Financial Performance and Sustainability of Rural Cooperatives in Nepal: PEARLS Framework of Janahit Cooperative

Abstract

Cooperatives play a vital role in economic development. This study investigates the PEARLS monitoring system. The study employed a quantitative method using data from FY 2077/78 to 2081/82. This study shows that the cooperative has strong position in the protection (P) indicators and also reveal that the structural weaknesses, especially in saving mobilization, capital formation, and external borrowings in terms of effective financial structure (E). While Asset quality (A) identifies poor efficiency in assets utilization but significant recovery in final year. The rate of return and cost (R) reflect good profitability and cost efficiency despite underutilization of total assets. Liquidity (L) remains sufficient despite high non-earning liquid assets. Also, Sign of Growth (G) indicates weak and fragile in enhancing the members and assets. Likewise, share capital (SC) demonstrates a strong, significantly positive correlation with loan investment (LI) (r = .932, p = .021) and moderate relation with total assets (TAs) (r = 0.520, p = 0.369), but relation is not significant. SC is negatively correlated with net income (NI) (r = -0.095, p = 0.879), which is not significant. TAs are positively correlated with LI (r = 0.772, p = 0.126), although relation is not significant. TAs are moderately negatively correlated with NI (r = -0.588, p = 0.297), but not significantly. Finally, LI is negatively correlated with NI (r = -0.214, p = 0.729), but correlation is insignificant. The study concludes that the cooperative requires a debt-funded expansion to internal equity mobilization for sustainability. This study offers new insight into how PEARLS affect financial condition along with different nexus of SC, TAs, LI, and NI; highlighting weaker relation of SC and LI with NI reflect some self-sufficiency gap. These findings imply that managers, policymakers, and regulators can integrate PEARLS to assess strength and weakness of cooperatives.