Effect of deposit mobilization on the technical efficiency of rural saving and credit cooperatives: Evidence from Ethiopia

Girma Jirata Duguma and Jiqin Han

Annals of Public and Cooperative Economics, 2021, vol. 92, issue 4, 621-647

Abstract: Rural Savings and Credit Cooperatives (RuSACCOs) are small‐scale financial service provider enterprises in rural areas. They foster local economic development by mobilizing deposits and lending these out to individuals, families, farmers, and small businesses in the same area. Using balanced panel data of 457 RuSACCOs from Ethiopia over the period 2014–17, we show how deposit mobilization affects technical efficiency. Our first stage efficiency estimate by Data Envelopment Analysis (DEA) Window model shows the average efficiency of RuSACCOs gradually increased over time. The second stage Tobit censored estimation and bootstrapped truncated regression results confirms our hypotheses for key and control variables effects on technical efficiency. Focusing on rapid expansion during the early life cycle affects technical efficiency. A high percentage of women membership in cooperative enterprises advances technical efficiency. Furthermore, attracting and including all segments of the local entrepreneurial class as a membership opens the possibilities for mobilizing more deposits to become efficient.

Date: 2021
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