Cooperatives 'Access to Finance and Financial Sustainability

Abstract

Rwanda's dominant sector lies in Agriculture with the majority of the population facing challenges in financial literacy and access to finances, which are critical for the sustainability of cooperatives' society. The strength of the rural population lies in agri-cooperatives and they often depend on members' contributions which are unsustainable, while they primarily rely on grants from financial institutions, government and NGOs. However, the financial impact of climate change on these institutions has reduced the funding of cooperatives. Financial literacy is important to executive members of the cooperatives for saving and investment decisions. This study has been conducted using descriptive statistics to analyze the financial barriers faced by cooperatives, identify best practices in financial management among successful cooperatives, the impact of financial access on cooperatives' sustainability, and propose policy recommendations to improve cooperatives' access to finance. A mixed methods approach is employed, integrating quantitative surveys and financial performance analysis with qualitative interviews and focus groups. Surveys were distributed to executive members of cooperatives to gather data on sources of finance, barriers, and performance metrics, while financial records were analyzed to evaluate net profit margins, liquidity ratios, and return on assets. Qualitative methods included in-depth interviews with financial experts, and cooperative leaders to explore their insights, and strategies, complemented by focus group discussions among members of cooperatives. Findings from the mixed-methods approach show that access to finance significantly impacts cooperative sustainability, with most barriers involving collateral requirements, high interest rates, and limited financial literacy. The research emphasizes the necessity of targeted financial assistance and education programs, advocating for cooperative loan schemes, subsidies, and training initiatives. These findings will be useful in designing the programs by the cooperatives in Rwanda.