Nigerian Journal of Banking and Financial Issues (NJBFI)

The Effect Of Loan Default On The Growth Of Cooperative Societies In Nigeria

Abstract

This study examined the effect of loan default on the growth of cooperative societies in Nigeria. Specifically, the study focused on establishing the association between loan management procedure, loan diversion and loan size and its association with the growth of cooperative societies in Nigeria. A total number of five (5) cooperatives were purposively selected for this study using the cross-sectional survey method of research design. Cooperative Society Growth is the dependent variable while Loan Management Procedure, Loan Diversion, and Loan Size as independent variables. The results affirmed that loan management procedure exerts positive insignificant effect on growth of cooperative societies in Ekiti State with coefficient estimate of 0. 619080 (p=0.0751>0.05); loan default exerts negative effect on growth of cooperative societies in Ekiti state with coefficient estimate of 0.479062 (p=0.0522=0.05); and loan size has positive insignificant relationship with growth of cooperative societies in Ekiti State given the coefficient estimate of 0.179562 (p=0.0802>0.05) and concluded that Loan default has remained a dominant issue that has discouraged most cooperative societies from granting loan to members while other cooperatives that has continuously disbursed loan to members have not performed soundly as they have remained stagnated per time. Therefore, recommended that Cooperative credit supervisor should evaluate records of credit officer to ascertain that loan policies are consistently observed; this would strongly establish loan procedures of cooperatives and enhance members commitment to loan repayment; Adequate training on financial management and business training should be carried out for members of cooperative towards aiding the profitability of their  businesses and consequent payment of loan; Management of cooperative societies should ensure that loan requests are either declined or granted rather than approving an insignificant amount of loan application which encourages members to default; Loan approved should be based on the past record of the members; Creating channels that will make the loanee able to pay the loan at a convenient time before the exceeding period e.g Loan Applications for the members.