FINANCIAL OUTREACH AND FINANCIAL SUSTAINABILITY OF SACCO UNIONS IN OROMIA REGION, ETHIOPIA

Abstract

This study examines the impact of financial outreach on the financial sustainability of Savings and Credit Cooperative Societies (SACCO) unions in the Oromia region of Ethiopia. Using a descriptive research design, longitudinal audited financial and administrative data were collected from sampled unions over a ten-year period from 2008 to 2017. The study analyzed the effect of the Number of Primary Members (NPM) and the Total Saving Mobilized (TSM) as independent variables on the financial sustainability of unions in the region. The findings show that both independent variables have a significant effect on the financial sustainability of the SACCO unions. However, the number of primary SACCOs that are members and the total savings mobilized by the unions were insignificant compared to the total primary societies and potential in the region. The study reveals that most unions have limited outreach, rely on external sources of funding, have a high cost of funds, are not open to new SACCO memberships, and have an imbalanced demand for loan seekers and savers. The financial sustainability status of the SACCO unions in the region indicates that 48% of them are sustainable, while the remaining 52% are at risk of failure. The study recommends that unions should open their doors to new SACCO memberships and develop strategies for internal savings mobilization to reduce reliance on external financial sources. The cooperative promotion office should also establish strong financial and operational regulations to guide the outreach and financial sustainability of the unions.