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Table.1. Liquidity of Gohe Cooperatives Saving and Credit Union (Years in E.C)
Indicators of Liquidity
Proposed 1998 1999 2000 2001
standard
L 1 :Loan Outstanding /Total Savings 60%-70% 66.5% 215% 64% 298%
deposits
L 2 :Liquidity Reserve/Saving Deposits 10% 0.00% 0.00% 0.00% 0.00%
L 3 :Non Earning Liquid Assets / Total Max.5% 20.41% 0.68% 78.03% 2.96%
Assets
L 4 :Current Assets / Current Liabilities 1:1 2:1 1.7:1 1.9:1 1.4:1
Source: Worked Out From Audit Reports of the Union
The result loan to saving (L 1 ) of Gohe cooperatives saving and credit union in the year of 1998 and
2000 (Table 1), indicates the union was in the position to the proposed standard which reflects the
union was funding loans to members from the balance sheet accounts i.e. from members saving
deposits, where as in the year 1999 and 2001 the union was not able to fund members loan from
members savings deposits and shares which forced the union to go for external credit and the union
was not in a position to meet the required standard showing lack of sustainable financial services to
finance loan from members savings deposits. The liquid reserve requirement (L 2 ) is out of the
WOCCUs proposed standard. The WOCCUs model proposed to maintain saving deposits as liquid
assets a minimum of 10% after paying all short-term obligations (30 days and under) and Gohe
cooperatives saving and credit union did not maintain such liquidity reserve in any of the study periods
(Table 1). This suggests Gohe cooperatives saving and credit union couldn’t meet cash needed for
withdrawals, however, this reflects also the union able to avoid the opportunity cost lost on idle liquid
assets due to the fact that funds in checking accounts and simple savings accounts earn negligible
returns, in comparison with other investment alternatives.
Investment in non-earning liquid assets increases the liquidity position of a cooperative but it does not
earn anything. So, investment in such assets should be minimal. As we can see here in the result Table
1, non-earning liquid assets to total assets (L 3 ) indicates, in the year 1999 and 2001 Gohe cooperatives
saving and credit union was in line with the proposed standards or WOCCUs model which suggests
the union have no any problem of liquidity and problem of idle funds where as in the study years of
1998 and 2000 the union could not perform in line with the proposed standards though, the liquidity
position is good there was too much investment in non-earning assets this indicated unhealthy
functioning on earnings in these periods. The percentage of non-earnings assets to total assets of Gohe
cooperatives saving and credit union in the year 1998 and 2000 was far beyond the proposed standards
which increase the liquidity position of the union that is in the union cash has occupied the
considerable amount of non-earning liquid assets in the year 2000 and in the year 1998 checking
account (current account) which is another non-earning liquid assets occupied the larger portion. The
non-earning assets yield nothing and have their own impact on L 3 as well as the earnings or
profitability of the union. The considerable amount of such nonearning liquid assets threats the
liquidity position of Gohe cooperatives saving and credit union further. L 4 measures the adequacy of
the liquid current assets to satisfy the current obligations request. L 4 is showing during the study period
the union was able to meet its current obligation which goes in line with the proposed standard but
there is also too much investment on current assets of the union. Overall, liquidity position is showing
unhealthy condition according to WOCCU proposed standards; Gohe cooperatives saving and credit
union may fail to satisfy the deposit withdrawal request because the union has no any liquid reserve
funds to come across such request.
www.theinternationaljournal.org > RJEBS: Volume: 02, Number: 06, April-2013 Page 61