Loan Default and Financial Sustainability of Cooperative Thrift and Credit Societies in Enugu Metropolis

Cooperative thrift and credit societies serve as critical informal financial intermediaries for low-income earners and small business operators in Nigerian urban centres, yet their long-term financial sustainability is frequently threatened by elevated loan default rates that erode institutional capital and undermine member confidence. This study examines the relationship between loan default and financial sustainability of cooperative thrift and credit societies in Enugu Metropolis. The study is anchored on the Institutional Theory of Finance, which emphasises the role of governance structures, regulatory frameworks, and institutional norms in determining the financial viability of cooperative financial organisations. A cross-sectional survey design was adopted. The population comprised 64 registered cooperative thrift and credit societies and their management committees operating in Enugu Metropolis. A sample of 52 societies was selected through purposive sampling, and 156 committee members and officers participated in the study. Data were collected via structured questionnaires and financial record analysis, then analysed using regression and descriptive statistics. Findings reveal that inadequate member screening, weak loan recovery mechanisms, and absence of credit history verification are the primary drivers of loan default in the studied societies. The results further show that cooperatives implementing digital loan tracking and employing guarantor-based lending models record 48 percent lower default rates and demonstrate higher indices of financial sustainability. It is concluded that governance reforms centred on credit risk management can substantially improve the financial sustainability of cooperative societies in Enugu. The study recommends that cooperative societies adopt formalised credit assessment policies, leverage group guarantee lending structures, and maintain digital member financial records to reduce default incidence.

Keywords: Loan default, financial sustainability, cooperative societies, Enugu, Institutional Theory