their children and receive better healthcare services among others (Darko, 2013). It is reported that 14000 credit unions in the U.S. provided loans and deposit services to about 60 million members. Therefore, credit unions are considered as the engine for poverty alleviation (Birchall & Simmons, 2009).

Robinson (2001) argues that small-scale commercial financial services in the form of credit and savings help the poor to improve household and enterprise management, increase productivity, and smooth income flows and consumption costs. This enhances the capacity of the poor to enlarge and diversify their microenterprises and increase their incomes. Credit is considered an essential input to increase agricultural productivity, mainly land and labour. It is believed that credit boosts income levels and increases employment at the household level and thereby alleviates poverty. Credit enables the poor to overcome their liquidity constraints and undertake some investments, especially in improved farming technology and inputs, thereby leading to increased agricultural production (Adugna & Hiedhues, 2000; Nathan et al., 2004).

This notwithstanding, credit unions can be said to have contributed prominently to economic development in terms of extending finance to small-scale businesses, generating the enthusiasm to save amongst rural people and enhancing the economic well-being of the people in especially rural communities. It is therefore in this light that this study seeks to assess how the Nkoranza teachers’ credit union has affected the lives of its members.

Statement of the Problem
The economy of Ghana has witnessed an exceptional upsurge of financial ingenuities over the past two decades within the financial sector. In view of this, both Banks and Non-Bank Financial Institutions (NBFIs) are contending and formulating countless means of capturing substantial customers through offering satisfactory competitive terms of credit retailing. Credit unions still employ limited officers to run the management of the union and are also incapable to employ exceedingly competent professionals and skilled personnel to run the affairs of the union (Frimpong, 2011).

There have been numerous delusions and views from people, small and medium business enterprises and corporate business entities that microfinance institutions have outlasted their significance in the twenty first century with the explosion of greater commercial banks (Traditional Banks) that offer a wider variety of financial services due to their sophisticated infrastructure, innovations and technology (Philip, 1993) Nevertheless, there is yet another school of thought that agitates that institutions such as credit unions are still significant in the twenty first century. Though huge commercial banks provide broader dimensions of financial services to their clientele, such services were essentially restricted to larger commercial, industrial and mining towns in Ghana. Thus, their services were not defused in the hinterland (Darko, 2005).

Gyan-Baffour (2008) posited that high interest rates charged by the traditional banks as well as savings and loans companies were killing businesses in the country particularly small and medium scale enterprises (SMEs). In his view, the problem of high interest rates was impairment on the economy since it forced more businesses to close down. In assenting with the views of Gyan-Baffour (2008), Agyemang (1998) postulated that in as much as traditional banks were perceived to provide needed financial services to individuals, small and medium scale enterprises’ (SMEs) access to credit facilities there remained a daunting constraint to most businesses in Ghana. Not only availability to credit but where they were made available, their insufficiencies, high cost of borrowing posed a great challenge to many businesses in Ghana due to principal agrarian economic activities that most people engaged in (Agyeman, 1998).

It is against this background coupled with lack of studies within the Nkoranza Municipality that the study seeks to ascertain the various ways in which the operations of credit unions have contributed to the lives of its members with regards to the teachers’ credit union at Nkoranza.

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Item Type: Ghanaian Postgraduate Material  |  Attribute: 76 pages  |  Chapters: 1-5
Format: MS Word  |  Price: GH110 ($20)  |  Delivery: Within 30Mins.
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