INFLUENCE OF LOAN DEFAULTS ON FINANCIAL PERFORMANCE OF UNIVERSITY WORKER COOPERATIVE IN ANAMBRA STATE, NIGERIA.

Abstract

The study titled “Influence of Loan Defaults on the Financial Performance of University Worker Cooperatives in Anambra State" aims to investigate how loan defaults impact key financial performance indicators—Net Profit Margin, liquidity, and Return on Equity (ROE)—of university worker cooperatives in Anambra State, Nigeria. Anchored on agency theory, this research explores the relationship between cooperative members (agents) and management (principals) and examines how misaligned financial responsibilities contribute to loan defaults. A descriptive survey research design was employed, targeting staff members from federal and state universities in Anambra, with a sample size of 382 respondents. Data were collected using structured questionnaires and analyzed using descriptive and Pearson’s product correlation analyses. The findings revealed significant positive effect of loan default on net profit, liquidity, and return on equity of university worker cooperatives in the study area. The study concludes that managing loan defaults is critical to cooperatives’ financial sustainability. It recommends that strict approval policies can help minimize the risk of defaults by ensuring that loans are issued primarily to members with a proven ability to repay and establishment of a system to monitor early signs of financial distress, such as delayed payments, so that the cooperative can proactively reach out to members facing difficulty. and organize workshops focused on budgeting, debt management, and the importance of timely repayments. These sessions can help members manage their personal finances effectively and make informed borrowing decisions.