| The majority of economic questions arise because of scarce resources.Hence,it is vital to use,produce,and distribute those resources efficiently in a sustainable way.Efficiency is related to the rational use of limited economic resources.Sustainability is ensuring uninterrupted service.Both efficiency and sustainability are essential to make sure the beneficiaries receive the best possible services.Rural Savings and Credit Cooperatives(RuSACCOs)are important financial intermediaries in providing financial services in rural areas,including poor and low-income people in many countries.However,their success in efficiently intermediating financial services on a sustainable basis depends on their ability to mobilize the cheap capital.Increasing institutional capital through deposit mobilization keeps the cost of capital low,hence resulting in financial sustainability.Yet,little is known about how deposit mobilization affects technical efficiency and financial sustainability.Thus,it is important to understand the impact of deposit mobilization on the technical efficiency and financial sustainability of RuSACCOs for effective management and responsive policy decisions.Using balanced panel data of 457 RuSACCOs from Ethiopia for the period spanning from 2014 through 2017,this study examined the effect of Deposit Mobilization on the Technical Efficiency and Financial Sustainability.While several factors likely influence the technical efficiency and financial sustainability of RuSACCOs,we focused on a few important variables of interest.First,we considered the influence of deposit mobilization on the technical efficiency and financial sustainability of RuSACCOs.Second,we are also interested in the impact of institutional-specific factors on both technical efficiency and financial sustainability.Lastly,we also included a macroeconomic factor.The results of the study have been organized into three empirical studies that address the effect of deposit mobilization on the technical efficiency and financial sustainability of RuSACCOs.The first study,presented in Chapter 5,utilized a DEA Window analysis to estimate and analyze the levels and trends of the technical efficiency of RuSACCOs.Results revealed that the overall average technical efficiency trends of the RuSACCOs during the study period ranges from 28.25%in 2014 to 34.79%in 2017,which shows that efficiency improved gradually over the last four years.Among our sample,the number of RuSACCOs that was on the frontier with an efficiency score of 1(100%)in 2014 and 2017 was 20(4.38%)and 27(5.91%),respectively,showing substantial improvement in technical efficiency levels over the study period.Besides that,RuSACCOs recorded an overall mean efficiency of 32.75%.This means that RuSACCOs in Ethiopia could increase their output by 67.25%using the existing level of inputs.On the other hand,we found that the average inefficiency appears to be declining over time from 71.75%in 2014 to 65.20%in 2017.The study also found out that the technical efficiency of RuSACCOs varies across the regions where the overall average efficiency scores for Oromia and Benishangul Gumuz regions were 32.98%and 29.44%,respectively.The second study,presented in Chapter 6,used a Tobit model to investigate the effects of deposit mobilization,institutional-specific characteristics(age of institution,membership composition,number of members,size,percentage of women members,and return on assets),and macroeconomic factor(inflation)on the technical efficiency of RuSACCOs.Results confirmed our hypotheses for key and control variables' effects on technical efficiency,with the notable exception of deposits to total asset ratio,gross loan portfolio to total assets,age,and inflation,which are insignificant.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 members of varied economic backgrounds as a membership opens the possibilities for mobilizing more deposits to become efficient,i.e.,heterogeneity among members improves technical efficiency.The third study,presented in Chapter 7,examined the effects of deposit mobilization,institutional-specific characteristics,and macroeconomic factors on the financial sustainability of RuSACCOs through the use of a robust fixed-effects model.We found that technical efficiency,interest rate spread,deposit to loan ratio,the volume of deposits,the number of members,return on assets,and size had a significant direct impact on financial sustainability while the age of institution negatively related to financial sustainability.Contrary to our expectation,the results of the robust fixed effect regression for inflation indicated a positive relationship with financial sustainability.We also observed the existence of a positive and causality relationship between technical efficiency and financial sustainability in our findings.Understanding the levels,trends,drivers of efficiency and financial sustainability,and detecting the source and amount of inefficiency in each input and output are essential for rural financial cooperatives to take measures to improve their efficiency for sustainable loan services.Measures that will enhance efficiency and sustainability in rural financial cooperatives are particularly beneficial for rural poor to foster income expansion and poverty reduction.Hence,to improve the performance(efficiency and sustainability)of the RuSACCOs in Ethiopia and enhance their contribution to economic growth,policy directions should focus on four main areas:(i)expanding the voluntary savings products should be encouraged;(ii)diversifying membership structure;(iii)mobilized savings must be transformed into productive uses in the form of credit;(iv)the interest rate spread should be carefully managed to ensure efficiency and financial sustainability of RuSACCO's by paying attractive rates on savings and charging competitive rates on loans. |
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