Use of Patron Demand Deposit Accounts in Cooperative Financing in Anambra State, Nigeria

Abstract

Patron Demand Deposit Account (PDDA) is a particularly unique system of raising cheap funds in cooperatives. However, because primary cooperatives lack the skills to manage PDDA and due to absence of necessary regulatory framework to control its operation, there have been calls for caution in its use by cooperatives. The paper evaluated the extent of the use of PDDA as a financing option by cooperatives in Anambra State and analysed possible factors leading to decisions to have PDDA as a financing strategy. Thirty cooperatives were randomly selected from three local government areas in the state. Descriptive statistics was employed to present data. Also Logit model was employed to examine the determinants of the choice to have PDDAs in cooperatives. We found that PDDAs were particularly common among agricultural and credit cooperatives. Access to credit, and grants, and years of operation were found to be primary determinants in having PDDA. But in view of the possible risk implications, the paper recommended that cooperatives should encourage their members to invest more in cooperative equity than in having PDDAs. It was also advised that cooperatives should take advantage of the various government credit schemes to reduce their financing problems and reliance on PDDAs.