The Effect of Credit Management Practices on the Financial Performance of Gibe Didessa Farmer’s Cooperative Union, Oromia, Ethiopia

Abstract

The purpose of the study is to investigate the effects of credit management on the financial performance of Gibe Didessa Farmers' Cooperative Union indicated by cooperative member impacting factors of return on assets (ROA), return on equity (ROE), surplus margin (SM) and patronage refund ratio (PRR). The descriptive and explanatory research designs were used for describing and explaining the effects of predictor variables on the response variable. Descriptive and multivariate analyses were used to describe the study variables and demonstrate the extent of effects of credit management factors on the financial performance indicators of ROA and ROE SM and PRR of the study. The result from the Multivariate analysis revealed that R square for ROA is 0.882 and for ROE is 0.868 which established the predictor variables used by the study explaining the ROA of Gibe Didessa Farmers’ cooperative union by 88.2% and that of ROE by 86.8%. The study also found that the R square for SM is 0.758 and for PRR is 0.784 implied that the credit management variable explaining surplus margin by 75.8% and patronage refund ratio by 78.4%. From this the study concluded that credit management practices have a strong and significant power to influence the financial performances of Gibe Didessa Farmers’ Cooperative Union. Hence, Gibe Didessa Farmers’ Cooperative Union required strengthening effective credit management practices for sustainably enhance its financial performance and long-term viability.