ROLE OF RURAL SAVING AND CREDIT COOPERATIVES IN PROMOTING FINANCIAL INCLUSION: A CASE OF HULBAREG WOREDA

ABSTRACT Financial inclusion is recognized as a key driver of poverty reduction, economic empowerment, and sustainable rural development. Despite the expansion of formal financial institutions in Ethiopia, a significant proportion of rural households remain excluded from formal financial services. Rural Saving and Credit Cooperatives (RUSACCOs) have emerged as important community-based financial institutions aimed at improving access to savings, credit, and other financial services in rural areas. This study examined the role of RUSACCOs in promoting financial inclusion in Hulbareg Woreda, Silte Zone, Central Ethiopia Regional State, Ethiopia. The study employed an explanatory cross-sectional research design using a mixed-methods approach. Quantitative data were collected from 374 rural household heads selected through a multi-stage sampling technique involving stratified and systematic random sampling. Qualitative data were obtained through key informant interviews and focus group discussions involving kebele leaders, development agents, RUSACCO management committee members, and woreda cooperative experts. Descriptive statistics, chi-square tests, and binary logistic regression analysis were employed to analyze the quantitative data, while thematic analysis was used for qualitative information. The findings revealed that RUSACCOs play a significant role in enhancing financial inclusion by providing accessible savings and credit services, financial literacy support, and financial advice to rural households. Access to RUSACCO services, utilization of loans, participation in financial literacy programs, and use of deposit and withdrawal services were found to positively influence the financial inclusion status of respondents. Qualitative findings further indicated that RUSACCOs contribute to income generation, asset accumulation, and improved household resilience through increased access to financial services. However, challenges such as limited capital, inadequate financial literacy, weak loan recovery mechanisms, and low community awareness constrain the effectiveness of RUSACCOs. The study concludes that RUSACCOs serve as an important mechanism for expanding financial inclusion in rural areas where formal banking services are limited. The study recommends strengthening institutional capacity, expanding financial literacy programs, improving loan management and recovery systems, increasing public awareness, and xviii enhancing support from government and cooperative promotion offices to improve the performance and outreach of RUSACCOs.