Micro-credit schemes and agricultural cooperative’s performance in Rwanda, a case of agricultural cooperatives in Nyanza district.

Abstract

The study was about micro-credit schemes and agricultural cooperative performance in Rwanda, a case study of agricultural cooperatives in Nyanza district. Based on FinScope survey (2016), about 86% of Rwandan adults are from households that are involved directly or indirectly in agricultural activities. Overall farmers are financially included with inclusion ranges varying between 86% and 91%. The specific objectives to be achieved during this study were to analyse the effectiveness of Micro-credit schemes received by Agricultural cooperatives in Nyanza District, to find out determinants of financial performance for farming cooperatives in Nyanza District, since 2012 to 2019; and to determine relationship between Micro-credit schemes and financial performance of farming cooperatives in Nyanza District. Methodology based on quantitative approach study population comprises 51 agricultural cooperatives in Nyanza District. Data collection instruments were questionnaire, and documentation, while Data Analysis Methods were Descriptive statistic method, Econometric model, and correlation matrix to show relationship between variables. Findings shows that there is a positive and low correlation between revolving credit facility in micro-credit schemes and profitability ratios (ROA, ROE, GPM, &NPM) of Agricultural cooperatives (r= .282*, p<0.05). The results also revealed that there is also positive and strong correlation between instalment credit and profitability ratios represented by return on asset, return on equity, gross margin profit, and net profit margin (r= .534**, p<0.01). Findings revealed that there is a positive and moderate correlation between revolving credit facility in micro-credit schemes and liquidity ratios (Quick ratio, & current ratio) for Agricultural cooperatives (r= .348* , p<0.05). The results also show that there is positive and strong correlation between instalment credit and liquidity ratios for Agricultural cooperatives represented by quick ratio, and current ratio (r= .598**, p<0.01). There is also positive and very strong correlation between open credit in micro-credit schemes and liquidity ratios (Quick ratio, & current ratio) for Agricultural cooperatives (r= .694** , p<0.01).Results from analysis of correlation matrix confirmed that there is a positive and moderate correlation between instalment credit in micro-credit schemes and solvability ratios of Agricultural cooperatives represented by Debt-to-Assets, & Debt-to-Equity (r= .579**, p<0.01). Findings also show that there is positive and low correlation between open credit in micro-credit schemes and solvability ratios (Debt-to Assets, & Debt-to-Equity) of Agricultural cooperatives (r= .286*, p<0.05). Findings revealed that there is a positive and moderate correlation between revolving credit facility in micro-credit schemes and Activity ratios (account receivables, inventory, &payables) in Agricultural cooperatives (r= .343*, p<0.05). The results also show that there is positive and strong correlation between instalment credit and Activity ratios (account receivables, inventory, &payables) in Agricultural cooperatives (r= .450**, p<0.01). There is also positive and strong correlation between open credit in micro-credit schemes and Activity ratios (account receivables, inventory, &payables) in Agricultural cooperatives (r= .519** , p<0.01).Findings on the relationship between micro-credit schemes and agricultural cooperatives performance indicated that the F-test= 46.509 which is positive and significant at 0.0% shows that we cannot accept H05 which states that Micro-credit schemes has no significant effect on financial performance of Agri-cooperatives in Nyanza District. As conclusion, based on the findings, we conclude that there is positive and significant effect on Micro-credit schemes on Activity performed in Agri cooperatives in Nyanza District. Agri-cooperative societies should initiate and implement financial policies to allow them to manage the costs of finance effectively. It is furthermore recommended that Agri-cooperative societies should fully involve all the members in the affairs of the organization.