Collateral security and the growth of savings and credit cooperative organizations in Uganda:

Abstract

The study examines the role of collateral security on the performance of Savings and Credit Cooperative Organizations (SACCOs). The dimensions of the independent variable include; Collateral eligibility, collateral valuation and collateral ownership whereas the dimensions of the dependent variable are; portfolio performance, interest income and the number of shareholders. The objectives of the study of the study are; i) To assess the relationship between collateral eligibility and the growth of Savings and Credit Cooperative Organizations. ii) To find out the relationship between collateral valuation and the growth of Savings and Credit Cooperative Organizations. iii) To assess the relationship between collateral ownership and the growth of Savings and Credit Cooperative Organizations. The study employed a case study research design which and also adopted a quantitative approach for the study. The sample size was determined by the Krejcie and Moegan (1970) table which obtained a sample size of 76 respondents and closed ended questionnaires were used to collect data for the study. The study findings revealed that collateral eligibility enhances secured borrowing and prevents counter party risks, collateral valuation helps to determine loan amount and quality of the loan and that collateral ownership prevents loan default and assures the SACCO about the safety of the loan. The study concludes that there is a positive relationship between collateral security and the growth of SACCOs given that a majority of the respondents agreed that collateral eligibility prevent counter-party risks, collateral evaluation determines loan amount and collateral ownership assures the SACCO of the safety of money lent. It can be recommended that the SACCO relax their loan pre-qualification policies to encourage more people to borrow as this will reduce incidence of reduce loan demand