Self-centered motives influence credit utilization intention among members of Savings and Credit Cooperatives in Uganda

Abstract

In developing countries, such as Uganda, lending within Savings and Credit Cooperatives
(SACCOs) is used as an instrument to guarantee individuals’ likelihood to pay back accessed credit. The aim is to minimize financial loss due to misuse of extended credits among relatively less credit worth groups. However, some members have been reported to bypass group members to use accessed credits outside set goals, and reasons beyond this pattern are not known. This study sought to assess the influence of self-oriented motive in credit utilization among borrowers under SACCO arrangements in Uganda. Results of structural equation modelling on data obtained from a sample of 237 smallholder farmers, members to SACCOs who had accessed credit within Soroti district, showed up to 38% of their credit utilization intention to be predicted by self-interest (β=.363, t-value=5.231, p<.05), rationality (β=.404, t-value= 3.525, p<.05) and decision making (β=.218, t-value= 5.352, p>.05). This leads to the conclusion that self-interest, rationality, and decision-making are vital inputs in credit utilization among smallholder farmers in Uganda. We recommend that in addition to group-based screenings, lenders need to assess individual SACCO members’ self-oriented contexts as complementary inputs to guide the forecasting of the potential of individual borrowers suited in a group, such as that of SACCOs, to utilize credits.
Keywords: Credit guarantee, decision making, rationality, SACCOs, self-interest, smallholder farmers, Uganda