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How Should Rural Financial Cooperatives Be Best Organized? Evidence from Ethiopia

Author

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  • Aga, B.K.
  • Tesfay, G.B.

Abstract

What is the optimal size and composition of Rural Savings and Credit Cooperatives (RuSACCOs)? With these broader questions in mind, we characterize alternative formation of RuSACCOs and their implications in improving rural households access to financial services, including savings, credit and insurance services. We find that some features of RuSACCOs have varying implications for delivering various financial services (savings, credit and insurance). We find that the sizes of RuSACCOs have nonlinear and varying implications across the various financial services that RuSACCOs provide. We also show that compositional heterogeneity among members (including diversity in wealth) is associated with higher access to credit services, while this has little (no) implication on households savings behavior. Similarly, strong social cohesion among members is strongly associated with higher access to financial services, particularly savings and credit access. These empirical characterizations suggest that the optimal size and composition of RuSACCOs may vary across the domains of financial services they are meant to provide. The results provide some insights into rural microfinancing operations and saving cooperatives which are striving to satisfy members demand for financial services. Acknowledgement : The authors gratefully acknowledge the financial support from the International Growth Center (IGC) through the Ethiopian country program. We also appreciate the support and comments from the IGC Ethiopia team. All remaining errors are ours

Suggested Citation

  • Aga, B.K. & Tesfay, G.B., 2018. "How Should Rural Financial Cooperatives Be Best Organized? Evidence from Ethiopia," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277735, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:277735
    DOI: 10.22004/ag.econ.277735
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