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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

Management