Abstract

The study was on strength and weakness of cooperative societies using Abia State Agricultural Cooperative Wholesale Association Limited, Abia state as a case study. Three societies namely: obalu, umuorie and obiahia municipal were sampled. this empirical study (n=135) was conducted in march 2010. the determinants of failure were measured using the questionnaire whose reliability as estimated by cronbach alpha was 93%. based on an extensive in-depth interview and closed ended questionnaire with the ordinary and the executive committee members, the findings show a significant interaction between management, financial and human resource constraints (β=0.427, 0.351& 0.216 sig= 0.000, 0.000, 0.000<0.005.) respectively and ASCWA failure, while the relationship between members‟ participation and ASCWA failure was not significant (β=-097, sig= 0.225>0.005) despite a higher r² value of 78.8%. the presence of organisational culture as a moderator variable has a strong effect in accounting for variability in SCC failure in Obiahia. The study concludes that whilst membership participation, financial and human resources constraints affects ASCWA performance, there were management aspects of the crisis which aggravated the situation and the ASCWA problems. The study recommends that for effective and successful performance of the ASCWA, strategic planning, capacity building of staff and performance evaluation should be practiced and considered very imperative for sustainable operations.

CHAPTER ONE

INTRODUCTION

1.0 Introduction

Abia State is one of the states that was created in August 1991 by General I. B. Babangida. The head of state inherited a total number of 3.758 cooperative societies from Imo State. But this figure increased immensely as a result of individual desires and government encouragement together with the benefit from the formation of cooperative societies.

This cooperative society is formed when a group of people with common interest decide to cooperate, rather than in dealing with a common set of supplier. Cooperative is wide spread and very important to both the members, customers entire public and the government as well as those in marketing, production, distribution etc of good and services at a fair price to those that need them.

Despite the energetic efforts towards the development of the system customers have not yet been fully convinced since it has been known that the aim of private traders is to buy cheap and sell at higher price but are theoretically restrained in the price that can change consumers or the users of their goods because government regulates prices for a whole range of commodities regarded as necessities. Infact ministry seems to regard the elimination of private middlemen as desirable. Cooperatives are set up with government encouragement and guidance goods from given localities and take them to a grouping centre to sell to the public, these goods could be vegetables such as potatoes, meats, onions, beans, rice etc. The various types of cooperative societies in Abia State are farmers, multipurpose cooperative society, Golden Guinea Breweries, Multipurpose Cooperative Society Ltd. Umuahia timber Dealers Multipurpose Cooperative Society Ltd.

The background to the study is organized in four broad themes that include: historical, theoretical, conceptual and contextual backgrounds.

Abia State is one of the decentralized local governments located in Eastern Nigeria. It is the home of the former most industrialized town (Obiahia) which has several large scale industries like steel rolling mills, Umuorie, Dunlop, Chillington among others. Abia State is an example of a region where both successful and unsuccessful ASCWA have co-existed. The district was selected to represent similar regions with a combination of successful and unsuccessful ASCWA. The District is the centre of old industrialization which gave birth to several ASCWA. Within these ASCWA are high levels of non-performing assets, erosion of deposits and losses. The incentives of credit cooperative design are distorted with weak monitoring and enforcement mechanism. The ASCWA have weak incentives for savings and share mobilization from members

This picture is in line with Adere‟s (1995) observations that “the co-operatives, which were intended to spread a process of rural transformation, have not been entirely successful. Not only are credit co-operatives fundamentally weak in both financial strength and economic impact but they have tended to reinforce existing social structures or even to aggravate class division rather than acting as vehicles of equitable change”. This scenario necessitated the researcher to refine the current understanding of determinants of failure of ASCWA in Nigeria using Obiahia as a case study.

This study therefore, sets out to identify determinants of failure of ASCWA in Nigeria using Abia State as a case study. The intention was to identify specific interventions ASCWA could undertake to reverse this undesired trend and promote their survival.

1.2 Statement of the Problem

Saving and Credit Co-operative Societies were established to enable members pool resources together so as to provide loans to one another at reasonable interest rates with the aim of achieving a common social and economic end. It is assumed that since Credit Co-operatives are self–help organizations with a close link to the local community, are nonprofit oriented and have performed this function successfully in many countries worldwide, they deserve to be promoted.

Despite their vast network, close proximity to members and their significant share in the credit dispensation to members, the observable facts in many parts of Abia State do not live up to these seemingly high expectations.

The experience in Obiahia shows a high rate of birth of new ASCWA amidst an equally high rate of closure. For example in the year 2000, Obiahia had 24 registered ASCWA and of these, 13 were classified as active and 11 as dormant. Among the ASCWA that have collapsed and closed down include NYTIL worker‟s ASCWA; People‟s Transport ASCWA and Nigeria

Garment Worker‟s ASCWA (Abia State Cooperative Report, 2000).

These ASCWA characteristics allude to issues of capital adequacy and asset quality, which not only hinder their growth but also pose a threat to their failure making them the weakest section of the country‟s financial system.

Given these internal weaknesses, it is prudent for ASCWA to provide robust policies that enhance their positive performance. Unfortunately most studies on ASCWA failure have tended to concentrate on financial ratios while giving limited coverage on issues of governance, human resources, member participation and institutional culture. This raises the question of the determinants of failure of ASCWA.

1.3 Purpose of the Study

The purpose of the study was to examine the strength and weakness of cooperative societies using Abia State Agricultural Cooperative Wholesale Association Limited, Abia state.

1.4 Objective of the Study

The objective of the study was to investigate the determinants of failure of ASCWA in Nigeria using Abia State Agricultural Cooperative Wholesale Association Limited, Abia State as a case study. The specific objectives were to:

1. To explore the influence of Management quality on failure of ASCWA

2. To examine the effects of human resources on failure of ASCWA

3. To establish the influence of financial resource management on failure of ASCWA

4. To analyze the effect of members participation on failure of ASCWA

5. To investigate the moderating role of institutional culture on determinants of failure of ASCWA

1.5 Research Questions

This study was guided by the following research questions:

1. What is the influence of management quality on the failure of ASCWA?

2. What is the effect of human resources on failure of ASCWA?

3. Does financial resource management have any significant influence on ASCWA

failure?

4. What is the effect of members‟ participation on failure of ASCWA?

5. Is there a significant moderator effect of institutional culture on the relationship between determinants and failure of ASCWA?

1.6 Hypotheses of the study

The study was designed to test the following research hypotheses

1. Management quality has no significant influence on Savings and Credit Co-operative Society failure

2. There is no relationship between human resource management and Savings and Credit Cooperative Society failure

3. Financial resource management has no significant influence on Savings and Credit Cooperative Society failure

4. There is no correlation between members‟ participation and Savings and Credit

Cooperative Society failure

5. Institutional culture does not modify the relationship between determinants and failure of Savings and Credit Cooperative Society failure

1.7 Scope of the Study

This study concentrated on the strength and weakness of cooperative societies using Abia State Agricultural Cooperative Wholesale Association Limited Society as a case study. It was limited to only three ASCWA namely: Obalu, Umuorie, and Obiahia Municipal Council. The study specifically discussed the management aspect of the institutions. It focused mainly on the human resource development, members‟ financial contributions and participation in society‟s activities to highlight the strength and weakness of cooperative societies in these institutions for the period ranging from 2004 – 2010.

1.8 Significance of the study

The results of this study may provide useful information to improve savings and credit delivery among ASCWA in Abia State and the entire country. Secondly the researcher hopes to contribute to more understanding of the problems that cripple the effectiveness of ASCWA in Nigeria. The knowledge generated thereafter may guide planners and policy makers of co-operatives to devise better strategies to avoid pitfalls of failure and realize the cooperative test.

1.9 Justification of the Study

The author chose to refine the current understanding of determinants of failure of ASCWA because despite a significant increase in the number of ASCWA failure, limited attention has been devoted to its detailed diagnosis in Nigeria and Obiahia in particular, except in the briefest

of terms (Kabuga, 2004, Assimwe and Nahamya, 2006), thus this study makes a contribution to filling this vacuum. Second, this study considers the potentialities of rejuvenating ASCWA to contribute to rural economic transformation and ultimately improvement of member‟s welfare.

1.10 Conceptual Framework

To develop a better understanding of ASCWA failure, it is necessary to understand how governance issues, financial constraints and member participation interact to cause failure. A fundamental axiom of the integrative framework (Bharel, 2003) is that the different theoretical assumptions and linkages underlying each perspective are not only reconcilable but that together they provide a more comprehensive understanding of organizational failure than any single perspective by itself.

Figure 1: An Integrated Conceptual Framework of Determinants of Failure of ASCWAs

The Figure (1) shows the relationship between causes and failure of ASCWA in Obiahia. Specifically it highlights that management quality, human resource, financial constraints and member participation combined explain failure of ASCWA which is reflected in form of poor communication, poor quality services and declining performance of ASCWA. This relationship is modified by the existing institutional culture in form of lack of respect for bye laws and mistrust in the ASCWA