A Study on the Working Capital Management of Agricultural Cooperative Unions in Tigray

Abstract

In this modern and competitive business world the need of improved, capable and flexible managerial skills to manage the working capital is very crucial. Cooperatives as business of the poor section of the society with the core mission of improving the living standards of the owners, they need strong support and control in improving their management. Hence, an attempt was made in this research work to study the working capital management of the Cooperative Unions in Tigray Regional State, Ethiopia. However, the result of the study shows that the overall performances of Cooperative Unions are not satisfactory. The management of these Unions has by far remained back when compared with other forms of competitive businesses in the market. The Cooperative Unions’ position on liquidity, solvency, and efficiency in the resources management and profitability shows fluctuating trends in the study period, 2004/5 – 2006/7. The compositions and proportions of their current assets and current liabilities indicate that they are not well managed in a way to earn profits. The percentage changes on the income statement and balance sheet items have also showed fluctuating trends, in the years stated. This is also used as a device to test the weakness or strength of the management in controlling the working capital level of their Unions. Of course there are many factors which could be mentioned for the weaknesses registered. According to the assessment made the main factors for the less profitability of these Unions are related with their internal managerial weaknesses and external influences. Some of the problems mentioned are: lack of skilled personnel including the board members; lack of adequate and timely market information, stiff competition in the market, lack of coordination vii among Unions; lack of cost minimization and working capital management, and the government interference. On the basis of these results, therefore, stakeholders’ of Cooperative Unions are recommended to take corrective measures on employing trained and skilled personnel. Moreover, the board members should be trained and even elected based on experiences and some educational backgrounds. Structural improvements which enable Unions to decide in a fast manner with flexibility are also recommended. Cooperative Unions should be audited and reports should be prepared yearly. There should also be a mechanism of providing accurate and reliable information independently. There should be clear guidelines and other working manuals about their credit policies. Moreover, standards of evaluation should be set so that Unions based on the same industry can be evaluated and judged so as to identify their weaknesses and strengths.