AN EXAMINATION OF ACCOUNTING DRIVERS FOR CREDIT AND COMMUNITY DEVELOPMENT (A CASE STUDY OF GBEOGO CREDIT UNION, GHANA)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In recent years, development theorists and practitioners have paid close attention to the operations of credit unions, owing to their position as Micro Finance Institutions (MFIs), which operate as mediators between micro savers and borrowers (Ofei, 2001). Following the implementation of the Economic Recovery and Financial Sector Liberalization Programs in 1985, research have been conducted to examine the Ghanaian market environment and the operations of MFIs. According to the research, measures that are relevant to the financial sector with strong competitiveness might act as an incentive for expanding the mobilization of non-financial domestic savings.

Aryeetey (1996) and Aryeetey et al. (1994) investigated the frameworks developed by MFIs to provide fund access for on-lending to the needy and small-to-medium-sized companies. Despite the fact that such studies describe MFI reactions to the current economic environment, they are not conclusive.

They are restricted by their lack of focus on the distinctive characteristics of credit unions as cooperative credit institutions. Co-operatives are institutional structures in which ownership and management are left to their members, who also serve as patrons. In co-operatives, all members have equal decision-making powers regardless of their degree of expertise or contribution to the organization's resources.

The co-operative idea predicts that members' empowerment and engagement will result in their mastery of organizational operations. Credit unions follow cooperative principles and are jointly owned by their members and the individuals who utilize their services. They can be constituted as consumer-owned, producer-owned, or worker-owned, depending on the group of individuals who joined forces to create the cooperative enterprise, which can be for-profit or not-for-profit. Co-operatives' strengths include the facilitation of resource pooling, the sharing of risks and rewards, and the facilitation of trade for members and other clients. Cooperative company operations are regulated by democratic government, open membership, transparency, use-based returns, ongoing education, and community service.

Finally, the distinctive feature of credit unions as co-operative credit organizations distinguishes their activity from other MFIs, which may be privately owned or subject to various rules. Because of the nature of credit unions in Ghana, research on their influence on community development has become important.

1.2 STATEMENT OF THE PROBLEM

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

Credit unions have their roots in the social and development goal of eradicating poverty among the most impoverished and vulnerable members of society. One of their aims is to provide credit to as many people as possible who do not have it. Credit unions have had significant expansion in the number of main societies and membership, and have been one of the fastest expanding sectors of the Ghanaian economy in recent years (Bauer, Miles, & Nishikawa, 2019). They operate as financial mediators, particularly for individuals whose operations are not serviced by regular banks. Credit union activities in terms of customer service, savings mobilization, access to loans, and other financial services are similar to those of traditional banks, but many are dubious of what credit unions can achieve and their value to society (Bauer, Miles, & Nishikawa, 2019).

These credit unions have faced several obstacles in their operations throughout the country, all in an effort to bridge the gap between the formal and informal sectors and achieve their stated goals. Again, while conventional banks claim to provide necessary financial services to people and small-to-medium-sized firms (SME), access to credit facilities in such institutions is nearly unattainable for the majority of businesses in Ghana. Even when they are made available, their inadequacies and exorbitant costs persist.

Because many Ghanaian firms are largely engaged in agricultural operations, financing costs represent a significant issue.

The topic of this study effort is these problems, the amount to which they have been addressed, and the benefits that these credit unions have been able to deliver for their members and the community in general.

1.3 OBJECTIVE OF THE STUDY

The research's overall goal is to investigate the accounting variables that drive credit unions' involvement in enabling growth in the areas in which they operate. The study specifically seeks;

1. To examine the product and services offered by Gbeogo Credit Union to its clients.

2. To determine the perceptions clients have concerning the Credit Union.

3. To assess the effects of the credit union activities on the standard of living of its members.

1.4 RESEARCH QUESTIONS

The following questions guide this study;

1. What are the product and services offered by Gbeogo Credit Union to its clients?

2. What are the perceptions clients have concerning the Credit Union?

3. What are the effects of the credit union activities on the standard of living of its members?

1.5 SIGNIFICANCE OF THE STUDY

Credit unions are not restricted to making loans; its goals are to govern the use of money and to promote people's moral and physical qualities. They help members reach their financial objectives, establish financial discipline, and provide loans for constructive purposes such as self-employment.

The World Bank's push for privatization in developing nations may boost economies in the short term, but it may worsen the socioeconomic position of the impoverished majority. Such people may become economically oppressed because they are unable to raise enough money to compete competitively with their more resourced competitors (Ninsin, 1992).

As a result, credit unions can serve as an alternative for impoverished individuals and small company owners in mobilizing finances for the growth of such a sector. For this reason, it would be important to investigate the successes of these credit unions in the areas in which they operate.

By offering financial advice and education, the credit union focuses on the long-term well-being of its members, not only as clients but as owners. These and many more things are what credit unions provide, and this study would help add to understanding about the utility of credit unions, their reason for being, and to expose their hidden contributions to community development that are often neglected.

1.6 SCOPE OF THE STUDY

This study assesses the role of credit unions on community development in Ghana. Contextually, the study based on the financial progress of credit union clients. Clients in this research refer to both shareholders and non-shareholders who do business with the union.

1.7 LIMITATION OF THE STUDY

The researcher during the course of undertaking this study was faced with financial constraints.

1.8 DEFINITION OF TERMS

ACCOUNTING: The process or work of keeping financial accounts

CREDIT UNION: A credit union is a type of financial cooperative that provides traditional banking services. Credit unions are created, owned, and operated by their participants. As such, they are not-for-profit enterprises that enjoy tax-exempt status.

COMMUNITY DEVELOPMENT:  A process where community members come together to take collective action and generate solutions to common problems.