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programs and the union was doing on the wrong way on achieving financial independence during the
study periods. External credit to total assets (F6) the target is less than or equals to 5% but the result on
table 6, points out Gohe cooperatives saving and credit union is in line with the target only in the
study years 1998 and 2000 which entails that the union able to finance its activities from members
saving deposit this the low external credit to total assets ratios suggested that the union was not
dependent on external funds or borrowings whereas, in the year 1999 and 2001 the union is out of the
proposed standards i.e., there is too much reliance on external credit this reflects the union has no
effective marketing program to sell its saving products and gained financial independency in the study
years 1999 and 2001 indicating lack of sustainable financial operation. The members’ shares to total
assets (F7) the target is to finance 10% - 20% of the assets of the union as we can see from the result
Gohe cooperatives saving and credit union was able to finance a sustainable proportion of the union
assets though it able to perform in line with the proposed standard only in the year 1999 and 2001 as
per WOCCU model suggests the larger portion of the union capital is members share capital which
clashes with the new capitalization system, member shares are de-emphasized and replaced with
institutional capital.
Both (F 8 ) and (F 9 ) are far below the WOCCU benchmark. Institutional capital is the second line of
defense to absorb unexpected losses. Institutional capital includes all legal reserves and surplus created
either from the accumulation of net income or from capital donation. Low level of institutional capital
(F8) implies that Gohe cooperatives saving and credit union has set aside insufficient reserves and
retained low level of earning in the financial activities which reveals a downward trend towards
dangerously insufficient capital reserves. (F9) is below the WOCCU benchmarks in the consecutive
years of the study period. The negative (F9) shows that its institutional capital is not enough even to
cover 100 percent of delinquent loan greater than 1 year and 35 percent of delinquent loan from 1 to 12
months. This analysis of institutional capital concludes that second line of defense of Gohe
cooperatives saving and credit union was weak during the study period.
Table 7: Sign of Growth of Gohe Cooperatives Saving and Credit Union on Its Key Indicators
Key indicators
Operational Years in E.C
1998 1999 2000 2001
G 1 :Saving Deposits NA 7.96 34.70 22.47
G 2 :Net Loan NA 500.94 -71.33 744.13
G 3 :Total Assets NA 93.55 31.39 80.91
G 4 :Member Share Capital NA 15.77 63.94 15.32
G 5 Institutional Capital NA 71.01 52.30 -12.83
G 6 :Profit NA 500.4 68 3
G 7 :Membership NA 0 11.8 15.8
Inflation (Annualized) 10.6 15.8 25.3 36.4
Source: Worked Out From Audit &Portfolio Reports of the Union
Note: source of inflation rate is NBE.
The sign of growth trends of Gohe cooperatives saving and credit union in its key indicators are
presented on Table 7, in summary form and discussed one by one in the following sections:
Although a cooperative does not make profits, profit is not their primary motive; it is reasonable and
desirable for it to run up surpluses. Surpluses are created in the cooperative because the world we live
in is full of uncertainties. To protect itself against these uncertainties, the cooperative must marginally
increase the amount collected to cover its annual expenses and the surplus created as a result will be
used to implement the fourth principle of cooperation provision of dividend (division among members
based on their participation or transaction in the union). Table 7, indicates profitability growth trends
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