LOAN MANAGEMENT OF GARIBI SACCOS

A Project Work Report

By

Mithila Dhakal

T.U. Regd. No: 7-2-0479-0027-2013

Hetauda School of Management

Submitted to

The Faculty of Management

Tribhuvan University

Kathmandu

In partial fulfillment of the requirement for the Degree of

BACHELOR IN BUSINESS STUDIES (BBS)

Kathmandu, Nepal

May, 2017
 DECLARATION

I hereby declare that the project work entitled Loan Management of Garibi SACCOS
submitted to the Faculty of Management, Tribhuvan University, Kathmandu is an original
piece of work under the supervision of Mr. Tika Sapkota, faculty member, Hetauda School
of Management, Hetauda, and is submitted in a partial fulfillment of the requirements for
the award of the degree of Bachelor of Business Studies (BBS). This project work report
has not been submitted to any other university or institution for the award of any degree or
diploma.

Signature

MITHILA DHAKAL

Date: 2074/01/24
 SUPERVISORS RECOMMENDATION

The project work report entitled LOAN MANAGEMENT OF GARIBI SACCOS

submitted by MITHILA DHAKAL of HETAUDA SCHOOL OF MANAGEMENT,
HETAUDA, is prepared under my supervision as per the procedure and format
requirements laid by the Faculty of Management, Tribhuvan University, as partial
fulfillment of the requirements for the award of the degree of Bachelor of Business Studies
(BBS). I, therefore, recommend the project work report for evaluation.

Signature:

TIKA SAPKOTA

HETAUDA SCHOOL OF MANAGEMENT

Date: 2074/01/24
 ACKNOWLEDGEMENT

Theoretical explanation of the cooperatives working procedures in campus is very much

limited to the book and no extra practical knowledge is gained. The objective of the Field
Work is to gear up students regarding the cooperative environment, its functions and
works. These types of direct studies have made quite easy for us to know the cooperative
procedure and have widened the knowledge about the specify activities that take place in
the cooperative as well.

This is a report on project sector. This fieldwork has been undertaken to present report on
the practical operation of cooperative in Nepal in its proper perspective. In this regard
fieldwork has been conducted at Garibi SACCOS.

This fieldwork has been influenced by a number of standard and popular texts. As far as
popular, they have been duly acknowledged at the appropriate places. It gives me immense
pleasure to extend my gratitude to Mr. Tika Sapkotaof Hetauda School of Management,
my family and friends, and the staff members of Garibi SACCOS, without whose guidance
it would have been impossible to accomplish this task.

Thank You.

Mithila Dhakal

BBS 4th Year

Hetauda School of Management

Hetauda, Makawanpur
 TABLE OF CONTENT

Title page i

Declaration ii

Supervisors Recommendation iii

Endorsement iv

Acknowledgement v

Table of Content vi

List of Table vii

List of Figures viii

CHAPTER I: INTRODUCTION 1

1.1 Background 1

1.2 Statement of Problem

1.3 Objectives of Study

1.4 Significance of Study

1.5 Limitations of Study

1.6 Organization of Study

CHAPTER II: RELATED LITERATURE REVIEW

Conceptual Review

Review of Previous Works

Research Gap

CHAPTER III: METHODS

Types of Research

Population and Sample

Types of Data

Data Collection Procedure

Instrument

Techniques of Analysis

Limitation

CHAPTER IV: RESULTS AND FINDINGS

Presentation of Data

Major Findings

CHAPTER V: DISCUSSION AND CONCLUSION

Discussion

Conclusion and Implication

REFRENCES

APPENDICES
 CHAPTER I

INTRODUCTION
1.1 Background
Nepal has a long cultural tradition of informal community based co-operatives including
savings and credit associations popularly known as dhikuti, and grain savings and labour
savings systems known as Parma and dharma bhakari. Similarly, Guthi provided a forum
to work together for smoothly running different socio cultural practices. Many of these
traditional systems of cooperation are still functioning in the rural areas of Nepal.

The first Co-operative Act was enacted by the government in 1960, which was followed by
the Agricultural Co-operative Act (Sajha Sahakari). In 1963, the capital of savings and
credit co-operative societies was converted into a Co-operative Bank in 1963, and in 1968
it was also converted into the Agricultural Development Bank of Nepal (ADBN). After 5
years the ADBN returned management back to the government and in 1975 the Co-
operative Act was amended again.

Beginning in the 1980s a new generation of community based savings and credit groups
began to emerge in Nepal. The Co-operative Act was amended for the third time to give
the Government more control. By this time the Savings and Credit movement had spread
throughout the country and the need for an apex coordinating body was evident. In August
16, 1988, the Nepal Federation of Saving and Credit Co-operative Union (NEFSCUN) was
formed.

After the restoration, the democratic government enacted the Co-operative Act and the Co-
operative Regulations. The new Co-operative Act permitted the establishment of a three
tiered co-operative system, and provides a legal base both for the establishment of co-
operative societies/unions/federations and application of co-operative values, norms and
principles into practice. At present, the Department of Co-operatives is working under the
Ministry of Agriculture and Co-operatives.
Today, the Interim Constitution of Nepal has considered the co-operative sector as one of
the three pillars for national development. The major types of co-operative societies
operating in Nepal are saving and Credit, Multipurpose, Dairy, Agriculture, Fruits and
Vegetables, Bee Keeping, Tea, Coffee, Consumers, Science and Technology, and Energy.
There are total 26,501 Co-operatives in Nepal which includes 4,647,549 members. Around
39,752 peoples are employed by Co-operatives. The total share capital of Co-operative is
NPR 27,095,151.00. The total Deposit in Co-operative is NPR 139,543,971.00 and the
total Loan disburses by Co-operative is NPR 134,033,495.00. (Source: Department of Co-
operatives Fiscal Year 2068/69)

Introduction to Garibi SACCOS

Garibi SACCOS was registered in Makawanpur Division Co-operative on Bhadra 2, 2056

BS with 30 shareholders. Its total share capital is 6818400 and its total transaction is
32227317/43 till now. (Source: Annual Report 2073, Garibi SACCOS)

It redeposit in Nepal Bangladesh Bank, National Corporation and National Co-operative

Society ltd. The basic objectives of this co-operative is to encourage people for regular
saving, provide competitive interest rate on deposit amount, granting credit on various
sector of human life to make people independent and self-motivated and for social and
economic development of Hetauda municipality.

Introduction of Loan procedure of Garibi SACCOS

Garibi SACCOS provide loan facilities to people to eliminate poverty. By its name Garibi
Niwaran its objective is to eliminate poverty by encouraging people for saving and
providing them loan to uplift their living standard. The various loan provided by Garibi
SACCOS are:

- Agriculture Loan
- Business Loan
- Household Loan
 1. Agriculture Loan- Maximum amount is NPR. 200000 for 1 year with collateral
with interest rate 13%
2. Business Loan- Maximum amount is NPR. 500000 for 5 years with collateral with
interest rate 13%
3. House Loan- Maximum amount is NPR. 200000 for 5 years without collateral with
interest rate 13%

1.2 Statement of the Problems

Garibi SACCOS was established in 2057 B.S. with main objective to provide credit for
general public for various purposes and accept deposits. Still public are unknown about
trend of loan process. Public dont know about financial strength and weakness of
organization. Garibi SACCOS has made certain criteria for lending loans to the needy
groups with or without collateral. In order to evaluate the following issues the researcher is
motivated to prepare this report.

a) What is the situation of deposit and loan investment of Garibi SACCOS?

b) What is the situation of ratio of interest income to total loan?
c) What is the situation of ratio of net profit to total loan?
d) What is the diversity of loan?

1.3 Objectives of the Study

a) To know the situation of investment of loan.
b) To examine trend of ratio of interest income to loan.
c) To find out the ratio of net profit to loan
1.4 Significance of the Study
The importance of this report writing is to introduce the Garibi SACCOS, Hattilet which
helps to increase saving and provide loan to promote business, agriculture especially in
Hattilet, Gauritar and Chisapani area. Significance of this report is to have experience of
actual work in real job of own cementation area for the students of BBS 4th year. For 4th
year Diploma, this report writing is very fundamental part of our course. Report is not
beneficial to us only but also to the other sector of society mentioned as below:
a) Easy for other cooperation to know their short coming for their future program.
b) Easy for general public to know about the condition of cooperation whether they're
gaining or bearing losses.
c) Reference for the forthcoming student while preparing reports in this subject.
d) Support for policy makers while changing their ambiguous policy.

1.5 Limitations of the Study

a) Among 26,501 co-operatives in Nepal, only Garibi SACCOS of Hetauda is taken
into consideration
b) In the study , an effort has been made to make the trend analysis of the data over
5years from F.Y. 2068/069 to 2072/073
c) Since the data are collected and analyzed within short period of time, the report
does not contain deep detail analysis of concerned Co-operative.
d) Most of the data are taken from secondary sources such as audit report, booklets,
annual reports and other book.
1.6 Organization of the Study
This study will be divided into five chapters as follows:
Chapter One deals with the subject matter of the study. The outline of the research is
presented in the chapter. The whole research will be based on the introduction chapter. It
deals with general background of the study, statement of the problems, objectives of the
study, significance of the study, limitations of the study and organization of the study.
Chapter Two deals with the review of literature. It includes a discussion on the conceptual
framework on loan management. It also includes review of various studies (i.e. various
books, journals & articles, bachelor degree thesis etc.) related with loan management.
Chapter Three explains the Research methodology used to evaluate loan procedure of
Co-operative in Nepal. It consists of research design, source of data, population and
sample statistical tools and financial tools and it also includes limitation of the study.
Chapter Four is the main part of the study which fulfills the objective of the study by
presenting data and analyzing them with the help of various statistical tools as per
methodology. In this chapter, descriptive analysis of the gathered data and information
using statistical as well as financial tools is carried out. In this chapter, major findings of
the study have been conducted based on primary and secondary data.
Chapter Five includes the major findings and conclusion of the study. This chapter deals
with the summary and conclusion of the study and gives recommendations for
improvement in the loan management procedure of Cooperation.
 CHAPTER II
RELATED LITERATURE REVIEW

2.1 Conceptual Review

This chapter is basically concerned with review of literature relevant to the topic Loan
Management of Garibi SACCOS. Every study is very much based on past knowledge.
The previous study cannot be ignored because they provide base for the current study.
There must be continuity in research. This continuity in research is ensured by linking
current study by past research studies. This chapter highlights the literature that is available
in concerned subjects as to my knowledge, research work, and relevant study on this topic,
review of journals and articles and thesis work performed previously.

Loan Management

The term loan refers to the amount borrowed by one person from another person. Loan
may be regarded as credit where the money is disbursed and its recovery is made on the
later date. Loan may be for short term or long term based on borrower requirements.
Cooperatives are established to provide some amount as a loan to the rural people
especially to the women and the unemployed people to uplift their economic situation.

Loans are an innovative loans management system that offers the full range of capabilities
needed in a mortgage and/or loans operations. It provides the flexibility required in
creating, maintaining, and processing commercial, consumer, mortgage and equity line
of credit loans, and takes care of management with its comprehensive reporting facility.
Furthermore, since it is highly parameterized, the various control functions allow
management to design and immediately implement loan products to satisfy individual
client markets. At the same time, it is ensured that cost structures that are profitable and/or
competitive are maintained.
The Garibi SACCOS has provided loan on the various productive as well as non
productive sectors such as Agriculture, Business and Household. The various loan
provided by Garibi SACCOS are:

1. Agriculture Loan- Maximum amount is NPR. 200000 for 1 year with collateral
with interest rate 13%
2. Business Loan- Maximum amount is NPR. 500000 for 5 years with collateral with
interest rate 13%
3. House Loan- Maximum amount is NPR. 200000 for 5 years without collateral with
interest rate 13%

2.2 Review of Previous work

Kurulkar (1983) in his published work on the topic of Agricultural Finance in Backward
Region reported glaring defects in the set-up of co- 69 operative credit system. He pointed
that out of the ten sample owners who obtained long- term credit from the co-operative
banks, 30% could not secure short- term credit. Lack of short- term or production credit to
the farmers who availed long-term credit resulted in lower output per acre, thereby
resulting in over dues.

Anand (2001) in her book titled Co-Operative Agricultural and Rural Development
Banks examined the role of the banks in meeting the long term credit requirements of the
rural masses in the State of Kerala. It also examined the impact of lending, and the
utilization and recovery pattern of the loans advanced. The study made a brilliant
exposition of all these issues and highlighted the real problem prevailing at the beneficiary
level.

Murthy (2008), in his paper titled, Rural Finance: A Remedial Measure for Rural Poor
focused on the role of financial services as key to enhancing economic development and
reducing poverty in rural areas. Rural finance has often led the way in addressing social,
gender and ethnic equity issues which hold families in poverty. He, however, observed that
the access was limited for poor households and for micro, 41 small and medium
enterprises. Despite rapid economic development in India the number of people living
below the poverty line has decreased only slightly. While there was a numerically strong
infrastructure of formal financial institutions in rural India, they often lacked the capacity
to provide adequate demand-oriented services. He recommended that the major constraint
of such important rural finance agencies, i.e., lack of resources should be removed, by
facilitating them to mobilize resources from capital market and other newer sources

Jayaraman and Srinivasan (2009) in their study titled, Relative Efficiency of Scheduled
Commercial Banks in India (2001-08): A DEA Approach attempted to measure the scale
efficiency of scheduled commercial banks in India using Data Envelopment Analysis. The
study listed out the number of efficient banks on the basis of relative performances using
efficiency scores. It was found that the general performance of scheduled commercial
banks under study was relatively high during the study period 2001-08 and the average
efficiency score was ranging between 0.9195 and 1. More than 60 per cent of the
scheduled commercial banks under study were above the average efficiency score for each
study period except for the year 2006, where it was around 53 per cent. The results show
that ICICI Bank, IndusInd Bank, ABN Amro Bank, Calyon Bank and Citibank were
efficient for all years during study period. In addition to above banks, efficiency scores of
State Bank of Travancore, Vijaya Bank, Bank of Maharashtra, and Oriental Bank of
Commerce, Axis Bank, Federal Bank and Yes Bank were above the average efficiency
scores for all the years.

Shrestha, Rubika (2016) in her case study titled A case study on loan providing system of
Gramin Bikash Bank Ltd include that in the modern age, the loan advancement is
increased rapidly. Loan is very important for forward of economy progress of Gramin
Bikash Bank Ltd. is very much within the reach of public. It is an easy procedure to fetch.
It provides different external facilities to the public as well. The strength and weakness of
any bank provides its situation in front of running market in society.
2.3 Research Gap

The above review of the literature from various books, journal and thesis related to the loan
management shows that the one of the major problem of loan management in Nepalese
organization is unhealthy and delay loan payment without use of application form for loan.
The literature review also shows lack of short- term or production credit to the farmers
who availed long-term credit. So, this study attempts to analyze the loan management in
Cooperative by using the 5 years data to know the situation of total deposit and loan
investment, to examine trend of ratio of interest income to loan and to find out the ratio of
net profit to loan by using the different methodology discussed below.
 CHAPTER III

METHODS

Method is studying ways. This is important part in report writing. Researcher should be
adopting good methodology in research. It helps to analyze, explain and interpret various
aspect of fieldwork. The objective of this study is to see the relationship between the
figures of loan management. The analysis of trend of loan management follows certain
methodology of fieldwork. The methods used for the research are discussed as below.

3.1Types of Research

Research design is the roadmap of the whole study that guides the researcher in
formulation, implementation and control the research work. Analysis with different tools
has been conducted to find out necessary result.

There are basically four types of research design: Exploratory research design, Descriptive
research design, Comparative research design and Interventional research design. Among
them this research is based on the descriptive research design.

Descriptive research design

A research design that is developed with the aim of studying the subject of research in
detail and explains the facts and characteristics related to research problem in known as
descriptive research design.

3.2 Population and Sample

The numbers of cooperatives are increasing every year. In Hetauda Ward No. 6 there are
total 10 Cooperatives. So the population for this report is the total Cooperatives of Hetauda
Ward No. 6. For the sample, Garibi SACCOS working under the Makawanpur District
Saving and Credit Cooperative Union Ltd. is taken.
3.3 Types of Data

There are two types of data such as Primary data and Secondary data.

Primary data are those data which are originally collected by the researcher as per the
objectives of the research. Primary data requires fieldwork for its generation so while
preparing report we meet with the related person and get the primary data by interacting
with them.

Secondary data are those data which are prepared by others in past for their purpose and
used by researcher in the present. We collect the secondary data through annual reports and
publication provided by the organization.

The data used for conducting the research are both primary as well as secondary data.

3.4 Data Collection procedure

It can be adopted different method to collect the data, while studying we have to depend on
nature and objective of relatives subject. To identify the planning of the project, two types
of data are collected. They are:

Primary Data: Some available procedures for collecting the primary data are:

Questionnaire
Visiting with relevant relative person
Observation
Firms daily book

Secondary Data: The available procedure for collecting the secondary data is Annual
audit report.
3.5 Technique of Analysis

The techniques used for the analysis of report are:

Tabulation Method
Statistical tools
Mean (x) = x
N
Standard deviation () = (x-x) ^2 / N
Coefficient of Variance (C.V) =
x
Questionnaire
Graphical Presentation
Pie chart
Bar Diagram
 CHAPTER IV

RESULTS AND FINDINGS

Presentation of Data in Tables and Figures and Their Analysis

4.1 Presentation of Data

For the presentation of data diagrams are more attractive, impressive and easy to
understand than the numerical data. So here are the data of previous 5 years of
Garibi SACCOS in tabular form, ratio, statistical tools and pie and bar diagram.

4.1.1 A) Investment of Loan

The finding is collected from the customers of the Garibi SACCOS who has invested
in different sectors such as Agriculture, Household and Business. Investment in the
productive as well as non-productive sector helps to create the employment
opportunities, to provide the income maintenance and also helps to uplift the economic
standard of the rural people.

Table No. 1

Investment of Loan in various sectors

S.N Fiscal year 068/069 069/070 070/071 071/072 072/073

sector

1 Agriculture 80,03,752.5 87,50,000 100,84,889 84,16,398 57,42,779

2 Business 26,67,917.5 37,50,000 31,17,168 72,34,084 158,93,745

3 Household ( ( ( 7,65,674 5,10,139

Total 106,71,670 125,00,000 132,02,057 164,16,156 221,46,663

(Sources: Annual audit report of Garibi SACCOS)
 Figure No. 1

Bar diagram of Investment of Loan in various sector (In Rs.00,000)

180

160

140

120 068/069
100 069/070

80 070/071
071/072
60
072/073
40

20

0
Agriculture Business Household

B) Interest Received by Garibi SACCOS

The loan is provided with some interest amount. Certain percentage is charged for the
investment in loan. Interest rate may be different for the different purpose. The interests
received from the investment in loan in different year are shown below:

Table No. 2

Interest received in various years

Particular 068/069 069/070 070/071 071/072 072/073

Interest Received 13,87,317.10 17,50,000 15,99,749 24,91,196 25,37,616

(Sources: Annual audit report of Garibi SACCOS)

 Figure No. 2

Bar diagram of interest received in various years (In Rs.00,000)

30

25

20

15
Interest received

10

0
068/069 069/070 070/071 071/072 072/073

C) Recovery of Loan

The loan invested is to be recovered within the specific time.

Table No. 3

Recovery of loan in various years

Particulars 068/069 069/070 070/071 071/072 072/073

Recovery of 7,61,014 25,62,192 78,53,223 110,96,901 142,18,234
loan
(Sources: Annual audit report of Garibi SACCOS)
 Figure No. 3

Bar diagram of Recovery of Loan in various years

160

140

120

100

80
Recovery of Loan

60

40

20

0
068/069 069/070 070/071 071/072 072/073

4.1.2 Ratio Analysis

A. Interest Income to Loan

Fiscal Year Interest Income Loan Invested Ratio

068/069 13,87,317.10 106,71,670 13%

069/070 17,50,000 125,00,000 14%

070/071 15,99,749 132,02,057 12.14%

071/072 24,91,196 164,16,156 15.18%

072/073 25,37,616 221,46,663 11.46%

(Source: Appendices 3.1)

B. Net Profit to Loan

Fiscal Year Net Profit Loan Invested Ratio

068/069 53,531.375 106,71,670 0.502%

069/070 136,135.31 125,00,000 1.09%

070/071 99,563.15 132,02,057 0.75%

071/072 168,579.33 164,16,156 1.03%

072/073 174,398.63 221,46,663 0.79%

(Source: Appendices 3.2)

4.1.3 Financial Analysis of Loan Investment

Mean(x) =x = 749, 36,546= Rs.149, 87,309.20

N 5

Standard Deviation () =(x-x) ^2 / N = 812, 96,52,41,90,000 / 5

= 162, 59,30,48,40,000

= Rs.40, 32,282.832

C.V = *100 = 40, 32,282.832 *100 = 26.905%

x 149, 87,309.20

(Source: Appendices 4)
4.1.4 Customers View

1.2 Who initiates you to approach

the cooperative for your first
loan request?
1 Have you met the loan
provision service as your
expectation?
0.8
Is the interest rate on loan is
adequate in current situation?

0.6
Do the application
requirements and procedures
convenient and simple?
0.4
Is the loan processing time
short and convenient for you?

0.2
For how long are you loan
client of the Cooperative?

0
How do you evaluate your so
far relationship with the
cooperative as a loan client?

In which part do you think the

cooperative needs
improvement?

Do you think the loan

repayment duration convenient
to your business?

Do you think the amount of

loan approved was enough for
the intended Purpose per your
request?
4.2 Major Finding

1. A) Investment of loan
The amounts collected from the customers are invested in the various sectors by the
Cooperative such as agriculture, business and household. By analyzing the amount of
investment of loan in various years, we can find out that the total investment amount is
increasing years by years. Comparing the various sectors, the investment of loan has
increased for FY 2068/069, FY 2069/070 and FY 2070/071. After that the investment
amount is decreasing. In the same way, loan for household is also decreasing in FY
2072/073 than FY 2071/072. In the contrary, the loan for business is increased here in five
fiscal years.

B) Interest received on Loan

Interest earning rate is increasing each year. The interest received in FY 2072/073 is
higher. It shows the interest received has a great impact on the investment on loan, which
encourages the cooperative to increase their amount of investment on various sector in
coming fiscal years.
C) Recovery of Loan
It is clear that from the data that recovery of loan is also increasing in each year. The
increasing amount of recovery of loan from FY 2068/069 to FY 2072/073 shows the strong
position of the Cooperative in the market.

2.Ratio Analysis

A. Interest Income to Loan

According to the ratio of interest income to loan in various years, the above calculation
shows the ratios in various years are fluctuated. The highest ratio was in FY 2071/072 and
the lowest ratio is in FY 2072/073. It shows even the interest income is increasing but the
ratio of obtaining the interest income from the loan is decreased this year.
B. Net Profit to Loan

According to the ratio of net profit to loan in various years, the above calculation shows
the ratios in various years are fluctuated because the net profits of the various years are
also fluctuated. The highest ratio was in FY 2069/070 and the lowest ratio was in FY
2068/069. The net profit in FY 2072/073 is increased in comparison to the net profit of FY
2071/072, but the ratio of net profit to loan is decreased due to increase in investment of
loan. It shows when the net profit and loan amount increase, the ratio between them also
increase and if the net profit decrease then the ratio will also decrease. So, we concluded
that there is positive relation between net income, loan invested and the ratio between net
income and loan invested.

3. Financial Analysis of Loan Investment

For the financial analysis of the loan investment, the different statistical tools can be used.
The above calculation shows there is decrease in the coefficient of variance (C.V) from the
FY 2068/069 to FY 2069/070. The coefficient of variance shows the relative risk, it means
the risk of the Garibi SACCOS has decreased from FY 2068/069 to 2069/070. After that
the coefficient of variance (C.V) has increased from FY 2070/071 to 2072/073, which
shows that the risk has increased. Increase in risk leads to increase in profit, which shows
Garibi SACCOS has invested the loan in the proper way in recent year.
 CHAPTER V

DISCUSSION AND CONCLUSION

Discussions

Cooperatives are trading in upward trend in recent years. Garibi SACCOS has also
increased its transactions in recent years. So I would like to provide the suggestion to
the Cooperative to provide more loans to the rural people to meet their requirements.
Some suggestions for the improvement of Cooperative are:

Appropriate Training should be given to employees and the other staff members
Proper supervision on utilization of loan
 Provide loan to backward area
There is a need to create stabilization fund for Cooperative to overcome this
short-term problem

Conclusion and Implications

From the above presentation and analysis of the data we conclude that the collected
funds are utilized properly. The invested money has been invested in the productive
sectors such as Agriculture and Business. The small amount is invested in the non
productive sector i.e. household. The increasing investment in business can generate
income and create employment opportunity in the society. Also the invested money is
satisfactorily returned back and interest is earned.

From the above ratio analysis of the interest income to loan, we concluded that there is
positive relationship between interest income, loan and ratio. If the interest income and
loan increased then the ratio between interest income and loan will also increase and
vice versa. Also if we look for the ratio analysis of the net profit to loan, we concluded
that there is positive relationship between net profit, loan and ratio. If the net profit and
loan increased then the ratio between net profit and loan will also increase and vice
versa.

Reference

Anand (2001), Co-Operative Agricultural and Rural Development Banks

Jayaraman and Srinivasan (2009), Relative Efficiency of Scheduled
Commercial Banks in India (2001-08)
Kurulkar (1983), Agricultural Finance in Backward Region
Murthy (2008), Rural Finance: A Remedial Measure for Rural Poor,
Vinimaya
 Shrestha, Rubika (2072) , A case study on loan providing system of Gramin
Bikash Bank Ltd
https://opendocs.ids.ac.uk

APPENDICES

1. Garibi SACCOS- Garibi Saving and Credit Cooperation Society

2. Questionnaire

Loan application and processing:

Name:

Age:
Profession:

Phone no.:

1. Who initiates you to approach the cooperative for your first loan request?

a) Self b) Villager c) Staff

2. Have you met the loan provision service as your expectation?

a) Yes b) No

3. Is the interest rate on loan is adequate in current situation?

a) Yes b) No

4. Do the application requirements and procedures convenient and simple?

a) Yes b) No

5. Is the loan processing time short and convenient for you?

a) Yes b) No

6. For how long are you loan client of the Cooperative?

a)1- 2 years b) 3 years c) 4 years d) 5 years

7. How do you evaluate your so far relationship with the cooperative as a loan client?

a) Excellent b) very good c) good d) fair e) bad

8. In which part do you think the cooperative needs improvement? (Hint. tick that

Apply)
a) In accepting loan applicants c) In follow up & collection of loans

b) In collateral estimation. d) In processing & approving loans e) both b & d

9. Do you think the loan repayment duration convenient to your business?

a) Yes b) No

10. Do you think the amount of loan approved was enough for the intended Purpose per
your request?

a) Yes b) No

Thank you!

3. Ratio Analysis

3.1 Interest Income to Loan

Ratio = Interest Income*100 / Loan Invested

068/069 = 13, 87,317.10*100 / 106, 71,670 = 13%

069/070 = 17, 50,000*100 / 125, 00,000 = 14%

070/071 = 15, 99,749*100 / 132, 02,057 = 12.14%

071/072 = 24, 91,196*100 / 164, 16,156 = 15.18%

072/073 = 25, 37,616*100 / 221, 46,663 = 11.46%

3.2Net Profit to Loan

Ratio = Net Profit*100 / Loan Invested

068/069 = 53,531.375*100 / 106, 71,670 = 0.502%

069/070 = 136,135.31*100 / 125, 00,000 = 1.09%

070/071 = 99,563.15*100 / 132, 02,057 = 0.75%

071/072 = 168,579.33*100 / 164, 16,156 = 1.03%

072/073 = 174,398.63*100 / 221, 46,663 = 0.79%

4.Financial Analysis of Loan Investment

Fiscal Year Loan Amount (x-x) ^2

068/069 106,71,670 186,24,74,17,00,000

069/070 125,00,000 61,86,70,70,56,000

070/071 132,02,057 31,87,12,54,18,000

071/072 164,16,156 20,41,60,31,78,000

072/073 221,46,663 512,56,34,68,30,000

Total 749,36,546 812,96,52,41,90,000

Mean(x) =x = 749, 36,546= Rs.149, 87,309.20

 N 5

Standard Deviation ( ) =(x-x) ^2 / N = 812, 96,52,41,90,000 / 5

= 162, 59,30,48,40,000

= Rs.40, 32,282.832

C.V = *100 = 40, 32,282.832 *100 = 26.905%

x 149, 87,309.20

A STUDY OF LOAN MANAGEMENT OF GARIBI SACCOS

A Thesis Submitted to:

Office of the Dean

Faculty of Management

Tribhuvan University
 Submitted by:

Mithila Dhakal

HETAUDA SCHOOL OF MANAGEMENT

T.U. Regd. No:7-2-0479-0027-2013

In partial fulfillment of the requirement for the Degree of

BACHELOR IN BUSINESS STUDIES (BBS)

Kathmandu, Nepal

May, 2017

CHAPTER- I

INTRODUCTION
1.3 General Background of the Study
Nepal has a long cultural tradition of informal community based co-operatives including
savings and credit associations popularly known as dhikuti, and grain savings and labour
savings systems known as Parma and dharma bhakari. Similarly, Guthi provided a forum
to work together for smoothly running different socio cultural practices. Many of these
traditional systems of cooperation are still functioning in the rural areas of Nepal.
The first Co-operative Act was enacted by the government in 1960, which was followed by
the Agricultural Co-operative Act (Sajha Sahakari). In 1963, the capital of savings and
credit co-operative societies was converted into a Co-operative Bank in 1963, and in 1968
it was also converted into the Agricultural Development Bank of Nepal (ADBN). After 5
years the ADBN returned management back to the government and in 1975 the Co-
operative Act was amended again.

Beginning in the 1980s a new generation of community based savings and credit groups
began to emerge in Nepal. The Co-operative Act was amended for the third time to give
the Government more control. By this time the Savings and Credit movement had spread
throughout the country and the need for an apex coordinating body was evident. In August
16, 1988, the Nepal Federation of Savings and Credit Co-operative Unions (NEFSCUN)
was formed.

After the restoration of the democratic government enacted the Co-operative Act and the
Co-operative Regulations. The new Co-operative Act permitted the establishment of a
three tiered co-operative system, and provides a legal base both for the establishment of
co-operative societies/unions/federations and application of co-operative values, norms and
principles into practice. At present, the Department of Co-operatives is working under the
Ministry of Agriculture and Co-operatives.

Today, the Interim Constitution of Nepal has considered the co-operative sector as one of
the three pillars for national development. The major types of co-operative societies
operating in Nepal are saving and Credit, Multipurpose, Dairy, Agriculture, Fruits and
Vegetables, Bee Keeping, Tea, Coffee, Consumers, Science and Technology, and Energy.
There are total 26,501 Co-operatives in Nepal which includes 4,647,549 members. Around
39,752 peoples are employed by Co-operatives. The total share capital of Co-operative is
NPR 27,095,151.00. The total Deposit in Co-operative is NPR 139,543,971.00 and the
total Loan disburses by Co-operative is NPR 134,033,495.00. (Source:Department of Co-
operatives Fiscal Year 2068/69)

Introduction to Garibi SACCOS

Garibi SACCOS was registered in Makawanpur Division Co-operative on Bhadra 2, 2056

BS with 30 shareholders. Its total share capital is 6818400 and its total transaction is
32227317/43 till now. (Source: Annual Report 2073, Garibi SACCOS)

It redeposit in Nepal Bangladesh Bank, National Corporation and National Co-operative

Society ltd. The basic objectives of this co-operative is to encourage people for regular
saving, provide competitive interest rate on deposit amount, granting credit on various
sector of human life to make people independent and self-motivated and for social and
economic development of Hetauda municipality.

The members who guide this organization are:-

President = Shree Ram Khatiwada

Vice-president = Nakul Pd. Pyakurel

Secretary = Krishna Prasad Sapkota

Treasurer = Tika Devi Sapkota

Advisor = Shiva Pd. Khanal

Ram Krishna Tiwari

Arjun Pd. Wagle

Ramesh Pd. Khatiwada

Guru Pd. Sapkota

Account Committee = Shankar Lamsal

 Rupa Kafle

Loan Committee = Nakul Pd. Pyakurel

Ripu Pd. Gautam

Krishna Pd. Khatiwada

Staff = Kuber Pokhrel

Dipa Khatiwada

Introduction of Loan procedure of Garibi SACCOS

Garibi SACCOS provide loan facilities to people to eliminate poverty. By its name Garibi
Niwaran its objective is to eliminate poverty by encouraging people for saving and
providing them loan to uplift their living standard. The various loan provided by Garibi
SACCOS are:

- Agriculture Loan
 - Business Loan
- House Loan
4. Agriculture Loan- Maximum amount is NPR. 200000 for 1 year with collateral
with interest rate 13%
5. Business Loan- Maximum amount is NPR. 500000 for 5 years with collateral with
interest rate 13%
6. House Loan- Maximum amount is NPR. 200000 for 5 years without collateral with
interest rate 13%

1.4 Statement of the Problems

Garibi SACCOS was established in 2057 B.S. with main objective to provide credit for
general public for various purposes and accept deposits. Still public are unknown about
trend of loan process. Public dont know about financial strength and weakness of
organization.Garibi SACCOS has made certain criteria for lending loans to the needy
groups with or without collateral. In order to evaluate the following issues the researcher is
motivated to prepare this report.

e) What is the situation of deposit and loan investment of Garibi SACCOS?

f) What is the situation of ratio of interest income to total loan?
g) What is the situation of ratio of net profit to total loan?
h) What is the diversity of loan?

1.3 Objectives of the Study

d) To know the situation of total deposit and loan investment.
e) To examine trend of ratio of interest income to loan.
f) To find out the ratio of net profit to loan

1.5 Significance of the Study

 The importance of this report writing is to introduce the Garibi SACCOS, Hattilet
which helps to increase saving and provide loan to promote business, agriculture
especially in Hattilet, Gauritar and Chisapani area. Significance of this report is to
have experience of actual work in real job of own cementation area for the students of
BBS 4th year. For 4th year Diploma, this report writing is very fundamental part of our
course. Report is not beneficial to us only but also to the other sector of society
mentioned as below:
e) Easy for other cooperation to know their short coming for their future program.
f) Easy for general public to know about the condition of cooperation whether they're
gaining or bearing losses.
g) Reference for the forthcoming student while preparing reports in this subject.
h) Support for policy makers while changing their ambiguous policy.

1.5 Limitations of the Study

e) Among 26,501 co-operatives in Nepal, only Garibi SACCOSof Hetauda is taken
into consideration
f) In the study , an effort has been made to make the trend analysis of the data over 5
years from F.Y. 2068/069 to 2072/073
g) Since the data are collected and analyzed within short period of time, the report
does not contain deep detail analysis of concerned Co-operative.
h) Most of the data are taken from secondary sources such as audit report, booklets,
annual reports and other book.

1.6 Organization of the Study

This study will be divided into five chapters as follows:
Chapter One deals with the subject matter of the study. The outline of the researchis
presented in the chapter. The whole research will be based on the introductionchapter. It
deals with general background of the study, statement of the problems,objectives of the
study, significance of the study, limitations of the study andorganization of the study.
Chapter Two deals with the review of literature. It includes a discussion on theconceptual
framework on loan management. It also includes review of various studies(i.e. various
books, journals & articles, bachelor degree thesis etc.) related withloan management.
Chapter Three explains the Research methodology used to evaluate loanprocedure of Co-
operativein Nepal. It consists of research design, source ofdata, population and sample
statistical tools and financial tools and it also includeslimitation of the study.
Chapter Four is the main part of the study which fulfills the objective of the study
bypresenting data and analyzing them with the help of various statistical tools asper
methodology. In this chapter, descriptive analysis of the gathered data andinformation
using statistical as well as financial tools is carried out. In this chapter,major findings of
the study have been conducted based on primary and secondarydata.
Chapter Five includes the major findings and conclusion of the study. This chapterdeals
with the summary and conclusion of the study and gives recommendations
forimprovement in the loan management procedure of Cooperation.