View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by IDS OpenDocs Mekelle University College of Business and Economics Department of Cooperative studies Credit Utilization and Rep ayment Performance of members of Cooperatives in Alaje Woreda, T igray, Ethiopia: By Asqual Berhe Tesfay A Thesis Submitted in Partial Fulfillment of the Requirements for the Master of Arts Degree in Cooperative Marketing Advisor: Dayanandan (PhD) May, 2010 Mekelle Ethiopia DECLARATION MEKELLE University College of Business and Economics Department of Cooperative Studies This is to certify that this thesis entitled “Credit utilization and Repayment performance of members of cooperatives in Emba Alaje Woreda, Tigray, Ethiopia” submitted in partial fulfillment of the requirements for the award of M.A degree in Cooperative Marketing to the College of Business and Economics, Mekelle University, through the Department of Cooperative studies, done by Asqual Berhe Tesfay, Id.No. CDANR/PR0012/01 is an authentic work carried out by her under my guidance. The matter embodied in this project work has not been submitted earlier for award of any degree or diploma to the best of my knowledge and belief. Name of the student: - Asqual Berhe Tesfay, Signature _________ date______ Name of the Advisor: - Dayanandan (PhD), Signature and date____________________ DEDICATION This thesis is dedicated to my Mother W/ro Kasa Reda and My Sister Netsanet Berhe. ii BIOGRAGH Mrs. Asqual Berhe Tesfay was born in July 1964 in Mekelle Town, Tigray region. She Started her Education at Gerebtsedo elementary School and her junior secondary school in Mekelle Melestegna Then she completed her senior secondary education at Astie- Yohanes comprehensive high school in 1982. After completed her high school she was employed as agricultural development agent for Tigray Ministry of Agriculture in 1983. From 1983 -1997. She has served as agricultural credit and marketing information expert in different Regions of Ethiopia. Since, 1997 she is working in Tigray Region Cooperative promotion office as marketing information expert. In September 2003 she joint Mekelle University Continuing education and graduated in management in 2007.Then she is serving as marketing information expert in Tigray cooperative promotion agency until she joined Mekelle University for second degree in 2008/09 to specialize in cooperative marketing iii ACKNOWLEDGEMENT I would like to express my gratitude for the guidance, mentoring, and intellectual support provided to me by my major advisor, Dr. Dayanandan, through out the study. I would like to extend my appreciations to Tigray Region Cooperatives Promotion Agency and Agricultural Rural Development Bureau for offering me the opportunity to attend post graduate degree studies and every kind of support and facilities made available for the research work. I am also grateful to Emba Alaje Woreda Cooperative agency, Woreda food security desk and Woreda Agricultural and Rural Development office I highly appreciate and acknowledge to Dr.Grmay Tesfay, Ato Getachew Mergia, Ato Alemat Hagoss, Ato Hailesselasse W/sselasse, Ato G/Hiwot Teklu, Ato Mulugeta Hagoss and Ato Hadera Halefom for their assistance and helpful comments in writing the research proposal and the Thesis. I thank my brothers and my sisters for their continual support and love that gave me the strength to achieve my goal. I would also like to thank my colleagues particularly W/ro Ftsum Desta,Ato kiros demsse sster Hiwot Abrham, Abebech Amha ,Selamawit Amha, for their continual support and moral gave me the to achieve my goal. Finally, I would like to address my heart felt thanks and appreciation to beloved my Husband Ato Habtu Lemma, for his encouragement and sincere guidance, assistance and helpful comments in writing the research proposal and the thesis shouldering all responsibilities of family affairs including nursing of our Sons and a daughter, Michael Habtu , Esknder Habtu and Mahder Habtu. iv ABBREVIATIONS AIDB Agricultural and Industrial Development Bank CACC Central Agricultural Census Commission CBE Commercial Bank of Ethiopia CIDA Canada International Development Agency CSA Central Statistical Agency DBE Development Bank of Ethiopia FAO Food and Agriculture Organization FMOH Federal Ministry of Health FSP Food security project GDP Gross Domestic Product GTZ German Technical Cooperation IDA International Development Association LDSs less Developed Countries LLF Log Linear Function LPM Linear Probability Model ML Maximum Likelihood MOARD Ministry of Agriculture and rural development MPCs Multi-purpose Cooperatives NBE National Bank of Ethiopia PCs Producers’ Cooperatives RDPS Rural Development Policy and strategy RFIs Rural financial Institutions RUSACCOs Rural Saving and Credit Cooperatives TBoARD Tigray Bureau of Agriculture and Rural Development TNRS Tigray National Regional State TNRSDP Tigray National Regional State Development plan TRCPO Tigray Regional Cooperatives Promotion Office TRFSP Tigray Regional Food Security Project WCPA Woreda Cooperative promotion Agency USD United State’s Dollar v Table of contents DECLARATION....................................................................................................................................... I DEDICATION ....................................................................................................................................... II BIOGRAGH ........................................................................................................................................... III ACKNOWLEDGEMENT ....................................................................................................................... IV LIST OF FIGURES ................................................................................................................................. IX ABSTRACT ........................................................................................................................................... X CHAPTER ONE INTRODUCTION ................................................................................................................... 1 1.1 BACK GROUND ........................................................................................................................ 1 1.2 STATEMENT OF THE PROBLEM ................................................................................................. 7 1.3 SIGNIFICANCE OF THE STUDY .................................................................................................. 8 1.4 PURPOSE OF THE STUDY .......................................................................................................... 9 1.5 OBJECTIVES OF THE STUDY ................................................................................................... 10 1.6 RESEARCH QUESTIONS .......................................................................................................... 10 1.7 RESEARCH HYPOTHESIS ......................................................................................................... 10 1.8 SCOPE OF THE STUDY ............................................................................................................ 11 1.9 ORGANIZATION OF THE THESIS .............................................................................................. 11 CHAPTER TWO LITERATURE REVIEW........................................................................................................ 12 2.1 CONCEPTS AND DEFINITION ................................................................................................... 12 2.2 EVOLUTION OF FORMAL FINANCIAL INSTITUTIONS IN ETHIOPIA ...................... 16 2.3 INFORMAL FINANCIAL INSTITUTIONS ......................................................................... 23 2.4 DEFINITIONS ........................................................................................................................ 24 2.5 EMPIRICAL STUDIES IN OTHER COUNTRIES .............................................................. 25 2.6 EMPIRICAL STUDIES IN THE ETHIOPIAN CONTEXT ................................................. 28 2.7 MISS UTILIZATION ............................................................................................................. 31 CHAPTER THREE MATERIALS AND METHODS ............................................................................................ 33 3.1 DESCRIPTION OF THE STUDY AREA .............................................................................. 33 3.2 . METHOD OF DATA COLLECTION AND ANALYSIS ................................................... 41 3.2.1 SAMPLING DESIGN ............................................................................................................. 41 3.2.1.1 SAMPLING TECHNIQUES AND SAMPLING METHOD ............................................. 41 3.2.1.2 DATA SOURCE AND METHODS OF DATA COLLECTION ....................................... 42 3.2.1.3 PRIMARY DATA .............................................................................................................. 42 3.2.1.4 SECONDARY DATA ......................................................................................................... 43 3.3 METHOD OF DATA ANALYSIS.......................................................................................... 43 3.3.1 DESCRIPTIVE STATISTICS ................................................................................................ 43 3.3.2 NON–LINEAR MODELS (LOGIT MODEL) ......................................................................