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The increase in the demand for financial services has brought changes to cooperative societies as a factor in financial, economic and social science disciplines to the extent that over the years, local and international organisations have continued to explore the best modalities in the application of cooperative concept to almost every area of the economic needs of individuals at urban and rural areas. This may have necessitated the declaration of the year 2005 as the international year of microcredit and the year 2012 as the international year of cooperatives by the United Nations General Assembly. This chapter provides direction for this study and it is divided into six sections. Section two explains the aim of the research while section three highlights the objectives of the study. Section four focuses on the scope of the study while section five explains the significance of the study. The structure of the thesis is presented in section six.
1.2 The Research Aim
The delivery of banking services in developing nations reaches less than 20% of the population (Rosenberg, 1994; Barenbash and Churchill, 1997; Robinson, 2001). The rest of the population may not have any access to a formal financial service provider and "the majority of low income households, in all parts of the world, historically have not had access to formal financial services" (Chiumya, 2006: 29) because most formal financial service providers regard low income earners and households in rural areas as too poor financially - having no access to surplus monetary funds - to either save with or borrow from their institutions. Several categories of people such as rural inhabitants, poor people and uneducated people are not served by formal financial institutions in developing countries (Adjei and Arun, 2009). Braverman and Guasch (1993) estimated that only 5% of farmers in Africa and about 15% in Asia and Latin America have had access to formal credit. On average across developing countries, Braverman and Guasch (1993) found that 5% of borrowers received 80% of formal credit. To buttress this finding, Rosenberg (1994) asserted that 90% of the rural population in developing countries lacks access to financial services from formal financial institutions, either for credit or for savings. This 90% may have no better alternative than to either patronise or participate in informal finance programs.
Iganiga (2008) pointed out that the formal financial system provides services to about 35% of the economically active population of Nigerian citizens, while the remaining 65% are excluded from their services. In a country with a population of 140 million people, it suggests that about 91 million are served by informal finance providers. If the only available financial service providers to the rural people in Nigeria are informal sources such as the cooperative societies, money lenders, self-help groups and rotational savings associations, what is the hope for a possible reduction in poverty and improvement in standard of living in rural areas using these informal financial service providers especially the cooperative societies bearing in mind the amount of savings that they can mobilise and the value of loan that they can give? This question is essential because it provides a guide for the aim of this study. This study aimed at assessing the role of cooperative societies in rural finance to bring about improvement in members standard of living at the individual, household and enterprise levels.
1.3 Research Objectives
"For an impact assessment to be credible, it is important to have clearly stated objectives that indicate the type of impacts that will be examined" (Sebstad, 1998: i). Based on the aim of this study and the gaps identified in the literature in chapter three, five objectives were identified and adopted for the study. The objectives are to:
Assess the roles cooperative societies' savings and loan products play in meeting participants' financial needs.
Examine the part played by cooperative societies in increasing participants' household income.
Assess the relationship that exists between cooperative members and the acquisition of household assets.
Establish the relationship between membership of cooperative societies and business development that lead to profitability.
Analyse the impact of participation in cooperative societies' membership on enterprise assets.
The research objectives were distilled into five research questions as stated below.
What is the role of cooperative societies in satisfying the financial needs of their members?
Does participation in cooperative loan services lead to increase in household income?
Does participation in cooperative loan services lead to ownership of household assets?
Does participation in cooperative loan services lead to changes in business development associated with profitability?
Does participation in cooperative loan services lead to increase in acquisition of business assets?
The research objectives above were further restructured into one proposition and four hypotheses as stated below after the literature review which identify the gaps that currently exist.
Cooperative savings and loan services satisfy the financial needs of their members in that they make a contribution to improvement in standard of living.
H1: There is no relationship between participation in a cooperative and increase in household income.
H2: There is no relationship between participation in a cooperative and increase in the acquisition of household assets.
H3: There is no relationship between participation in a cooperative and changes in business development associated with increased profitability.
H4: There is no relationship between participation in a cooperative and increase in the acquisition of business assets.
1.4 Scope of the Study
The researcher has identified gaps in the literature in chapter three and also reveals the dearth of studies that cover the activities of both the registered and unregistered cooperative societies in Nigeria and especially in Ogun State. The identification of more than one hundred unregistered cooperative societies in the rural areas of Ogun State where there is lack of government provided drinkable water supply, electricity supply and tarred roads necessitates the scope of this study to cover only the activities of unregistered cooperative societies operating in the rural areas of Ogun State, Nigeria with the above infrastructural deficiencies.
A random sampling method was used to select the loan and no-loan members of the cooperative societies that participated in the study. The no-loan members are members of the cooperative societies, but they did not take loans as at the time of this study. The choice of loan and no-loan members is to enable the researcher to use the no-loan members as the control group for the loan members. This is because members of the two different categories live in the same community. This therefore gave room for the comparison of results as to the impact traceable to participation in cooperative societies as loan members. In all, 291 loan members and 101 no-loan members from 54 cooperative societies participated in the study.
1.5 Significance of the Study
This study is significant because it focuses only on members promoted cooperative societies in rural areas without support from donor and government, while none of the previous studies used only members promoted cooperatives. For example, Ghosh and Maharjan (2001) used government sponsored cooperative, while member/self promoted, government sponsored and programme promoted cooperatives were used by Simkhada (2004). Sharma et al. (2005) used two self promoted and two programmes promoted cooperatives, while the programme promoted cooperatives enjoy support in form of grants from donors. Wanyama et al. (2008) used multiple ownership cooperatives which include a donor funded cooperative. Ramotra and Kanase (2009) study does not provide the ownership type of cooperatives used. The cooperative used by Holmgren (2011) receives financial support from a Non Governmental Organisation (NGO) and the participants are not very poor.
The study provides a clear distinction between standard of living and quality of life variables in measuring the economic condition of rural dwellers. Hitherto, this has been combined in other studies (Edgcomb and Garber, 1998; Falaiye, 2002; Calkins and Ngo, 2005; Sharma et al, 2005; Allahdadi, 2011) which leads to the inability to properly report their findings on quality of life criteria - not because quality of life is more of a qualitative issue but because their studies cover too many parameters of both the standard of living and quality of life. Because of these, results for the standard of living and quality of life variables were not properly reported. This study concentrates on variables of standard of living alone. This helps to trace the role of cooperatives to ownership of household assets, enterprise assets, enterprise profitability and increase in household income to determine changes in members' standard of living. This is important because it enhances our understanding of the role of cooperative societies in rural finance to be concerned with improving standards of living of the members rather than quality of life such as health and family planning which rural cooperatives may not be financially adequately empowered to do.
The study attempts to be the first empirical investigation in Nigeria that focuses on the relevance of cooperative societies on members' standard of living in rural communities and villages outside the state capital and local government headquarters which are without government electricity, water and tarred road facilities.
Only four studies on cooperative societies (Larocque et al., 2002; Sharma et al., 2005; Enete, 2008; Wanyama et al., 2008) considered the impact of participation in cooperatives on members' ability to acquire enterprise asset. However, none of these studies provide a comparison data on members and non-members' performances on enterprise asset ownership. Furthermore, no statistical test was carried out by the studies. In addition, the component of enterprise assets used for their studies were not stated, while the studies also lacked any theoretical underpinning. This study is significant because it provided comparison data for both groups of respondents while statistical tests were carried out on the data including all the component of enterprise assets used. It is also underpinned by social capital theory which was missing in other studies on enterprise assets.
The study found an improvement upon the primitive and local ways of keeping money at home, on the roof and under the mattress, for a long period of time as a result of participation in cooperatives that provide financial intermediation to their members in form of savings and loans. The study documents evidence that supports social capital theory. This shows that satisfaction is derived by cooperative members through the inter-personal relationships that arise among them, such that members do help each other when in trouble because they see themselves as their sibling's keepers.
The study found evidence that participation in cooperative societies explains increases in household income and household assets. At the enterprise level, the study shows that access to cooperative loans for enterprise use does not translate into more profit. Evidence of increases in enterprise assets as a result of participation in a cooperative society was found by the study. The cooperative societies are contributing to better standard of living in rural areas by increasing asset ownership.
The finding of the study is more robust as they are situated within the cooperatives and informal finance literature. This provides better understanding and clarity to the implication of the findings for comparison by future studies. The outcome of the study will be useful as reference materials for government, development agencies and rural development practitioners on the role of cooperatives in the provision of financial services to rural dwellers. It will also serve as base line data for other researchers and as basis for comparison with similar rural areas within and outside Africa.
1.6 The Structure of the Thesis
This thesis is organised into nine chapters. Chapter two provides background information to the study by reviewing various definitions of cooperatives. It also assists in providing contextual information on development and practices of cooperatives within and outside Africa, this includes a review of the cooperative and informal finance sector in Nigeria.
Chapter three reviews key literatures on the topic under investigation. The literature review focused on studies on informal rural finance, cooperatives and savings mobilisation, cooperatives and loan facilities, cooperative services and members satisfaction, effect of cooperatives on household income, cooperatives and household asset acquisition, cooperatives and members enterprises profitability, and cooperatives and enterprise assets. The chapter helps to identify the existing gap in the literature and possible areas where contributions to knowledge can be enhanced by the researcher and the theoretical underpinning for the study. In chapter four, the researcher presents the methods adopted for the study and the steps taken in conducting the research after evaluating different research strategies and designs suitable for the study.
Chapter five reports the results and findings of the qualitative tools used on members' satisfaction while chapter six presents the first empirical study of the thesis. It examines the relationship between participation in cooperative societies and household income and assets. In chapter seven, the researcher reports the second and the last empirical study of the thesis. This examines the relationship that exists between membership of cooperative societies and enterprises. Chapter eight focuses on the summary of the results presented in chapters five, six and seven. This is used to integrate all the findings in this study on individuals, households and enterprises together. The last chapter - chapter nine - concludes upon the major findings of the research and its limitations and suggests directions for further studies.