Determinants of Financial Performance of Co-Operative Unions in Central Region

Abstract

The performance of financial institutions in Ghana has become very topical in the backdrop of the collapse of many institutions in the financial sector. Among the key institutions that have been folded up in the financial sector of Ghana are those in the banking sector and savings and loans companies. Firms in the Co-operative Credit Union industry, however, seem to have been stable and maintained their survival rate and little is heard about them in terms of the rising level of collapse in the counterpart firms in the banking, savings and loans industries. While Co-operative Credit Unions have been able to maintain their survival rate over the years, there is no sufficient evidence to show that the steady survival rate is due to good performance. In this study, the financial performance of Co-operative Credit Unions was examined in terms of firm size, deposit, business mix and diversification, and operational efficiency based on data covering 2015 to 2019 from 15 selected Credit Unions in the Central Region of Ghana. The CAMEL model was used to measure financial performance. The findings based on the system dynamic generalised methods of moment estimations revealed that the key factors that influence the financial performance of Co-operative Credit Unions include financial performance measures, deposits, business mix and diversification, operational efficiency, and growth in sales. The study found no significant relationship between firm size and financial performance. The study, among other things, recommended that management of Co-operative Credit Unions in the Central Region of Ghana should map up efforts to grow their sales and deposits, ensure proper diversification of assets, and improve the efficiency of their operations to raise the level of financial performance.