Assessing the effectiveness of group lending and Its impact on profitability in case of Jimma zone Oromiya credit and saving share company

Abstract

This study was focused particularly on assessing the effectiveness of group lending and its impact on profitability at Oromiya Credit and Saving Share Company of Jimma Zone. To achieve this objective, the researcher used primary and secondary data. The researcher used questionnaires, interviews and relevant documents to gather primary and secondary data from the data sources and collects the questionnaires from 252 borrowers and interviewed 4 branch manager of OCSSCO from the population. Descriptive statistics with the help of Pie charts, graphs, table, Percentages were used in analyzing the collected data. In addition to this econometric model by employing SPSS (Statistical Package for Social Scientists) version -J 6 windows software were used to analysis. With the help of logit model the researcher found that educational level, business type, land size, other source of credit social ties, number of the group, screening the group before theformation, internal rule and conduct, credit officer visit the group, distance and family size were positive and statistically significant at 1%, 5% and 10% significance level. While the age of the group member, gender of the group member, visiting each other and training are positive and insignificant. The study recommended that the OCSSCO of Jimma zone should give attention on distance between the group members, the period of training, educational level of the borrower, experience and credit officer visit/pressure to make the group lending effective and to have impacts on profitability.