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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