An Examination Of Accounting Drivers For Credit And Community Development (A Case Study Of Gbeogo Credit Union, Ghana)

An Examination Of Accounting Drivers For Credit And Community Development (A Case Study Of Gbeogo Credit Union, Ghana)

First Part

Introduction

1.1 Context Of The Study

Due to their role as Micro Finance Institutions (MFIs), which serve as intermediaries between micro depositors and borrowers, development theorists and practitioners have paid close attention to the operations of credit unions in recent years (Ofei, 2001). Following the implementation of the Economic Recovery and Financial Sector Liberalization Programs in 1985, studies on the Ghanaian market environment and the operations of MFIs have been conducted. According to the research, measures pertinent to the competitive financial sector could serve as an incentive for increasing the mobilization of non-financial domestic savings.

Aryeetey (1996) and Aryeetey et al. (1994) investigated the frameworks developed by MFIs to provide access to funds for on-lending to the indigent and small-to-medium businesses. Even though these studies describe the responses of MFIs to the current economic climate, they are not conclusive.

Their inattention to the distinctive characteristics of credit unions as cooperative credit institutions limits them. Cooperatives are organizational structures in which ownership and administration are delegated to members, who also serve as patrons. In co-operatives, all members have equal decision-making authority regardless of their level of expertise or resource contribution.

The cooperative concept predicts that the empowerment and engagement of members will result in their mastery of organizational operations. Credit unions adhere to cooperative principles and are co-owned by their members and those who use their services. They can be consumer-owned, producer-owned, or worker-owned, depending on the group of people who formed the for-profit or non-profit cooperative enterprise. The strengths of cooperatives include facilitating the pooling of resources, the sharing of risks and rewards, and the facilitation of trade for members and other customers. Democratic governance, open membership, transparency, use-based returns, ongoing education, and community service govern the operations of cooperative businesses.

Lastly, the cooperative nature of credit unions distinguishes their operations from those of other MFIs, which may be privately owned or subject to various regulations. Due to the character of credit unions in Ghana, it is crucial to study their impact on community development.

1.2 Description Of The Problem

Credit unions are institutions that combine a social development objective (providing financial services to the lowest-income population possible) with a financial objective that motivates the institution to achieve self-sufficiency and continue service delivery without relying on subsidies. (2016) Fried, Lovell, and Eeckaut

The origins of credit unions lie in the social and development objective of eradicating destitution among the poorest and most vulnerable members of society. One of their goals is to provide credit to as many individuals without it as feasible. Credit unions have been one of the most rapidly expanding sectors of the Ghanaian economy in recent years (Bauer, Miles, & Nishikawa, 2019) due to a significant increase in the number of principal societies and membership. They act as financial intermediaries, especially for individuals whose transactions are not serviced by conventional institutions. The activities of credit unions are comparable to those of traditional banks in terms of customer service, savings mobilization, access to loans, and other financial services, but many doubt what credit unions can accomplish and their value to society (Bauer, Miles, & Nishikawa, 2019).

In an effort to bridge the gap between the formal and informal sectors and accomplish their stated objectives, these credit unions have encountered numerous obstacles in their operations across the country. Moreover, despite the fact that conventional banks claim to provide essential financial services to individuals and small- to medium-sized enterprises (SME), the majority of businesses in Ghana are unable to obtain credit from these institutions. Even when made available, their deficiencies and exorbitant prices persist.

Due to the fact that many Ghanaian businesses are primarily engaged in agricultural operations, financing costs pose a significant problem.

These challenges, the extent to which they have been addressed, and the benefits that these credit unions have been able to deliver to their members and the community are the subject of this study.

1.3 PURPOSE OF THE STUDY

The overarching objective of this study is to investigate the accounting variables that influence credit unions’ participation in fostering economic development in their service areas. Specifically, this research aims to;

Examine the products and services offered to customers by Gbeogo Credit Union.

Determine the perceptions of clients regarding the Credit Union.

Assess the impact of the credit union’s activities on the members’ standard of living.

1.4 Research Questions

The following topics serve as a guide for this study:

What products and services does Gbeogo Credit Union offer to its members?

What are the perceptions of the Credit Union held by its clients?

What impact do the credit union’s activities have on the members’ standard of living?

1.5 Importance of the Research

Credit unions are not limited to making loans; its objectives are to regulate the use of money and promote the moral and physical well-being of its members. They assist members in reaching their financial goals, in establishing financial discipline, and in obtaining loans for positive purposes, such as self-employment.

The World Bank’s drive for privatization in developing nations may boost economies temporarily, but it may worsen the socioeconomic position of the majority of the poor. Such individuals may become economically oppressed if they are unable to obtain sufficient funds to compete with rivals with greater resources (Ninsin, 1992).

Consequently, credit unions can serve as an alternative for poor individuals and small business proprietors seeking to mobilize funds for the expansion of this sector. In light of this, it would be essential to investigate the viability of these credit unions in the regions where they operate.

By providing financial advice and education, the credit union prioritizes its members’ long-term well-being, not only as consumers but also as owners. These and many other services are provided by credit unions, and this study would contribute to our comprehension of their utility, their raison d’être, and their often-overlooked contributions to community development.

1.6 Radius Of Study

This study evaluates the impact of Ghana’s credit unions on community development. The context of the investigation was the financial development of credit union members. In this study, clients include both shareholders and non-shareholders who conduct business with the union.

1.7 Limitation Of The Study

During the course of conducting this investigation, the researcher encountered financial constraints.

1.8 Definition Of Terms

Accounting is the process or job of maintaining financial records.

A credit union is a form of cooperative financial institution that offers traditional banking services. Credit unions are formed, owned, and managed by their members. As such, they are tax-exempt organizations that are not for profit.

Community development is the process by which members of a community join together to take collective action and generate solutions to shared problems.