DETERMINANT FACTORS OF SUCCESS OF SAVING AND CREDIT COOPERATIVES IN TIGRAY

Abstract

Savings and Credit Cooperative Organizations (SACCOs) are key to promoting financial inclusion and socio-economic growth, particularly in regions with low exposure to formal banking. While SACCOs are registered in the Tigray region of Ethiopia, most of them fail to achieve sustainable success. This study assesses the determinants of the success of SACCOs in Tigray, with a specific emphasis on governance, technological adoption, and financial management practices. The study adopted a cross-sectional research design, and quantitative data were collected using a structured questionnaire from 257 officers, managers, and board members of selected urban SACCOs. Descriptive statistics and binary logistic regression were used to analyze data and determine factors that were significantly linked with SACCO success as measured by loan repayment rates, membership growth, and savings mobilization. The findings indicate that SACCOs in Tigray are staffed by a highly educated workforce, implying high human capital potential. The regression model identified four statistically significant determinants of success: Work experience (AOR = 00.211, p<0.030), Governance Effectiveness (AOR = 0.115, p < 0.001), the Impact of Technology Adoption (p = 0.002), and Dividend Payment (AOR = 5.430, p = 0.022). SACCOs with very strong governance, experienced employees, and those that paid dividends were significantly more likely to be successful, while a moderate (as opposed to high) technological impact was negatively associated with success. Operationally, speedy loan processing was the principal membership growth driver, overshadowing traditional drivers like low-interest rates. A fundamental "governance paradox" was observed, whereby formal arrangements like regular board meetings exist alongside a grave deficiency in board member training. The study concludes that SACCO success in Tigray is multifaceted, premised on the effective alignment of robust governance, deep (not moderate) technological integration, and strategic financial practices like dividend distribution. It recommends that SACCOs invest in board capacity through continuous training, in core banking and mobile technologies, and formalize financial strategies. Policy recommendations are that policymakers establish a tiered regulatory framework and facilitate technology adoption. This research provides valuable empirical lessons for enhancing SACCO performance and sustainability in Tigray and similar settings.