Embed Size (px)
Citation preview
University of Nigeria Research Publications
UDOGU, Charles Eberecukwu
Aut
hor
PG/MBA/86/4181
Title
“Incidence of Informal Financial Organisations in some Selected Institutions
in Enugu – Anamabra State”
Facu
lty
Business Administration
Dep
artm
ent
Banking and Finance
Dat
e
October, 1987
Sign
atur
e
" I N C I D E N C E O F INFORPIAL F I N ~ L ~ T C I A L
ORGANISATIONS I N SOME S E L E C T E D I N S T -
I T U T I O N S I N ENUGU - ANAMABRA S T A T E "
UD OGU , CHARLES EBERECHJKWU
(PG - MBA - 86 - 4181)
I DEPfiRTMENT O F FINJLNCE
FACULTY OF B U S I N E S S ~ ~ D I Y I W I S T W L T I ON 1 U N I V E R S I T Y O F N I G E R I A
ENUGU CliMPUS, @J
0 i3
O C T O B m e 1987
I I I N C I D E N C E O F INFORMAL F I N A N C I A L
ORGANISAT1 ONS I N SOME S E L E C T E D I N S T I T U T I O N S
I N ENUGU - ANAMBRA S T A T E
B E I N G h T H E S I S REPORT PRESENTED
T O
T H E DEPARTMENT OF F I N A N C E
FACULTY OF B U S I N E S S I I D M I N I S T W L T I O N
U N I V E R S I T Y O F N I G E R I A b
ENUGU CAPPUS
BY
UDOGU , CHIARLES EBERECI-IUKWU
( P C - PlBA - 86 - 4181)
I N P A R T I A L FULFILMENT OF T H E REQUIREMENTS F O R T H E AWARD O F T H E DEGREELWLSTER O F B U S I N E S S PLDPIINISTRTITION (MBA) I N F I N ~ L N C E
S U P E R V I S O R :
DERN , FLCULTY O F B U S I N E S S L D M I N I S T R A T I ON
U N I V E R S I T Y O F N I G E R I A
ENUGU Cf3lPUS.
( i>
C E R T I F I C A T I O N
I CERTIFY THAT T H I S WORK CARRIED OUT
BY UDOGU , CHARLES EBERECHUKWU I N T H E DEPPLRTMENT ' OF b
F I N L N C E , UNIVERSITY OF N I G E R I A , ENUGU CAMPUS
UNDER NY GUIDANCE AND S U P E R V I S I O N *
FACULTY O F B U S I N E S S ADMINISTRRTION)
(ii)
D E D I C A T I O N - - - - - - - - - I - - - - - - - - =
T H I S WORK IS Df lDIChTED T O T H E GREEN
MENORY OF MY BELOVED F ~ L T H E R - W I T E MR. FRANC IS OGB ONNAYA UDOGU
WHO S L E P T I N T H E LORD SOME
TWFJ\JTY-THREE YERRS AGO
fipXpri, m y YGUR LOVING SOUL CONTIWE
T O R E S T I N P E R F E C T PEACE T I L L WE
MEET AGAIN T O Pl iRT NO MORE"
MY h ighes t apprec ia t ion goes t o the Almighty
~ o d and Father who no t only kept me a l i v e t o t h i s
day but also made the accomplishment of t h i s work,
once again, possible . ItMay a l l p ra i ses and a l l
thanksgiving be every moment HISll.
i ow ever, God, through t he ins t rumenta l i ty of
some ind iv idua l persons c a r r i e s o u t is marvelous
deeds. I n this p a r t i c u l a r case of mine, ~ o d has
used t he following ind iv idua l s , ( t o whom I own my
apprc ia t ions a l so ) t o acco~~ip l i sh t he work.
Foremost among these ind iv idua l persons i s my
p ro j ec t mentor (who is a l s o t h e Dean of t h e Faculty
of Business fldministration) professor Francis 0,
okafor. I n f a c t , without him, I doubt i f I would
have been ab le t o s e t t l e on a top ic t o wri te . I
hereby express my profound apprec ia t ion t o him no t only
f o r accepting t o supervise me, but a l s o squeezing out
time off h i s t i g h t programme t o o f f e r h i s c r i t i c i sms
during the course cf my study.
In l i k e manner, I wish t o show my apprec ia t ion t o
t h e co-ordinator of t h e pos t Graduate School, M r .
J.A. Ezeh who has worked r e l e n t l e s s l y very hard t o
s e e t o i t t h a t t he programme i s accomplished a s scheduled,
MY a p p r e c i a t i o n goes a l s o t o my u n c l e an s sponsor
Chief Pgthony A. o b i who took up t h e cha l l enge o f
s e e i n g me through a l l t h e s e y e a r s of academic
p u r s u i t s and t o him I s i n g f ~ o d Loves a c h e e r f u l Giver f
The l i s t w i l l b e incomple te i f 1 f a i l t o mention
a l l t h o s e who i n one way o r t h e o t h e r he lped me d u r i n g
my d a t a c o l l e c t i o n d r i v e s e s p e c i a l l y a l l t h o s e who
completed my q u e s t i o n n a i r e , and t h o s e who g r a n t e d me b
f r i e n d l y aud ience d u r i n g i n t e r v i e w s e s p e c i a l l y
Messrs ~ g w i n ( o f Eag le S t a r D a i l y S a v i n g s ) , o l i ( o f
M i n i s t r y of F inance and Economic p l a n n i n g ) , ~ b a (o f
M i n i s t r y of works and ~ o u s i n g ) , Sam (of Im), ~ b o (of
ogbe te ~ a r k e t ) , Ezeani ( o f A r i a Market) and MrS
Egwele (o f U,N.E.C.), To a l l t h e s e and o t h e r s
unmentioned, I show my g r a t i t u d u .
I a l s o thank a l l my f r i e n d s and c l a s sma te s ,
e s p e c i a l l y my roommate (pp-. Cha r l e s ~ g o l u m ) , Messrs
p e t e r fimah and ~ i v i n u s onuh f o r a l l t h e i r u s e f u l and
c o n s t r u c t i v e c r i t i c i s m s d u r i n g t h e course t h e s t u d y . F i n a l l y , my a p p r e c i a t i o n a l s o goes t o t h e Typ1.S
who saw t o it th3.t t h e work a s i t is produced is typed
w i th minimum of e r r o r s , and t h i s is no l e s s a pe r son
t h a n Mrs. B.U. wogbo .
However, t h e r e s p o n s i b i l i t y f o r t h e q u a l i t y of
t h e work i n terms of accuracy and in format ion con ten t
e n t i r e l y mine . t h e r e f o r e acknowledge a l l p r a i s e s
and c r i t i c i s m s t h a t fo l low t h e e n t i r e work as produced.
UDOGU , CHARLES EBERECHUKWU
UNIVERSITY OF N I G E R I A
ENUGU ChMF'US .
OCTOBER, 1987.
............................... C e r t i f i c a t i o n i
Dedication ......................OD........, ii
.................. L i s t of ~ a b l e s and Figures i x
CIUiPTER ONE: INTRODUCTION . . . . . . . . . . .~ . .~.~ 1 D
1 Basic I s sues ................. I Statement of Problem ............... 1.2. s tatement of objec t ives 2
............... 'l.4 s ign i f i c ance of s tudy 4
1.5 nef i n i t i o n of ~ e r m s ............... 5
1 . 6 imitations of t he s tudy .............. 7
2 p1txouuction ........................ 9
2.2. The Financia l ~ n f r a s t r u c t u r e - An overview^^
......... 2.3, he Informal ~ i n a n c i a l s e c t o r 17
2.4. ~ e a s o n s f o r continued co-existence ..... 21
2.5. Types of inform31 Financia l organisat ions 28
2.6, objec t ives and funct ions of These 35 organisa t ions ....d....O...............
2.7. organisa t ion and ~anagenen t : ........... 38
( v i i )
...... CW;PTER TIBEE: METIiOD O F RESURCH ; : ; 40
3.1. ~ e t e r m i n a t i o n of popu la t ion .......... 40
.......... 3.2. ne te rmina t ion of sample s i z e 40
...................... 3.3. Data c o l l e c t i o n 42
3.3.1 Sources of Data ....................... 42
. primary Data ..O.... .............O.. 42
. secondary Data ................O...... 43
3 - 4 . InFORP'IilL FINANCIAL ORGhNISBTIONS STUDIES 43 b . .................... 3 .5 i i na lys i s and Tes t s 43
3.5.2 T e s t s t a t i s t i c s ....................... 44
3.6 ~ e v e l o f s i g n i f i c a n c e ................. 46
3.7 Decis ion c r i t e r i o n 46
CH>LPTER FOUR: EXPL'iNATORY NOTES ON THE 47
OPER!LTI ONS OF THE INFC'RYU~L ORGliNISATI OIVS 47
STUDIES .................................... .................... 4.1. ~ a i l y c e n t r i b u t i o n 47
................. 4.2. chr i s tmas T h r i f t fund 55
4.3. I S U S U ................................ 63
CI-L'J'TER FIVE; PRESFA!TiLTI ObT ~ L L J iLNALYSIS OF 66
Dl'L'i'A: i:m TEST OF HYPOTHESES ........... 66
5.1 . p r e s e n t a t i o n and m a l y s i s of Data . . 66
.................... 5.2. T e s t of Hypotheses; 66
( v i i i )
PAGE
5.2.7. Tes t of Hypothesis 1 . . , . . . . . . . . . . . . . 5.2.2. Tes t of ~ y p o t h e s i s 2 ............,... 5.2.3. T e s t of ~ y p o t h e s i s 3 . . . . . . . . . . . . . . . .
CXLPTZR SIX: RZSE.RCH DEDUCTIONS,
6.1, ~ e s e a r c h Deductions ........,.....,... 6.2 necommendations .............. O . D . .
6.4, Areas f o r f u r t h e r nesearch . . . . . . . . . . . .
I Advert isement bLid
2 a Conversion of Daily Income t o 1Jlnual Incomes
3. Conversion of income rcmges t o Absolute va lues
4. computat ion of p r a t i o sum of squa re s
5. computat ion of Regress ion parameters I
7. Regress ing Rate of Returns 011 :?mo~:nts
c o n t r i b u t e d i n Christmas m n d T h r i f t
8. Q u e s t i o n n a i r e
9. Bib l iography
v i t a
( i x >
LIST OF TliBLES AND FIGURES
1 . Da i ly c o n t r i b u t i o n
2. A c t i v i t y F igures
3 . ~ s u s u D i s t r i b u t i o n
4. Ques t ionna i re l ~ c c o u n t i n g
5 . D i s t r i b u t i o n of Respondents by Sex
6. D i s t r i b u t i o n of ~ e s p o n d e n t s by Marital s t a t u s
7. Tflcome D i s t r i b u t i o n of ~ e s p o n d e n t s
8. D i s t r i b u t i o n of Married Respondents by
pqember of Chi ldren
9. Ranking of reasons f o r j o i n i n g t h e Groups
10. p re fe rence of In formal Groups t o ERnks
11. Analysis of va r i ance Table
F I GI JRES :
1. Funds Trans fe r Function
3. Formal of Emergency Withdrawal ca rd .
4. c r i t i c a l Region f o r hypothes i s 1
5. c r i t i c a l Region f o r hypothes i s 2
6 c r i t i c a l Region f o r hypothes i s 3
7, c r i t i c a l Region f o r hypothes i s 4
~ g s z n ~ c z
The t r a d i t i o n a l f i n a n c i a l i n s t i t i o n s , otherwise
ca l l ed t h e informal f i n a n c i a l organisa t ions , which
form the theme of t h i s work, have been found t o be
p laying a major r o l e i n t he savings mobil izat ion e f f o r t s
~f v a r i ~ u s economic u n i t s , i n s p i t e of t h e exis tence
of t h e m ~ d e r n sophis t ica ted f i n a n c i a l i n s t i t u t i o n s
l i k e banks.
~t i s su rp r i s i ng t o f i nd t h a t even i n t h e b
urban cen t res , where such informal f i n a n c i a l
arrangements should normally be looked down upon as
being crude and p r imi t ive , these i n s t i t u t i o n s s t i l l
survive.
Three groups of i n s t i t u t i o n s were se lec ted i n
JgIUgU t o prove the exis tence o r otherwise of these
organisa t ions and a l s o t o f i n d out, where they e x i s t ,
t h e forms of t h e i r presence and t h e i r modes of
organisa t ion and ope ra t im .
prel iminary inves t iga t ions through an i n i t i a l
extensive interview with indiv iduals fr3m among t he
th ree groups of i n s t i t u t i o n s se lec ted
Viz: Markets, Min i s t r i e s and schools - revealed
t h a t these informal organisat ions ac tua l l y ex i s t .
fL c lo se r study cf t he i n s t i t u t i o n s revealed t h a t
these informal f i n a n c i a l groups e x i s t along organisa-
t i o n a l l i n e s . I n t h e markets, which a r e dominated by market t r a d e r s whose income s t reams come on d a i l y
b a s i s , informal f i n a n c i a l o rgan i sa t ions t h a t r e l y on
d a i l y c o n t r i b u t i o n e x i s t . I n t h e M i n i s t r i e s and
Higher ~ n s t i t u t i o n s , workers tend t o o rgan i se t h e i r
own groups on monthly payment b a s i s n a i n l y because
t h e i r remunerations a r e pa id by t h e month.
o u t of t h e 90 respondents t o t h e q u e s t i o n n a i r e ,
i t was found t h a t 53(59%) were men and 37(41%)
were women. This seems t o sugges t t h a t men involve 8
themselves more i n sav ings t h a n women. Again, ou t of
t h e 90 respondents , 62(69%) were married men and
women. This f a c t and t h e f a c t t h a t men a r e more may
combine t o sugges t t h a t t h e need t o save has a
p o s i t i v e r e l a t i o n s h i p wi th f ami ly r e s p o n s i b i l i t i e s .
This i s moreso, when we look a t t h e uses i n t o which
t h e s e sav ings a r e put . Some of t h e uses are:-
paying of f i x e d o b l i g a t i o n s l i k e s choo l f e e s , house
r e n t s and o t h e r b i l l s , and t h e purchase of f i xed
a s s e t s l i k e home fu rn i sh ings .
Convenience and low income were t h e two f a c t o r s
ranked h i g h e s t as major exp lana t ions f o r involvement
i n i n fo rma l f i n a n c i a l o rgan i sa t ions . The a t t i t u d e of
banks was minimally mentioned - may be because t h e
respondents never had access t o banks o r t h a t they s t i l l
recognize t h e unique r o l e s t h a t banks can play.
( x i i )
There were s i g n i f i c a n t income v a r i a b i l i t y among
members of v a r i o u s in formal f i n a n c i a l groups. The .
d a i l y c o n t r i b u t o r s i n t h e market p l a c e s were mai ly
people of ve ry low income. 8003 of t h e market respondents
were below pq2000.00 p e r annum income, whi le over 60%
of t h e m i n i s t r y and schoo l workers i n ~ s u s u and
ch r i s tmas t h r i f t funds were i n incomes p e r annum
of over p42000.00
Though t h e s e respondents belong t o one form of
i n fo rma l group o r t h e o t h e r , m a j o r i t y o f them s t i h l
do no t p r e f e r i n fo rma l groups t o ~anks.
in ally, t h e s e i n fo rma l groups have t h e i r own
p e c u l i a r i t i e s , n o t on ly among groups of i n s t i t u t i o n s
b u t a l s o w i t h i n each group of i n s t i t u i o n s , i n t h e
ways t hey a r e organised.
CHAPTER ONE .-
INTRODUCTION
BASIC ISSUES
one i n s t i t u t i o n t h a t plays a v i t a l r o l e i n t he
savings mobil izat ion e f f o r t s among t h e various economic
u n i t s i n our soc i e ty , but which has of ten been neglected
is t h e informal f i n a n c i a l i n s t i t u t i o n , a l s o ca l l ed t h e
t r a d i t i o n a l f i n a n c i a l i n s t i t u t i o n o r t he informal
c a p i t a l market,
~mphas i s , among t he f i n a n c i a l w r i t e r s , analys ts
and commentators, has been on t h e formal and institutions- b
l i s e d f i n a n c i a l i n s t i t u t i o n s and co-operative associa t ions
o r unions, with t he r e s u l t t h a t l i t t l e or nothing i s
ever s a i d about the informal s ec to r ,
pqentions ever made of these i n s t i t u t i o n s ( t h a t i s
t h e informal i n s t i t u t i o n s ) have remained s p a t i a l i-n a
few f inance l i t e r a t u r e t h a t ca re t o recognize t h e i r
presence.
~ h o u g h t h e t rend seems t o be changing, with some
s tud ies now being ca r r i ed out on informal f i n a n c i a l
organisa t ions , t h e amount of work done remains l i t t l e
when compared with work a l ready done i n t h e formalised
s e c t i o r , pgoreso, these s t ud i e s a r e never de t a i l ed and
often. come up a s newspaper a r t i c l e s or commentaries,
one reason f o r t h i s neglec t may be due t o t h e
informal na ture of t h e a c t i v i t i e s ca r r i ed out by these
ins - t i tu t ions . Sometimes, such associa t ions do not even
have names under which they operate , They a r e
usua l ly f o rmd among f r i ends , co-workers, age grades,
t r a d e r s , r e l a t i o n s and other i d e n t i f i a b l e groups who
can e a s i l y come together t o make r egu la r con-tributions,
Evidences abound t o show t h a t these informal
f i n a n c i a l organiaat ions have contrinued t o co-exist
with t he modern f i n a n c i a l i n s t i t u i o n due mainly t o
the inadequacy of f a c i l i t i e s of fered by t h i s formal
s ec to r , and a l s o due t o the f l e x i b i l i t y t h a t t h e
informal s ec to r provides.
STATST ZNT Oil' PKOI31ZM: - = - --.------- - . .. , - Given t he above p rob l em, t h e major poin t of
concern w i l l be t o f ind out why these informal f i nznc i a l
organisat ions have continued t o co-exist w i t h t he
formalised o r i n s t i t u t i o n a l i s e d f i n a n c i a l organisat ions
i n oar cor:liiiunities p a r t i c u l a r l y i n the ~ l r b a n cent res
where we have a networl; of fo rna l i sed i n s t i t u t i o n s .
Their modes of operat ion i n terms of a c t i v i t i e s ,
organisa t ion and performance as wel l as the problems
t h a t confront them a r e ye t other i s sues t h a t t he s tudy
w i l l address i t s e l f t o .
STATEL LIQTT OF OBJECTIVES : .=- -.- -s --- "--A&.
The i n fo r~xa l f i n a n c i a l i n s t i t u t i o n s have been found
-to be co-exist ing with the f ormalised o r i n s t i t u t i o n a l i s e d
f i n a n c l a l i n s t i t u t i o n s l i k e t h e commercial banks and
co-operat ive s o c i e t i e s and a l s o p l a y t h e v i t a l r o l e of
sav ings mob i l i za t ion from t h e ' n e t s a v e r s t t o t h e ' n e t
consumers o r u s e r s ' of funds f o r va r ious investment
purposes. The c u r r e n t s tudy then aims a t t h e fo l lowing
ob jec t ives : - ,
To determine t h e i n c i d e n t s o r o therwise and
reasons f o r co-exis tence of t h e s e i n fo rma l
i n s t i t u t i o n s wi th t h e formal i sed i n s t i t u t i o n s . b To examine t h e ope ra t ions ( i n terms of s e r v i c e s
r ende red ) , o r g a n i s a t i o n and performance of
t h e s e i n s t i t u t i o n s .
To f i n d ou t t h e prcblems con f ron t ing t h e
smooth f u n c t i o n i n g of t h e s e i n s t i t u t i o n s
To mike recommendations on how t o improve on
t h e a c t i v i t i e s of t h e s e i n s t i t u t i o n s . I n o ther -
words, t o recommend ways f o r overcoming t h e
problems con f ron t ing t h e i n s t i t u t i o n s .
STATEMENT OF HYPOTHESES :
l e Hol There i s no s i g n i f i c a n t income v a r i a b i l i t y
among members of d i f f e r e n t in formal
f i n a n c i a l o rgan i sa t ions ,
2. Ho2 Dai ly income has no s i g n i f i c a n t i n f l u e n c e
on t h e amount con t r ibu t ed by t h e d a i l y
cor i t r ibu tors ,
3- Ho3 I?ieri!bers of i n f o r ~ a l - f i n a n c i a l o rgan i sa t ions
do n o t p r e f e r in formal f i n a n c i a l groups t o
bank.
4. Eo4 Rate of r e t u r n s on t h e c o n t r i b u t i o n s of t h e
menlbers of Chr i s t j - z t s fund does no-t depent B
signif i c a ~ l l t l y on amounts con t r ibu t ed over
t h e per iod .
been done i n t h i s a r e a of in formal f i n a n c i a l organi.sat ions
The c u r r e n t s t u d y i s t h e r e f o r e , almost l i k e
furming i n a f a l l o w land o r f i s h i n g i n a mighty ocean.
Secause of t h i s , t h e s tudy wi :Ll be s i b n i f i c a n t t o t h e
f ollowin;3: - * The r e s e a r c h e r , who ,!lay be i n t ~ r e s t e d i n i n q u i r i n g
more i n t o t h e ~ c t i v i t i e s of t h e s e groups
* The une;nployed, who lay d i scove r o p p o r t u n i t i e s i n
going i n t o t h e unuiscovercd t r e a s u r y as a c a r e e r
by s t a r t i n g such o rgan i sa t ions a s d a i l y con t r ibu t ion ,
* The workers, who may no t have known of t h e e x i s t e n c e
of such savings arrangement among co-workers . The p o l i c y makers, who should s e e t h e s e o rgan i sa t ions
as having p o t e n t i a l s f o r he lp ing i n sav ings
mob i l i za t ion , and s o he lp modernize them.
F i n a l l y , t h e s tudy w i l l a l s o be s i g n i f i c a n t t o t h e
formal l zed f i n a n c i a l i n s t i t u t i o n s who should begin
t o recognize them a s having p o t e n t i a l s f o r he lp ing
i n sav ings mob i l i za t ion , and then channel t h e i r ,
marketing e f f o r t s towards encouraging them, r a t h e r
t han s e e them as r i v a l s .
DEFIRITION OF TERMS : ----- -A-- .- - I n t h i s s tudy , t h e fo l lowing terms were
employed t o mean t h e fol lowing:
1. Incidence: jqeaning ways i n which t h e in formal - -- ---- - -- f i n a n c i a l o rgan i sa t ions e x i s t and a f f e c t t h e s e l e c t e d
i n s t i t ~ t i o n s . I n otherwords, inc idence has been
employed h e r e t o mean !presence! o r !ex is tence!
v o l u n t a r i l y formed groups o r i n d i v i d u a l s , who
formed f o r t h e purpose of engaging i n some kind of
mutual-aid scheme through sav ings mobi l iza t ion .
This impl ies absence of coerc ion o r compulsion;
gene ra l lack of anykind of s o p h i s t i c a t e d o rgan i sa t iona l
s t r u c t u r e ; and u s e of f r e e - w i l l and s e l f de t e rmina t ion
i n one ts d e c i s i o n t o a s s o c i a t e f o r t h e purpose of
sav ings and/or lending.
3 . T h r i f t : Th i s , according t o s t r i c k l a n d means t h e
evoidance of extravagance and t h e p r a c t i c e of wise
spending ( s t r i c k l a n d 1934 p.13). I n t h i s s t u d y ,
t h r i f t a l s o means t h e a r t of r e f r a i n i n g from c u r r e n t
consumption now, i n o rde r t o have more t o spend i n
f u t u r e . ~t does n o t mean be ing s t i n g y .
4. I s a s u : This means t h e r evo lv ing type of i n f o r m a l b
f i n a n c i a l arrangement whereby a few i n d i v i d u a l s o u t
of mutual unders tanding and f r e e - w i l l dec ide t o
c o n t r i b u t e a sum c e r t a i n i n amount on monthly b a s i s ,
t o g ive o u t loans t o members i n r o t a t i o n . A s much
as p o s s i b l e , t h e amounts con t r ibu t ed a r e uniform f o r
ea se of account ing and c r g a n i s a t i o n . Number of
persons i n a group i s u s u a l l y small,. r e l a t i v e l y .
5 Fund: This means a sum of mcney made a v a i l a b l e - ( o r s e t a s i d e ) f o r a de f ined p r p o s e . I n otherwords,
it i s a pool of money s p e c i f i c a l l y made a v a i l a b l e f o r
a known o b j e c t i v e .
6 Rate of Return: This i s employed t o mean, t h e
percen tage of r e t u r n ( o r i n t e r e s t earned? p e r HI .00
of c o n t r i b u t i o n i n a pool of fund when t h e c o n t r i b u t i o n s
a r e given back o r shared ou t t o t h e i n i t i a l
c o n t r i b u t o r s t o t h e fund.
7. u.N.E.C. Th is is an a b b r e v i a t i o n f o r ! u n i v e r s i t y d
of ~ g g e r i a , Enugu Campus.
8. I.PI.T, Th is i s an a b b r e v i a t i o n f o r ? I n s t i t u t e of --* - Management and Technology, F f l u ~ .
9. A,S,U. TECH: This is an a b b r e v i a t i o n f o r fnnambra ----- S t a t e u n i v e r s i t y of ~ e c h n o l o g y ( m u g ~ campus)rl
LIMITATIONS OF THE STUDY -- ----- The r e sea rch work, as anyother endeavour of man,
w a s n o t wi thout i t s c o n s t r a i n t s i n terms of l i m i t i ~ g
f a c t o r s . Some of t h e s e c o n s t r a i n t s ( t h e l i s t n o t
be ing exhaus t ive) inc lude : -
Finance: This i s a ve ry l i m i t i n g f a c t o r i n whatever
a c t i v i t y one f i n d s h imse l f . I n t h i s case of t h e
s tudy , t h e r e s e a r c h e r be ing a s t u d e n t was q u i t e
cons t r a ined by l ack of funds , Frequent c a l l s made on
t h e s e l e c t e d i n s t i t u t i o n s meant a l o t of money on
t r a n s p o r t s and sometimes c i r c u m s t a n t i a l pat ronages
p a r t i c u l a r l y i n t h e market p l aces . Because t h e meagre
purse of t h e student-researcher1 was n o t r i c h
enough t o engage i n an ex t ens ive r e sea rch , t h e scope
of t h e s t u d y was h igh ly r e s t r i c t e d .
2. Time: cons ide r in2 t h e f a c t t h a t t h i s r e sea rch work -- had t o be combined wi th classroom l e c t u r e s and inview
of t h e f a c t t h a t t h e whole s tudy s t a r t e d on ly i n t h e
second semester of t h e s e s s i o n run r ing , t h e r e was n o t
enough t ime a v a i l a b l e f o r t h e s tudy . The r e s e a r c h e r
had t o f o r f e i t h i s l e c t u r e s and r e s t s sometimes i n
o rde r t o meet up wi th appointments. m e n a t t h a t ,
t h e p r e s s u r e of t ime was s t i l l much.
3. Lack of Co-operation: This i s ye t ano ther of such -.- - a- ----- -.-
cons - t r a in t s encountered. 111 t h e f i e l d of s tudy one
had t o meet with ve ry unco-operat ive elements. Some-
t imes , you i d e n t i f y somebody who i n d i c a t e d be ing i n b
t h e in formal group b u t w i l l d e c l i n e o u t r i g h t t o f i l l
your q u e s t i o n n a i r e o r g ive you any audience f o r
i n t e rv i ew. Also, some c o l l e c t e d your ques t ionna i r e s
and k e p t t hen only t o g ive it back t o you a f t e r many
p o i n t s of c a l l ; when t h e s e a r c h f c r ano ther p o t e n t i a l
respondent begins once more.
4. p a c i t y of L i t e r a t u r e : The t o p i c of r e sea rch i s U_L LI_----------
p a r t i c u l a r l y a f f e c t e d by t h i s problem. ~ o t much has
been w r i t t e n on t h e s u b j e c t . A s a r e s u l t t h e r e were
n o t much l i t e r a t u r e t o re-riew i n t h e l i t e r a t u r e rev iew
s e c t i o n of t h e r e p o r t .
5. Bias : c l o s e l y r e l a t e d t o t h e problem of l ack of - co-operat ion i s b i a s . 'The respondents sonetimcs tended
t o answer t h e way they f e e l you want them t o answer t h e
ques t ions . Also, t h e r e may have been some ambiguity
i n the ques t ions t h e way they were framed t h a t may have a f f e c t e d t h e answers.
St r i ck land , C,F. Report on t h e In t roduct ion of
Co-operative Soc i e t i e s i n t o b
Nigeria, ( ~ a g o s Government P r i n t e r
CHAPTER TWO
Savings h a b i t among t h e peoples of t h e
developing count r ies of t h e world have been found t o
be very low. Though low per c a p i t a income may be
c i t e d as one of t h e major causes of t h i s low ebb i n
t h e savings p o t e n t i a l s , t h i s does not t e l l t h e whold
s t o r y . Lack of savings i n s t i t u t i o n s has a l s o been
found t o be a con t r ibu to r t o t h e poor savings h a b i t .
o the r f a c t o r s o f t en adduced include:-
Imperfect maintenance of law and order , p o l i t i c a l
i n s t a b i l i t y , u n s e t t l e d monetary condi t ions , lack of
con t inu i ty i n economic l i f e , t he extended family
system with i t s d r a i n on resources and i t s s t i f f l i n g
of personal i n i t i a t i v e , and c e r t a i n systems of land
tenure which i n h i b i t savings ( ~ r i v i n e 1967 p .23O).
Given a l l t h e s e impediments t o saving and a l s o
given t h a t economic development r equ i res a r i s e i n t h e
r a t e of savings and investment s o a s t o break the
v ic ious c i r c l e of poverty, the c e n t r a l i s s u e cf
economic develop~~lcnt then becomes - t h e problem of
mobilizing and a l l o c a t i n g resources f o r t h e growth i n
such a manner t h a t growth becomes s e l f - s u s t a i n i n g
( ~ r i v i n e p . 229)
Resources mob i l i za t ion and a l l o c a t i o n imply t h e
accumulation of sav ings and channel ing them from t h e
n e t s a v e r s t o t h e n e t consumers f o r op t imal
investment. There i s c e r t a i n l y an u rgen t need f o r t h e
sys t ema t i c aggrega t ion and o r g a n i s a t i o n of savings
(powell 1966 p.273) i f any meaningful econcmic
development could be achieved, a s sav ings form t h e
bedrock of investment.
This onerous t a sk of sav ings mob i l i za t ion a n 8
o r g a n i s a t i o n i s mostly performed by t h e va r ious
f i n a n c i a l i n t e r m e d i a r i e s i n t h e economy. They employ
a l l s o r t s of f i n a n c i a l arrangements a t t h e i r d i s p o s a l
t o f a c i l i t a t e t h i s t a sk .
Apart from banks and o f f i c i a l ( fo rmal ) c r e d i t
f unds , some f i n a n c i a l suppor t i s a v a i l a b l e t o t h e
smal l -holders from secondary sources of development
funds . Loans of t h i s k ind a r e a v a i l a b l e , a l though
t o a l i m i t e d e x t e n t , from co-opera t ive s o c i e t i e s ,
unions and l o c a l government a u t h o r i t i e s which
f inance loan programmes from t h e i r own resourc2s .
Some shor t - te rm c r e d i t can be obta ined from t r a d i n g
o rgan i sa t ions as w e l l a s from t r a d e r s (and o t h e r
in formal groups). There i s a l s o a c e r t a i n amount of
p r i v a t e l end ing , which i s arranged between i n d i v i d u a l
fa rmers , o r between farmers and non-f armers e s p e c i a l l y between r e l a t i v e s (Marl in 1970 p.287). These l a t e r
sou rces of c r e d i t s f o r investment purposes a r e a l l
i n fo rma l t r a d i t i o n a l sources of funds , t h i n g
then becomes c l e a r -- t h e i n fo rma l s e c t o r a l s o p l ays
a b i g r o l e i n sav ings mob i l i za t ion e f f o r t s ,
u n f o r t u n a t e l y , t h e s e r o l e s played by t h e
in formal s e c t o r and t h e p o t e n t i a l s it has f o r p l ay ing
more, i n sav ings mob i l i za t ion e f f o r t s have been
g r o s s l y neg lec ted p a r t i c u l a r l y i n t h e . .-: economic
l i t e r a t u r e , ~ r e a t m e n t s given t o t h e s e c t o r lmd b
remained s p a t i a l ,
THE FITJANCIAL INFRGTRUCTURE AN 0VERVIF.N
The f i n a n c i a l i n s t i t u t i o n s g e n e r a l l y , perform
two f u n c t i o n s v i z : t h e economic and f i n a n c i a l
f u n c t i o n s ( ~ u r d a 1975 p.5)
Economic Function: They f a c i l i t a t e t r a n s f e r of r e a l -II
economic resources from l e n d e r t o borrower,
~ i n a n c i a l Function: They provide borrowers wi th funds p- --- ( o r purchas ing power) t h a t they want o r need t o have
now, t o ca r ryou t t h e i r p l ans
k d i s t i n c t i o n made between t h e two f u n c t i o n s is
t h a t when r e a l r e sou rces a r e a f f e c t e d ( i n t h e
t r a n s a c t i o n ) , we r e f e r t o t h e economic f u n c t i o n s , b u t
when such t r a n s f e r s have l i t t l e o r no e f f e c t upon
r e a l resources a l l o c a t i o n , economists r e f e r t o i t
as f i n a n c i a l func t ions . However, it must be noted
t h a t many f i n a n c i a l t r a n s f e r s have on ly a s l i g h t
e f f e c t upon r e a l resources a l l o c a t i o n ( i b i d ) . So, t h e
major f u n c t i o n of t h e f i n a n c i a l i n s t i t u t i o n s
g e n e r a l l y i s f i n a n c i a l i n n a t u r e , through t h e
t r a n s f e r of funds from n e t s a v e r s t o n e t consumers.
A good p i c t o r a l i l l u s t r a t i o n s of t h i s funds
t r a n s f e r f u n c t i o n of t h e f i n a n c i a l i n s t i t u t i o n s w a s b
given by ~ e u f e l d i n h i s work e n t i t l e d t h e f i n a n c i a l
system of Canadaft ( ~ e u f e l d 1972 p.3). ~ e u f e l d saw
f i n a n c i a l system as composing of i n s t i t u t i o n s and
i n d i v i d u a l s engaged i n t r a n s f e r i n g funds from t h o s e
i n s u r p l u s t o t hose i n d e f i c i t and i n f a c i l i t a t i n g
changes i n ownership of f i n a n c i a l claims t h a t t h e
process i n e v i t a b i y c r e a t e s . The f i r s t p a r t of t h e
d e f i n i t i o n ( t h a t i s - t r a n s f e r i n g funds from t h o s e
i n s u r p l u s t o t h o s e i n d e f i c i t he r e f e r r e d t o as t h e
f i n a n c i a l in te rmedia t ion . Below i s t h e p i c t o r a l
i l l u s t r a t i o n of t h e f i n a n c i a l func t ions as given
- 13 - sur&r% spending F igu re 1
Source: z,p, ~ e u f e l d : The F i n a n c i a l system of
Canada ( ~ a c r q i l l a n : canada 1972 p .3)
~n h i s words: ~n any economy, t h e r e a r e . .
i n d i v i d u a l co rpo ra t ions , unincorporated bus ines ses , b
i n d i v i d u a l s , non-prof i t o r g a n i s a t i o n s and governments
which i n a given per iod have s u r p l u s funds a f t e r
deduc t ing from t h e i r c u r r e n t income, t h e purchase
of c u r r e n t ou tpu t of goods and s e r v i c e s - These may
be r e f e r r e d t o s s u r p l u s spending u n i t s o r u l t i m a t e
l ende r s ( o r n e t s a v e r s ) . A t t h e same t ime, t h e r e a r e
o t h e r members of t h e aforementioned groups whose
purchases of goods and s e r v i e s w i t h i n a given per iod
exceed t h e i r i n ~ o m e ~ d e f i c i t spending u n i t s o r
u l t i m a t e borrowers o r (nc t consumers)- and who must
borrow t h e funds of s u r p l u s u n i t s by i s s u i n g
tprimary s e c u r i t i e s l r F i n a l l y , t h e r e a r e i n s t i t u t i o n s
which s p e c i a l i z e s i n accumulating s u r p l u s funds by
i s s u i n g t h e i r own i f i n d i r e c t s e c u r i t i e s i t and d i s t r i b u t -
i n g t i lose funds by purchasing primary s e c u r i t i e s
o r even o the r t i n d i r e c t s e c u r i t i e s ? That i s , t h e i r
l i a b i l i t y instruments i n t h e form of i n d i r e c t
s e c u r i t i e s a r e t h e i r source of funds, and t h e i r a s s e t s
i n t h e form of i n d i r e c t and primary s e c u r i t i e s
i n d i c a t e how they have uscd t h e i r funds, Those
i n s t i t u t i o n s a r e r e f erred t o as f i n a n c i a l in t e rmedia r i e s ,
I n t h i s i n s t i t u t i o n a l environment t h e r e f o r e , su rp lus
spending u n i t s can i n v e s t t h e i r funds i n t h e primary
s e c u r i t i e s of d e f i c i t spending u n i t s o r i n the B
i n d i r e c t s e c u r i t i e s of f i n a n c i a l in termediar ies ,
D e f i c i t spending u n i t s can s e l l t h e i r primary
s e c u r i t i e s t o su rp lus spending u n i t s , o r t o f i n a n c i a l
in termediar ies ( i b i d p,4)
From t h i s simple model of f i n a n c i a l a c t i v i t i e s
of t h e f i n a n c i a l market a s given by ~ e u f e l d , the
following deductions emerge: - t h e r e is one
p r i n c i p a l func t ion of the f i n a n c i a l market, namely:
t h e func t ion of t r a n s f e r r i n g funds t h a t surp lus
spending u n i t s have a v a i l a b l e , t o d e f i c i t spending u n i t s ,
- Three bas ic economic u n i t s a r e d i sce rn ib le : - t h e
t h e n e t save r , t h e n e t consumer, t h e
intermediary.
- Two types of t r a n s f e r s a r e poss ib le :
( a ) Face t o face t r a n s f e r between saver cmd - borrower, I n which case , the intermediary i s
no t Very important. He may only serve as a
broker, However, t h i s kind of resource t r a n s f e r i
f raugh t with numerous problems, such as problem
of imperfections i n t he market, problem of I double coincidence of wants a s i n b a r t e r
economy ( f o r example somebody who has savings
may not e a s i l y f i nd an o u t l e t or one,who wants
t o borrow. on the otherhand, those who have no b
savings and want t o borrow may no t e a s i l y f ind
t he saver t o borrow from). Furthermore, the
d i f f i c u l t y a t times, of t h e small savers i n
1 gaining access to. markets where primary
1 s e c u r i t i e s a r e bought and sold , and t he
r e l a t i v e l y high costs- of e f f ec t i ng small I
t r ansac t ions , combined with t h e l a rge
I denominations i n which they usua l ly t ake p lace , I has resu l t ed again i n a preference by t h e
publ ic f o r t lose f i n a n c i a l intermediar ies
I f e a tu r i ng claims aga ins t themselves which I I emphasize t h e a t t r i b u t e s of l i q u i d i t y and safety.
( b ) Intermediation: under t h i s arrangement, f i n a n c i a l .-. intermediar ies accumulate savings from surplus
economic u n i t s and then mc&e them ava i l ab l e t o
those who need them.
~ y t h i s a c t i on of the f i n a n c i a l in termediar ies
i n mobilizing savings from ne t savers t o ne t
consumers, c r e d i t , which i s a combination of
p o t e n t i a l i t y and a c t u a l i t y - obtaining cash,
goods and se rv ices ( a c t u a l i t y ) by given a promise
t o pay money ( p o t e n t i a l i t y ) is created. ( see
Abe 1981 p. 115) The i n t e r a c t i o n among t h e t h r ee
i d e n t i f i ~ b h un i t s gives r i s e t o t he f i n a n c i a l
funct ions of the f i n a n c i a l s ec to r ,
Among the i d e n t i f i c ab l e f i n a n c i a l
i n s t i t u t i o n s t h a t perform f i n a n c i a l funct ions
d i s t i n c t i o n i s o f t en made as per t h e i r modus
operandi, hence we begin t o t a l k of formal i ty
versus informal i ty of thc i n s t i t u t i o n s ; banking
versus non-banking i n s t i t u t i o n s , and s o on,
Though these i n s t i t u t i o n s d i f f e r i n modes
and nomenclature they s t i l l perform the same
funct ion- Savings mobilization.
Generally, the f i n a n c i a l in termediar ies
include: t he commercial banks, merchant banks,
development f inance i n s t i t u t i o n s , insurance
companies, c r e d i t and savings i n s t i t u t i o n s ,
investment t r u s t s and mortgage i n s t i t u t i o n s
be regrouped i n t o banking and ~non-banking
i n s t i t u t i o n s . The non-banking i n s t i t u t i o n s can
be s a i d t o be of f o u r types (od le 1972 p.10)
1. Savings (and c r e d i t ) i n s t i t u t i o n s - p o s t a l savings ,
Building s o c i e t i e s and c r e d i t unions and
co-operatives . 2. Insurance ~ n s t i t u i o n s - Li fe and on-life s e c u r i t y
funds.
3 . unorganised money market opera tors - woney lenders
pawn brokers e t c .
4. publ ic f inance corporat ions - I n d u s t r i a l and
; ,g r i cu l tu ra l c r e d i t coroporations . b
Every o the r f i n a n c i a l i n s t i t u i o n s a p a r t from t h e
f o u r given above, come under t h e banking s e c t o r . These
in termediar ies including the f i n a n c i a l instruments ,
r u l e s conventions and norms which f a c i l i t a t e and
r e g u l a t e t h e flow of funds through t h e macro-
economy c o n s t i t u t e t h e f i n a n c i a l system; and t h i s
system i s con t ro l l ed by t h e government through t h e
agency of t h e Cent ra l ~ank (okafor p67)
F inanc ia l s e c t o r s t u d i e s have tended t o concentrate
on formal f i n a n c i a l in termediar ies : the c a n t r a l Banking
and monetary macro-relations here looks a t t h e g loba l
p i c t u r e of a l l t h e formalised f i n a n c i a l i n s t i t u t i o n s
wi th in an economy, inc ludicg a l l t h e banking and non-
banking i n s t i t u t i o n s - whose a c t i v i t i e s , i n one way o r
t h e o the r , a f f e c t t h e movement and a p p l i c a t i o n of money
such a s t h e commercial banks, t h e mortgage banks, t h e insurance companies, pension funds e t c .
Emphasis on these f or'malised f i n a n c i a l in termediar ie . i n t h e p a s t has not been without u t t e r neglec t of the informal f i n n n c i a l i n s t i t u t i o n s i s a l s o c a l l e d t r a d i t i o n a l f i n a n c i a l i n s t i t u t i o n s ( o r system).
However, evidences have show;? t h a t t h e s e forma-
l i s e d f i n a n c i a l i n s t i t u t i o n s , i n s p i t e of a l l emphasis,
a r e g r o s s l y inadequate t o meet t h e f i n a n c i a l needs
of t h e g e n e r a l i t y of t h e peoples i n t h e var ious
world economics, p a r t i c u l a r l y i n t h e developing
c o u n t r i e s , where t h e s e r v i c e s a r e n o t only i n a c c e s s i b l e
b u t a l s o a r e no t s u f f i c i e n t l y a v a i l a b l e even t o those
who have access t o them. A g r e a t ma jo r i ty of t h e .. C
r u r a l dwe l l e r s , t h e i l l i t e r a t e s , t h e low incornc
e a r n e r s , who c o n s t i t u t e 60 - 80% of t h e populat ion
of t h e s e developing coun t r i e s have v i r t u a l l y no b
access t o t h e s e r v i c e s rendered by t h e formal i sed
f i n a n c i a l i n s t i t u t i o n s . ~t then fol lows t h a t s
szenar io whereby e f S o r t s a r e concentra ted on
s t u d i e s of t h e f ormalised i n s t i t u t i o n s t h a t c a t e r
only f o r 20 - 40% of t h e popula t ion a t -the expense
of t h e informal i n s t i t u t i o n s i s not s a t i s f a c t o r y .
Ever be fo re t h e advent of t h e modern f i n a n c i a l
i n s t i t u t i o n s ( t h a t i s , t h e formal ised i n s t i t u t i o n s ) ,
t h e r e e x i s t e d , one kind of informal f i n a n c i a l cO-
ope ra t ion o r another zmong t h e var ious economic
u n i t s through which they mobil ized savings . Co-
ope ra t ion according t o Bedi (1962), i s t h e a c t of
persons v o l u n t a r i l y u n i t i n g f o r u t i l i z i n g , r e c i p r o c a l 1 , t h e i r own f o r c e s , resources o r bo th , under t h e i r
mutual arrangement t o t h e i r economic p r o f i t s o r l o s e s ,
pu t i n another way, t h i s kind of co-operation is
form of organisa t ion wherein persons v o l u n t a r i l y
a s soc ia te together as human beings on the b a s i s of
equi ty f o r t h e promotion of t h e economic i n t e r e s t s
of thzmselves ( c a l v e r t 1959 p.1) professor okafor
i d e n f i f i e d o the r f e a t u r e s of t h i s kind of arrangement
a s s e l f -imposed bu t group - inf luenced, mandatory
savifigs, Ije f u r t h e r explained t h a t t h e arrangement
i s vouluntary, because each member determines t h e
a c t u a l amount of r egu la r savings t o make, b u t group- b
influenced because t h e s o c i e t y determines t h e
minimum per iod ic con t r ibu t ion acceptable (okaf o r p.1 I )
This form of informal co-operation have bzen
shown t o have ex i s t ed long before t h e coming of t h e
modern and formalised f i n a n c i a l arrangements.
According t o Onyemachi ( ~ u s i n e s s Times lyay 18 1987 - -
~ 0 1 4 ) 9
1lBef ore t h e advent of mod-ern co-operative l h r i f t
and c r e d i t s o c i e t i e s , t h e r e ex i s t ed s i m i l a r organisa t ions
which operated almost l i k e co-operative c r e d i t s o c i e t i e s ,
These co-operative l i k e organisa t ions exis ted and
s t i l l e x i s t i n many p a r t s of t h e world today,
e s p e c i a l l y i n Southern Asia, ~ { e s t ~ f r i c a and t h e West
Indies . They a r e a s soc ia t ions formed upon a core of
- 20 - p a r t i c i p a n t s who agree t o make r e g u l a r c o n t r i b u t i o n s
t o a fund which i s given, i n a whole o r i n p a r t , t o
each c o n t r i b u t o r i n rotat ionsl ,
Another evidence of t h e ex i s t ence of such
arrangements i n t h e e a r l y days w a s given by ~ o n a l d s o n
e t a l i n t h e fol lowing l i n e s , !!The aggrega t ion of
money, even t h e r~loney of t h e i n d u s t r i a l workers, i n t o
p o t e n t i a l l y p roduc t ive masses had a l r e a d y made some
p rog res s when t h e modern money market came i n t o being.. .
When i n s t i n c t g ives p h c e t o reason , under t h e
s t imu lus of a b e t t e r s o c i a l &nvironment, money is b
t ransformed from a ba r r en s t o r e of v a l u e i n t o a
phalanx of f ecund i ty , because hoa rd ing is superseded
by t h e d e p o s i t account. The change, a t t h e lower
ex t r emi ty of t h e s o c i a l s c a l e , i s c l e a r l y d i s c e r n i b l e
b e f o r e t h e end of t h e 18 th cen t ru ry . . . . The process
of t r ans fo rma t ion from hca rd t o d e p o s i t - no t always
on i n t e r e s t - b e a r i n g d e p o s i t went on!! (Donaldson e t a l
1977 ~ ~ 2 6 9 ) ~
1t should be noted t h a t t h e s a f e t y of t h e money
t h e n , (and even now) was o f t e n considered an ample
r e t u r n t o t h e d e p o s i t o r . I n sach hands, it i s
secured n g a i m t p i l f e r e r s , t h i e v e s and robe r s which
i t cannot be i n t h e d e p o s i t o r l s h a b i t a t i o n ,
These anc ien t arrangements a r e what we r e f e r
t o a s t h e t r a d i t i o n a l f i n a n c i a l i n s t i t u t i o n s which
have continued t o su rv ive up t o now,
un fo r tuna te ly , t he presence of t h e modern
f i n a n c i a l i n s t i t u t i o n s has tended t o dwarf t h e
p o p u l a r i t y of t h i s . t r a d i t i o n a l f i n a n c i a l
i n s t i t u t i o n among a g r e a t major i ty of t h e people,
However, due t o t h e ind ispensable r o l e s and
o t h e r p e r c u l i a r i t i e s of t h i s t r a d i t i o n a l
i n s t i t u t i o n , i t has no t been completely debased,
The i n s t i t u t i o n has continued t o s tand t h e t e s t 0%
time arid has contiriued t o co-exis t wi th t h e modern
f i n a n c i a l i n s t i t u t i o n s ,
REASONS FOR THIS CGNTITJUZD CO-FXISTENCE
me would expect t h a t t h e emergence of t h e modern
f i n a n c i a l i n s t i t u t i o n s a s we f i n d them today would
have s p e l t t h e t o t a l c o l l a p s e of t h e crude
t r a d i t i o n a l f i n a n c i a l i n s t i t u t i o n s , s u r p r i s i n g l y ,
t h e s e i n s t i t u t i o n s have been found t o cont inue
co-exis t ing with t h e b e t t e r organised, formal i sed
f i n a n c i a l o rgan i sa t ions , Many reasons hzve been
adduced f o r t h i s continued co-exis tence of t h e two
seemingly incompat ible systems,
- SRVZRS ' AND BOIIROWBS ' PREFERENCE AND NED : -.
The funct ion of a sound f i n a n c i a l s t r u c t u r e
i s t o move f i n a n c i a l resources e f f i c i e n t l y from
surplus t o d e f i c i t non-f inancial u n i t s and from
a c t i v i t i e s y ie ld ing low s o c i a l r e tu rns t o those high
y ie ld ing , s o c i a l r e tu rns . . This movement of
funds requ i res , among o the r t h i n g s , f i n a n c i a l
instruments t h a t a r e cons i s t en t with savers t
and borf owers f p r e f erenceand needs, These a t t r i b u t e s --- have faund s u f f i c i e n t expression i n t h e t r a d i t i o n a l
f i n a n c i a l i n s t i t u t i o n s . The t r a d i t i o n a l f i n a n c i a l
i n s t i t u t i o n s have been found t o be very compatible , - . with t h e preferences and needs of v a s t majori ty
of t h e masses who seek and make use of the
f a c i l i t i e s offered t h e i n s t i t u t i o n s .
of t h i s , t h e informal c r e d i t markets ( a s t h e
t r a d i t i o n a l i n s t i t u t i o n s a r e a l s o c a l l e d ) se rve a
very u s e f u l purpose and t h e r e should be no l e g a l
o r customary obs tac les t o t h e i r development.
Ififorma1 market dea le r s a r e o f t e r n much b e t t e r
placed than banks t o i d e n t i f y new oppor tuni t ies f o r
f i n a n c i a l t r ansac t ions - new markets r equ i r ing
new products and processes. (Bhat t 1986 p.21).
Because of t h i s high f l e x i b i l i t y of fered by t h e
i n s t i t u t i o n . ( t r a d i t i o n g i t has continued t o
e x i s t along with t h e modern i n s t i t u i o n s ,
- unique Services provided: -- The unique s e r v i c e s rendered by these informal
i n s t i t u t i o n s have been found as a s t rong reason why
they have survived t h e competit ion of modern
f inancing opt ions, According t o professor okafor
(lg83), t hese i n s t i t u t i o n s have survived t h e competition
of modern f inancing options because of some unique
s e r v i c e s which they provide, inc luding , among others:-
provis ion of l i b e r a l c r e d i t f a c i l i t i e s f o r b
members, pqost s o c i e t i e s g ran t f i n a n ~ i a l
a s s i s t a n c e without i n s i s t i n g on s e c u r i t i e s
o the r than t h e s o c i a l sanc t ion of t h e group o r
t h e community which o f t e n d e t e r s d e f a u l t ,
Reduction of u n c e r t a i n t i e s i n investment
planning. planning i s f a c i l i t a t e d by t h e
exis tence of def ined schedules f o r c o l l e c t i n g
group cont r ibut ions (okaf o r p .7l) ,
These se rv iees which a r e r a r e t o f i n d among
t h e modern f i n a n c i a l i n s t i t u t i o n s mark t h e
i n f o rna l s e c t o r out a s a hope f o r t h e masses.
Because of t h i s , they have continued t o e x i s t
s i d c by s i d c with t h e so-cal led soph i s t i ca ted
modern i n s t i t u t i o n s even i n t h e urban areas ,
p ro fesso r onoh surnrnarised h i s own reasons
f o r t h i s co-existence under two broad ca tegor ies
namely; ignorance and banking v i g i d i t i e s (onoh 1980
pp 27 - 28)
- Ignorance: --.--. This has been i d e n t i f i e d a s a major c o n t r i b u t o r
t o poor banking h a b i t s among a v a s t major i ty of our
people. I n most developing c o u n t r i e s , t h e i l l i t e r a c y
r a t e i s y e t very h igh ( i n some p l a c e s , it i s s t i l l
as high as 70%). A s a r e s u l t of i l l i t e r a c y , t hey do
n o t understand what t h e rudiments of banking
bus iness a r e and do n o t a p p r e c i a t e t h e s e r v i c e s t h a t
banks render. b
Also, duc t o bad exper iences with banking
bus iness r i g h t from t h e incep t ion of banking
bus iness i n ~ i g e r i e , p a r t i c u l a r l y du r ing t h e c ra sh
of t h e mushroom banks i n t h c f i f t i e s whlch l c d t o
f i n a n c i a l r u i n s f o r many deposkors and a l s o , t h e
exper iences of depos i to r s du r ing the ~ i g e r i a n c i v i l
\far of 1967 - 1970 i n t h e w a r zones (onoh p.27)
t h e r e has remained t h i s f e a r among t h e i l l i t e r a t e s
about t h e s a f e t y of a d e p o s i t o r f s money wi th t h e
banks as t h e memory of t h e s e awful exper iences is
s t i l l green with those d i r e c t l y o r i n d i r e c t l y
a f f e c t e d . AS a r e s u l t of t h i s l ack of confidence
among t h e i l l i t e r a t e s of t h e developing c o u n t r i e s , of
which ~ ~ g e r i a i s one, they had continued t o s e e t h e
- 25 -
t r a d i t i o n a l f i n z n c i a l institutions as t h e b e s t b e t and
avenues f o r ensur ing s a f e t y f o r t h e i r savings.
- BANKING REGIDITIES : ----- -
The banking i n s t i t u t i o n s which i s t h e k ing of
t h e modern and formal ised f i n a n c i a l o rgan i sa t ions i s
f r a u g h t wi th n o t o r i e t y of r i g i d i t i e s . I n o rde r t o
maintain a high s tandard 01 banking p r a c t i c e , U g i s l a -
t i o n i s passed t o r e g u l a t e t h e ope ra t ions of f i n a n c i a l
i n s t i t u t i o n s t h a t ca r ryou t t h e func t ions of modern
banks. The Niger ian Banking Decree (Decree NO. I 1969) B
as amended i s one such l a w which has r a i s e d some d u s t s .
The p rov i s ions of t h i s dec ree , f o r one t h i n g ,
succeeded i n l i m i t i n g t h e number of banks being
e s t a b l i s h e d with t h e r e s u l t t h a t banking f a c i l i t i e s
a r e t n s u f f i c i e n t l y a v a i l a b l e , p a r t i c u l a r l y i n t h e
r u r a l a r eas .
Even where t h e banking f a c i l i t i e s a r e a v a i l a b l e ,
a number of problems a r e encountered by p o t e n t i a l
depos i to r s . The f i r s t of such problems is t h e long
p rocesses t o be undergone be fo re a chequeable account
i s opened - t h e demand f o r r e f e r e e s , a l l t h e forms
t o be f i l l e d (even where one i s n o t l e t t e r e d and t h e
h igh l e v e l of i n i t i a l d e p o s i t s , when t h e account i s
f i n a l l y oened,) The problems encountered when ope ra t ing
it i s even worse. A l o t of t ime i s wasted whi le t r y i n g
t o cash a s i n g l e cheque. I n some cases , it takes a
whole day t r y i n g $0 cash a cheque. I n t e r c i t y
t r a n s a c t i o n takes weeks o r even a month before it
is c leared , k l s o , t h e a t t i t u d e of t h e o f f i c i a l s of
t h e banks t o customers is another de te ran t .
Discr iminat ion aga ins t customers abounds. Somelbigl
customers a r e given p r e f e r e n t i a l treatment with a l l
t h e courtesy denied the !ordinary! customers . The
condi t ion f o r loans may be d i f f i c u l t t o comply with
by a smal l saver intending t o borrow from a bank.
~ 1 1 these r i g i d i t i e s very common among banks and ' o the r formalised f i n a n c i a l i n s t i t u t i o n s compound t o
make t h e i r se rv ices inaccess ib le t o the majori ty
of t h e people, such t h a t they f i n d consolat ion i n t h e
t r a d i t i o n a l f i n a n c i a l i n s t i t u t i o n s .
Reasons f o r t h e continued co-existence of t h e
informal s e c t o r with the modern i p s t i t u t i o n s a l s o
abound among farmers. Some of these reasons among
o thers include: - - They a r e major sources of c r e d i t t o farmers.
According t o ~ i l l e r (7 977) the non- ins t i tu t iona l
sources ( t h e informal lenders) provide most of
the c r e d i t s used by smal l farmers , (while t h e
commercial banks and o the r f ormalised i n s t i t u t i o n s
c a t e r f o r the f i n a n c i a l needs of t h e meciiut;l and
l a r g e s i z e d fa rmers ) . Be t h a t as i t may, t h e --
in formal o r n o n - i n s t i t u t i o n a l sources cont inue t o e x i s t
as long a s t h e s m a l l farmers cont inue t o e x i s t .
- u n a t t r a c t i v e n e s s of A g r i c u l t u r a l loans t o s m a l l
farmers: This i s another reason advanced by t h e ~ o o d
and A g r i c u l t u r a l o rgan i sa t ion (F ,A. 0) f o r t h e
continued co-exis tence of t h e in formal i n s t i t u t i o n s
with t h e modern ones. small farmers a r e t o o numerous
afid a r e n o t i n d i v i d u a l l y known t o banks. I n t h e words
of ~ ~ f l ~ ~ ~ " t h e e x t r a expense of adminis te r ing a b
m u l t i p l i c i t y of s m a l l loans t o fa rmers , who a r e
g e n e r a l l y i l l i t e r a t e s and of low p r o d u c t i v i t y , and
t h c high r i s k s involved tend t o discourage t h e
ord inary bank from e n t e r i n g t h e f ie ld11 . (F.A.o.
1965 p.V). Because of t h i s , t h e small farmer has
no o t h e r f i nanc ing opt ion than t o r e s o r t t o t h e crude
f r a d i t i o n a l methods of f i nanc ing t o n a i s e t h e needed
funds.
o t h e r reasons f o r t h e s u r v i v a l of t h e in formal
s e c t o r a r e : - - ~overnmen t s apparen t i n d i f f e r e n c e i n encouraging
r u r a l banking. This has tended t o enhance t h e
p r o l i f e r a t i o n of t h e t r a d i t i o n a l f i n a n c i a l
i n t e r m e d i a r i e s (onoh p.29).
- Convenience and l i q u i d i t y which a r e among t h e
f a c t o r s i d e n t i f i e d by ~ u r d a (1975 p.197) a s
c r i t e r i a f o r s e l e c t i n g i n s t i t u t i o n s f o r saving,
have a l s o helped t o account f o r t h e continued
co-existence of t h e i n f o r n a l f i n a n c i a l organisa t ions ,
TYPES OF INFORMAL FINANCIAL ORGANISATIONS
~t i s not easy t o completely i d e n t i f y a l l t h e
var ious types of t h e informal f i n a n c i a l organisa t ions ,
For one th ing , a s the name implies , these organisa t ions
a r e informal i n na tu re and t h e r e a r e no laws laid,down
t o guide t h e i r $orri~cition and operat ion, A s a r e s u l t , . . . ,
when once two o r more people a r e capable of coming
toge the r f o r t h e common purpose of mutually a id ing
each o ther i n f i n a n c i a l terms o r f o r t h e purpose of
extendillg c r e d i t s t o o u t s i d e r s , through some pe r iod ic
con t r idu t ions , an informal f i n a n c i a l organisa t ion
emerges,
However, some f inance scho la r s have been able
t o i d e n t i f y some common forms o r systems
of these t r a d i t i o n a l f i n a n c i a l organisat ions.
For example, p ro fesso r Onoh i d e n t i f i e d twelve of
$i.uch systems i n h i s work as following: - 1 , ~ s u s u ( ~ s u s u , osusu, susu) group,
2. Fillarlce through s l ave ry , human labour and ch i ld
marriage (This i s no i n vogue)
3 . 4.
5.
6.
7.
8.
9.
10.
11
12.
and
- 2 9
Age grade assoc ia t ion
v i l l a g e adminis t ra t ion cont r ibut ions
v i l l a g e r u r a l developm~nt schemes
Men s revolving loan associa t ions
Married womenfs assoc ia t ions
~ a i n i l y fund pools
Fgtended falriily co-operative fund
Town u ~ i o n s
Local money lenders and
Soc i a l clubs (onoh p.13) 8
Each of these groupings has i t s va r i a t i ons
the number of such va r i a t i ons vary from
l o c a l i t y t o l o c a l i t y . For example, tak ing up
v i l l agee r u r a l development schemes ; while i n some
places they may be organised j u s t f o r one scheme (
say e l e c t r i f i c a t i o n scheme$, some may have such a
r u r a l development scheme as a s tanding or permanent
f ea tu res . 1r1 other words, while some of t h e schemes
a r e adhoc i n na tu re , some a r e standii3g. a l s o , while
some a r e f o r s p e c i f i c p r o j e c t s , o thers a r e formed
f o r development general ly.
of these twelve types given above, t he most
popular and most widespread of t r a d i t i o n a l i n s t i t u t i o n
prevalent i n almost a l l t h e nooks and corners of
the world p a r t i c u l a r l y i n t he developing countr ies
a r e those engaged i n snvings, loan and mutual schemes.
I n t h e words o f professor onoh: these schemes a r e
in teg ra ted i n a system r e f e r r e d t o i n l o c a l par lance
as i susu i n ~ g b o land. A s a r e s u l t of t h i s popu ia r i ty
which i susu system enjoys, i t w i l l now be given some
deeper treatement.
The I s u s c system:
According t o professor okafor , the ~ s u s u - t y p e
s o c i e t y is based on t h e p r i n c i p l e of self-imposed
bu t group-ii:f luenced mandatory savings. ~t is
voluntary9 becausc each member determines t h e
a c t u a l amount of r egu la r savings t o make, but b
group-influenced because the s o c i e t y de-termines t h e
minimum p e r i o d i c contribu-tion acceptable ( okaf o r
p. 71) . con t r ibu t ions r a i s c d through t h i s system
a r e appl ied i n t h e ways agreed upon by t h e menbers
i n a l l e i v a t i n g the f i n a n c i a l problems of members.
This kind of f i n a n c i a l arrangement which i s co-
opera t ive l i k e has been found t o e x i s t i n many .
p a r t s of t h e world, e s p e c i a l l y i n Southern Asia,
Afr ica and the y e s t Ind ies . ~t i s given
d i f f e r e n t rlanies i n t h e varicjus places it i s found
f o r example i n N~ g c r i a it i s known by t h e
fol lowing names:-
~ s u s u , aha, Adashi, Ajo, ~ s u s u ain,d/or as hi, among
t h e d i f f e r e n t e thn ic groups t h a t cu t across t h e
country (onyemachi 1987), I n 2bo land i t i s c a l l e d
i s u s u , yorubas c a l l i t esusu whi le t h e Hausas c a l l
i t adash i . A t t h e i n t e r n a t i o n a l level : I nd i ans
r e l e r t o it as Kameti; o t h e r c o u n t r i e s wi th t h e i r
d i f f e r e n t names f o r t h e financial arrangement a re : -
S i e r r a Leone - zlsusus; Cameron - d jangg i ; Indonesia-
a r i s a n ; japarl- K O ; Victnam - ho; China - h u i ;
Malaya - t o u t i ; a e n i n Republic - ndjariu; Congo - k i limo.
~ h o u g h t h e system may d i f f e r i n nomenclature
among c o u n t r i e s and e t h n i c groups, t h e system b
remains same - a c o n t r i b u t i o n c lub whereby a
l a r ~ e group of people meet a t r e g u l a r i n t e r v a l s
t o pay a f i x e d s u b s c r i p t i o n i n t o a fund which
i s given t o each member i n t u r n (Ardener 1953
PP 217 - 219).
The i s u s u system has been found t o have
e x i s t e d f o r a very longtime i n h i s t o r y , According
t o Reverend o ~ k e e f f e ( s e e onyemachi 1987).....
c e r t a i n l y t h e esusu e x i s t e d i n 1843, f o r
according t o him rlcrowthePs 1 yoruba vocabula r ly
of t h a t d a t e gave d e t a i l s of s m a l l r o t a t i n g c r d d i k
a s s o c i a t i o n s ammg t h e ~ g b n and noted t h a t t h e term
1 ~ s u f was used f o r c m t r i bution:!. u n f o r t u n a t e l y ,
one caniiot t e l l wi th any degree of e x a c t i t u d e when
t h e i susu system a c t u a l l y s t a r t e d - though t h a t
i s not very important,
onyemachi i d e n t i f i e d fou r c l a s s i f i c a t i c n s 1 .
of t h i s system based on the method of operat ions,
1. TYPE A: This i s organised i n such a way --- t h a t each member pays i n some s p e c i f i c amount
money i n t o a fund. The to - t a l amount
cb l l ec ted is thcn handed over t o one member
f o r h i s use . This process i s repeated
s eve ra l times from one member t o another,
?;fi?en ever/body has gc t h i s /he r own tu rn , the
assoc ia t ion may e i t h e r come t o an end o r &other
round of cont r ibut ion m y be s t a r t e d , Here,
who ge t s f i r s t o r second o r l a s t , a s the case
may be, is determined through ba l l o t i ng ,
2, TYPE B: I n t h i s types cont r ibut ions a r e a l s o -- made as i n type A above, but i n t h i s case, no
payment i s made i n cash t o anybody. Ins tead ,
the t o t a l co l l e c t i on i s usua l ly invested on
something concrete a t the end of t he year f o r
one member (probably t o check t he tendecny
among members of c'iverting the funds t o non-
productive uses) . The process is a l s o
repeated u n t i l everybody i s served. This form
of arrangen;t.nt is comnion among tht? M.ano/~andigo
people of ~ i b c r i a ,
3. TYPE C . This type i s organised i n such a way
t h a t a respected and t r u s t worthy member c o l l e c t s
contribution:: from a l l members a t r egu la r
i n t e r v a l s . r\jo p a r t o r t o t a l cont r ibut ions
co l l ec ted is paid out t o members, n e i t h e r
a r e they given c r e d i t s a t such regu la r i n t e r v a l s .
A 1 1 t h e money co l l ec ted i s l e f t i n t h e custody
of t h e chosen honest member u n t i l the year ends
o r another pre-arranged t ime, when t o t a l
a m ~ u n t s contr ibuted by each member i s given
back t o him o r he r . This arrangement is
popular among t h e Vai people of L ibe r i a and
t h e former rJostern region of Nigeria.
4. TYPE Do This i s thc t y p i c a l savings and c r e d i t -- assoc ia t ion organised i n such a way t h a t i t s
l i f e s p a n o r dura t ion i s t i e d t o t h e a c q u i s i t i o n
of d e f i n i t e ma te r i a l a s s e t s by a l l members.
xverymember must have benef i ted from t h e
a s s o c i a t i o n - mate r i a l -asset-wise before i t s
l i f e s p a n is conplcted. I n o the r words, i n t h i s
kind of arrangement, no sooner t h e a s s o c i a t i o n
has achieved t h e major ob jec t ive of hers than
it i s disbanded by members themselves.
Apart from t h e s e four types descr ibed ,
there i s yet another type whereby the u s u a l
c o l l e c t i o n i s got from mzmbers bu t c r e d i t s
can be given t o both members and non-members. A
non-member, provided he can g e t a member of the
a s soc ia t ion a s a guarantor , can request f o r c r e d i t
from the associa t ions I n t e r e s t i s chargeable on t h e
loan. NO d i s t r i b u t i o n i s made t o members d i r e c t l y
a f t e r t h e rebwlar co l l ec t ion .
In more s p e c i f i c t e r n s , t h e r e i s a v a r i a t i o n of
t h c schenles c a l l e d ~ b h i s h i l i n Ind ia , which is
common among a l l c l a s s e s of soc ie ty , e s p e c i a l l y
t r a d e r s and labourers i n t h e ~ ( o l h a p u r D i s t r i c t of t h e
Bombay s t a t e . b his his advance loans up t o a c e r t g i n
extent and f o r c e r t a i n purposes. Before s t a r t i n g a
Bhishi , i t s dura t ion (usau l ly between one and t h r e e
years ) and t h e r a t e of savings expected of the
members a r e decided upon. The cont r ibut ions made by
membcrs, togethcr with i n t e r e s t , a r e repaid them on
t h e terminat ion of t h e hish hi i n proport ion t o t h e i r
sha re i n savings. This kind of arrangement resembles
what we have i n some m i n i s t r i e s i n ~ . g e r i a some times 3.
c a l l e d clwistmas t h r i f t fund. ~ n i s h i s , it must be
noted, can be terminated even before t h e pcr iod
normally f ixed f o r them (committee of ~ i r e c t i o n
1954 p.28).
one th ing t o be noted about these typologies
of mutual cont r ibut ions and c r e d i t ex tent ion is t h a t
t h e r e i s no c lea r -cu t l i n e of demarcation among them.
~ l l involve one kind of f i n a n c i a l con t r ibu t ion o r
t h e o ther , AS a r e s u l t , op i r~ions have continued t o
vary among va r iours a u t h o r i t i e s on t h e b e s t way t o
c l a s s i f y t h e infgrmal f i n a n c i a l i n s t i t u t i o n s . For
example while the F.A,@. (1959) took a pure ly
t r a d i t i o n a l view po in t i n identifying b a s i c a l l y two
types of c r e d i t societies namely: strural t h r i f t
and c r e d i t societyit and {turban t h r i f t and c r e d i t soc ie ty :
(F .A,rJ. Agr icu l tu ra l ~evc lopr r ,mt paper 1959 pp .19-27)
Adeyeye (1978) adopted e n t i r e l y d i f f e r e n t approach
by lumping, genera l ly , c r e d i t s and t h r i f t s s e p a r t e l y
and c a l l i n g them - rfco-credits!! and vtco-thrifts!!,
~ r r e s p e c t i v e of the approach adopted i n
c l a s s i f y i n g then!, t h e f a c t remains t h a t the re e x i s t s
d i f f e r e n t types of t h r i f t s and c r e d i t a s soc ia t ions
i n t h e t r a d i t i o n a l s o c i e t i e s who organise one kind of
f i n a n c i a l nutua l a id scheme o r the o the r t o mobilize
savings,
0BJECTIVES AND FUNCTIONS OF THESE INSTITUTIONS %
T h r i f t , which i s tllc avoidance of extravngance
and t h e p r a c t i c e of wise spending are t h e lessons
which t h e Afr ican has t o learn. What i s needed i s
t h r i f t under supervis ion; organised and cc~n t ro l l ed
t h r i f t , f r e e from specu la t ion ( s o f a r as humanly
p o s s i b l e ) , f r e e from t h e r i s k of embezzlemant. T h r i f t
must be v o l u n t a r y , i f t h e s a v e r i s ever t o become a
r e s p o n s i b l e c i t i z e n , it ixust be coii t inuous, i f an
econornic r e s u l t i s t o be a t t a i n e d , and it mst be
p r a c t i s e d by organised and s e l f governing groups i f
t h e l abour of s u p e r v i s i o n and c o s t of management a r e
n o t t o tc excess ive ( s t r i c k - l a n d 1934) p.13) From
t h e above s t a t emen t s , one o b j e c t i v e of t h r i f t
o rgan i sa t ions becofiic t h a t of cnccurngirig t h e h a b i t
of s u s t a i n e d and organised sav ings , b
Okonjo notcd t h a t t h e main aim of t h e a s s o . i a t i o n
i s t o assist i t s members i n sma l l s c a l e c a p i t a l
format ion by making them pay compulsor i ly a t s h o r t
r e g u l a r i n t e r v a l s l i k e on a f o u r day n a t i v e weeks,
weekly, f o r t h n i g h t l y o r monthly b a s i s , a f i x e d sum
of money which i s t h e n pooled t o g e t h e r and given t o
members a t a time on 2 r o t a t o r y b a s i s (Ckcnjo,
unpublished work), This aim o r 1 ob jec t ive1 of
a s s i s t i n g members i n s x a l l - s c e l c c a p i t a l format ion
conforms with t h e savi.ngs encwragement o b j e c t i v e
of a s s i s t i n g members i n sma l l - s ca l e c a p i t a l f o r n a t i o n
conforms wi th t h e sav ings ericouragement o b j e c t i v e
e a r l i e r nu t ed,
Apar t from encouraging c a p i t a l fo rmat ion , through ,% '
s a v i n g s , the va r ious i n f o r tml f i n a n c i a l o rgan i sa t ions
a l so aim a t and perform c r e d i t funct ions by t . extending c r e d i t s t o deserving inves tors out of the
accumulated savings made from the per iodic contr ibut ions.
In the words of professor onoh: ' A good number of t he
t r a d i t i o n f i n a n c i a l ins t i - tu t ions perform c r e d i t
func t ions , prmviding c r e d i t t o t h e i r members, on
which i n t e r e s t i s charged by some assoc ia t ions , while
o the r s provide i n t e r e s t , f r e e c r e d i t . Some demand
some form of c o l l a t e r a l s e c u r i t y while o thers r e l y
on t he i n t e g r i t y of members, ( Onoh p .21)
Ljhile savings and c r e d i t funct ions remain t h k
dominant funct ions of these i n s t i t u t i o n s , other
func t ions a r e d i sce rn ib le among t h e various forms
of such organisat ions t h a t e x i s t , For example, t he
age grade assoc ia t ions perform c e r t a i n cicveloprnental
p ro j ec t s i n t h e v i l l a g e s e i t h e r vo lun ta r i ly o r
mandatorily, The various v i l l a g e funds a r e no t r a i sed
f o r credi t -extension as such but f o r developmental
p ro j ec t s ,
These various organisat ions a l s o form avenues
where people come together t o provide a l l s o r t s of
mutual a id t o each o ther , Those i n some kind of
f i n a n c i a l predicaments may he ba i l ed out of t h e i r
precarious s t a t e s through obt ianing some discount
se rv ices even where t h e i r tu rns f o r the r o t a t i n g funds
have no t matured,
A g r e a t ma jo r i t y of t h e s e a s s o c i a t i o n s a l s o
perform some s o c i a l f u n c t i o n s , f o r example a t
b u r i a l ceremonies 2nd o t h e r f e s t i v a l s .
ow ever, t h r i l t and c r e d i t f u n c t i o n s remain
t h e key f u n c t i o n s performed by ma jo r i t y of t h e
i n s t i t u t i o n s t h a t a r e i d e n t i I i a b l e .
ORGANISATI ON AND WLNkGEI'DINT : - Due t o t h e n a t u r e of t h e o r g a n i s a t i o n s , ( t h a t
i s t h e in formal n a t u r e of t h e i n s t i t u t i o n s ) t h e r e i s
no s o p h i s t i c a t e d o r g a n i s a t i o n o r management
s t r u c t u r e , f o r them. There may o r may no t be perhanent
l e a d e r s (onoh p .I 7) t h e r e o r g a n i s a t i o n s a r e u s u a l l y
very s i m p l i f i e d somctimcs r e q u i r i n g j u s t coming t o g e t h e r
of a few people t o mnkc t h e u s u a l c o n t i r i b u t i o n .
I n some arrangements, t h e r e a r e no formal meetings,
A de s igna t ed c o l l e c t o r merely goes round a t t h e
appointed t ime, and a p p l i e s t h e proceeds as mutual ly
agreed upon by members. where meetings a r e t o be
h e l d , such meetin@ a re u s u a l l y r o t a t e d among members
and t h e member who h o s t s a meeting au toma t i ca l ly
becomes t h e chairman of t h e day
There a r e no w r i t t e n laws, r u l e s o r r e g u i a t i o n s
t o gu ide t h e ope ra t ion of t h e o l d e r f i n a n c i a l u n i t s .
The convent ions , a r e however, known by members who
keep t o them and r e s p e c t then l i k e any w r i t t e n laws.
The f requency of meeting, t h e day, t ime and
p lace a s we l l a s t h e amount t c be pa id by each
member a r e usua l ly determind by genera l consensus o r
by t h e inner l eader s , where thcy e x i s t (onoh p.18)
The more rccen t organisa t ions of the t r a d i t i o n a l
o rgan i sa t ions , however, now 'n;lvc w r i t t e n guiding
c o n s t i t u t i o n s , a complete s e t of p r i n c i p a l o f f i c e r s
and even maintain bank accounts , f o r example t h e
s o c i a l c lubs , t h e f ~ j o or' , d a i l y con t r ibu t ion which
i s a v s r i a n t of t h e i susu , and i n f a c t almost a l l
o thers . This may be due t o t h e improving standard,
of educat ion and the r i s e i n l i t e r a c y r a t e ,
The na tu re of thzse organisa t ions a r e such t h a t
r equ i res l i t t l e f i n a n c i a l management, even a t t h i s
t h e i r new re-or ienta t ion .
Conformity t o t h e l a i d down r u l e s and
regu la t ions as w e l l a s the genera l conventions i s
ensured through the use of sanct ions. Any member
f o r example who d e f a u l t s i n r egu la r cont r ibut ions i s
s w c t i o n e d , and such a person r e a l l y f i n d s it
d i f f i c u l t t o gain accept*:nce i n t o any such informal
group,
-- --* REFERENCES
*- . Abe, S , I . . IfNigerian Jarmers and Their Finance
" Adeyeye, S.0, The Co-operative ~dvement i n Nigeria- Yesterda Today and Tgmorrow: (Cotting;;: Vandenhoen and Ruprecht 1978):
Ardener, S ,
I
Bedi, R.D. . Theory, History and P rac t i c e of Co- I operat ion 3rd ed,( lndia: Prabhat Press , Meernt 1962).
I I I . Bhatt , V.V. Devehpment Perspect ives Problems, I I
St r a t egy and Po, l lc les (Oxford: I Pergamon Press 1980).
I! I
. Bourne, Comptom: I1Structure and Performance of Jamalcan I Rural F inanc ia l Markets" Soc i a l and Economic Studies Volume 32 Number 1
i 1
March 'l983, .I Burda, Edward I, Consumer Fi.nance (Newyork: Harcourt
brace Joranovich Inc. 1975).
Calver t , H,G, The Law and P r inc ip l e s of Co-Operations (unpublished Work - London 1959). I
Quoted i n Enugu Consultants Report NO 6 1961,
Donaldson, Elvin Personal Finance 6 th ed, (Newyork : ) e t a 1 Ronald Press Company 1977).
MAgr icu l tu ra l Credi t Through Co-operatives a n d other institution^^^ F.A.o. Agr icu l tu ra l ' Studies No 68 1965
"Co-operative T h r i f t Credi t and Marketing I i i n Economicall~v Underdeveloped Countriesl1 I
Agr icu l tu ra l ~ e v e l o ~ m e n t paper No 34 U , N Rome '1959.
India , Committee of Direct ion; Report of " A l l Ind ia Rura l Credi t Survey Volume 111 Hombay 1934
.. Krivine, D ed, I1Fiscal and Monetary Problems i n Developing S t a t e s (New York : 1967).
METHOD OF R E S W C H 4.
3.1. DETERMINATION OF P0IDUT;ATION:
The nature of the current study i s such tha t t h e
population i s not well defined', This i s due to the Tollotrlng
reasons( s)': - Informa.1 f inanc ia l o r g m i sa t ions , as: the name implies,
i s informal i n nature, There i s no record of the number ,md
popula t im of these orgsnisetions. Those who belong to such
organisat ions a r e o f ten very d i f f i c u l t t o be iden t i f i ed ,
unless through personal interview you a r e ab le to f in$ ou t
whether one belongs to such m organisation, As a r e s a t
of t h i s , the study i s similar to f i shing i n a. mighty ocean,
i n which case, the fisherman has no idea o f the population
of f i shes i n the ocean, I n the seme manner, our population
for the current stud'y i s indeterminate.
3.2, DETERPENATION OF SMPLE SIZE
Because the population i s indeterminate a s explained
s c i e n t i f i c method o r s t a t i s t i c a l could'
be found amenable f o r ,arriving a t a sample size.
Fbwever, i n order to avoid a s i t ua t ion of unguideif
search f o r information, we hs.ve decided- to use three groups
of i n s t i t u t i o n s a l l i n Enugu viz:
A, Markets,
R, Higher Educational I n s t i t u t i o n s
C. Ninis t r ies .
In each group of i n s t i tu t ions , t h r e e organi sa t ions wer c
Markets: - Kenyota Mark&
Ogbete Main Markett
A r i s ? (New) Market.
Higher Educational I n s t i tukions:-
University of Nigeria, Enugu Campus.
Anambra Skate University of Technology, Enugu Campus,
I n s t i t u t e of Manngement and Technology, Enugu.
Ministries:-
Vfinistry of F inmce and Economic Planning,
Mini s t r y o f Works ,and ~ousing-.
Ministry of Est~bl ishments ,
I n e x h of these organisat ions, a preliminary
invest igat ion w.s carried out to f i s h ou t who and who belonged
to one kind' of informal f i nanc i a l ong,misation o r the other)..
U n s t r u c t ~ e ~ interview method was used a t t h i s stage! of
inves t igat ion to find- ou t who was a member,
After th$s. preliminary stage of inves t iga t ion we decided
tb use a emple s i z e o f 90 respondent% broken down a s
folkwing:-
a, Kenyaka Mark& 10
b, Ogbete Main Market 10
c Aria C:New) Market
d, University of Nigeria, &U&U Campus 10
e; Anambra Sbcte University of Technology,Ehugu Cc?mpus 10
Ministry o f F inmce 2nd Economic Planning
Mini s t ry Works
Ministry of Estzlllishments
T O 'ra
DATA COLLECTION:
3,361 SOURCES O F DATA:
3.3.1.1 PRIMARY DATA SOURCE
Raw $a& were got from those who indicated' thaB they
belonged to one form o f informal f inanc ia l organisat ion
during the preliminary inves t iga t ion interview. To &xtmc'i
inform2tion from them, s Wuctzrrcd questionair ox were usedo
These quest ionaire copies were ad:minis-tiereCi, both fa,ce to
fece and IBrough the i d e n t i f i e d informel l eaders of t h e s e
informal orgnniszt ions, on the i d e n t i f i r b l e members,
I n the, cp-se of the market t raders , we mi t e d f o r t;liex
to complete the quesUionaire (o r vre completed i t for tho s;.
who cannot write) i n ord-er to c o l l e c t them on t h e spo&
This was due 'dr, the nature o f t h e i r business a n d i t mPy not-
Be easy to l oca t e them i f l e f t alone,
O'ccasional in temiews were also used to ge t some
information not cover-ed by the ques-tionnirc, Also, inter-- '- t
were used to g e t informstion from the i den t i f i ed collectorr ;
o f the a a i l y contribu-bion type of informal f i nanc i a l
o~ganisa-bion.
- 43 - 0 - , -
3.3d'. 2. Se-condary Da,B Sour r .
The secondary data used for t h e study were both the
p u b l i s h d a n d unpublisheif l i t e r a t u r e on the subject- and
finance generally, h i c h were employed i n t h e - l i t e r a t u r e
review sectkion af the report.
3 INFROMAL FINAECI ORGAN1 SATIONS STUDIED:
From tlhe preliminary invest igat ions a l so , i t was found
ou t t h a t the re a r e basical ly, three major- types of informal
f i nanc i a l organisat ions very commnon among the three
a r b i t r a r i l y selected groups of i n s t i t u t i ons . These informal B
groups according to t h e i r respect ive i n s t i t u t i o n s of
popular i ty a re given belot\c . . - - -
3.4.1, E',Tarkets.- Daily con-tribution ( t h e - ' , a j o t varrima - i n Yoru'tla) .
.. . - -
3.4.2, Prigher Educational I n s t i t u t i o n s - I susu( monthly. . . . .
, , contribution)
3.4,3. Minis t r ies - Christmas Thr i f t Fundt CtJith va,r iat ions)
, , . : i These thaee informal &ns-tjS'dutJions %rere then dk&L&
No%e: Though there were some other kinds of armngemen'ds
anong the workers ( especia l ly i n the ministr iesy
where%r- some fundraising a c t i v i t i e s a r e done,
membership o f such associa%ions i s not voluntary
and' so a r e not consi6ered i n the> current study.
3.5. - .
ANALYSIS AND TESTS,
Relevant &&ta go t through the quest5onair e 2nd i n t e r v i a $
wene presented' i n SaBular forms with percentage, poines,
folIowing which some qua l i t a t i ve a n a l y s b Baseif on tohe
object ives which the) study aims a t achieving,wera~ rnad'e~.
This was preceeded by individual treatment given to
t he major types of i n f o r m 1 f inanc ia l organi sa t ions ,
$iscovered- a t the preliminary stage, which were studiedlo
3.502, TEST STATISTICS:
Three s t a t i s t i c a l t e s t s were emplayed i n t es t ing the .
s t a t ed n u l l bypo theses, %ey include: - i B.ezrsonr s Chi-square t e s t t of homogeneity o f
b
d3.stributXonW3 This s t a t i s t i c was employe6 to testf
hypothesis 3 which i s on non-pre fmnc of informal
groups over bznks, For a given s i z e i ~ f sample,
the d i s t r i bu t ion of Chi-square values i s the same
whatlever t h e value of the t rue variance;
This Chi-square t e s t s t a t i s t i c i s denoted- 'by:-
Chi-Squar e,
Ork 7 Observod frequency
C1 E r r k - Expected frequency
randtk represent number - of ~ w s and column mspec-tjivel
~15th d%g~ee of fzee6om (df) a s (k-l)(r-1):.
- 4 5 - -.
C i i ) : Pnofessor R.A. F i she r ' s F - r a t i o t e s t was also
esnployed to t e s t hypo t h e s i s 1 wbich i s on the non-
variabYli ty of income arrong aembms of d i f f e r en t informal
f inanc ia l groups.
F- ra t io r i s thc r a t i o of 2 estirna-tes of variance
denoted7 by F (a,f ter Professor Fisher)' , 3
1% i s given By: & $2 C;
Where f$ and S$ are tva e s t i m ~ t e s o f v s ~ i o n c e .
This d i s t r ibu t ion has two degrees of frecdom - Em$- and l o w ~ r degrees of freedom given by:
k - 1 m d n-k; whcrc:
k = number of collurms, and I?, r sample size.
p- rc7ti.o t e s t was employed along with t h e t'mdiltional
Analysis of v n r i m c e (AVOVA) tcble.
Ciii)) W,S, Cosse-tfls stud-ents.1 ii - d i s t r i bu t ion test'
w a s aks i mployed to test; hyyotheses 2 2nd' 4 vhich er
were on -the i n f l u m w , of income on da i ly contr ibution and
influence of contribut'lons on the r a t e s of re turn .
Students1 t - t e s t i s uscd fo r m a l l samples because
of the uncertainty i n the estimation of the standkrd error ,
Thc t&e of students1 "c t e s t crnployed i n the
currcnt study i s given By:
b l %- = - Obi
where lQ = Co-efficient of responsiveness Celast ici ty]
of the depenaent v u l a b l e on the,
%I = the standmd - mrorr,of t h e co-efficient
The- 6-e-grees. of freeclom f o r k- t e s t depends on
$he nmbm of estrirnated puameters and the. sampl'e size.
$6 LEVEL OF SIGITIFICANCE:
The leve l of s ign i f icmce , fo r a l l the t e s t s i n
me sAudy, (&) was 5%. . .
3.7-o DEXI S I O N CXL TERION :
Accept n u l l hypo thes i s whenwar the observed value
of the t e s t s t a t i s t i c f a l l s below the -table value which
marks the beginning of the c r i t i c a l region, otherwise - .
accept the a l t e rna t ive hypo thesis'.
CHAPTER FOUR EXPLANATORY NOTES ON THE OPERATIONS OF THE THREE IDENTIFIED 1NFORlU.L ORGANISATIONS
This chapter gives a little expose of the work-
ings of the three major types of informal financial
organisations studied, The procedure is to pick t M
the three types one after the other,
1. DAILY CONTRIBUTION.
This is the type of financial organisation found
to be very common among the market traders. In
the three markets surveyed, viz: Ogbete, Kenyata
and Aria markets; this daily contribution form of,
financial arrangement was about the only type of
informal financial organisation noticeable, Those
who indicated being in other forms of organisations
like isusu, showed that such arrangements were out-
side the market place,
i TKF: CONTRIBUTORS
The contributors are the market traders of var-
ious trades. This type of savings arrangement seem
to be very compartible with their own Wnd of income
pattern. That is, the contribution which is made mn
daily bzsis seems to agree with their income pattern
which is also a daily event,
Each contributor usually has a card issued to
him by the collector (~kawo' as they call him), It
is into this card that all the da.ily contributions
are entered, The contributor decides, based on both
* 44 a
ability and preference, how much he/she wishes to
be contributing daily, usually for a period of one
month. At the end of the month, if thq contribtor
wishes to have the amount already accumulated back,
that is given to him or her. Amounts contributed
daily ranges from H1.00 (One Naira). Below is a run
down of contributions by the thirty respondents:
TABLE .. . 1 , .-
DAILY CONTRIBUTION
Daily Contribution Frecluencv Percentage
ii THE COLLECTORS
The collectors are ordinary citizens who see
the job as a rewarding business opportunity. They
call their type of business tlocal banking business'
because of the similarity of their services with
the bankst services - namely: savings and lending. To be eligible for this kind of business an
individual must first register with the Ministry
of Trade, just as any other business , and obtain a registration number.
In the course of survey, the researcher was able
to identify the following registered collectors:
1. Eagle Star Daily Savings (~egistration No.16009)
Head office: 5 Hassan Lane, Zik Avenue, Uwani-
Enugu . 2 , Eddy Brown International ~ompany(~egistration
No. 17622) Head Office: M line No. 8 Old Park
Enugu.
3, Confident Daily Savings (~egistration No.162168)
Head. Office: Ogbete B'Iotor Park, Enugu. b
Others are:
4. Unity Associates (~aily Savings)
~ e a d Office: 24 Idewu Street, New Haven Enugu.
5. Mercury Daily Savings
Head Office: 18 Ejindu Street, Ogbete-Enugu.
These registered collectors cover most markets
in Enugu, through a band of workers. !mile some
collectors do the business as a part-time, others
do it full-tihe as their major business,
THE OPERATIONS
The collectors go out to the markets to prospect
for customer - Contributors. They approach the
traders in the market and other identifiable indivi-
duals and solicit their patronage. Some of them use
hand bills as advertisement aids. In the hand-bills
are explained some of the things a prospective cont-
- 50 -
r i b u t o r should know. An example of such a hand b i l l
i s shown i n appendix 1.
When a t r a d e r agrees t o s t a r t con t r ibu t ing , a
card i s i ssued t o him. This card resembles t h e
banks1 Savings pass-book and i s even ca l l ed 'pass
book1. The card i s u sua l l y r u l ed i n t he fol lowing
manner:
II
Jan. - I 1 Feb.
.
.
Amount with 1 Subscr ibe drawn i Signature
Daily con t r ibu t ions a r e entered everyday i n t h e
Columns 1,2 . , .31, while amounts withdrawn a t t h e
end of t h e month i s entered under t h e I3:K Column
aga in s t each month and signed.
A t t h e back of t h e card i s t h e name and address
t h e co l l e c to r . There a r e a l s o provis ions f o r
t h e c o n t r i b u t o r ' s pass card number; name and add-
r e s s a s we l l a s da t e of i s s u e ; and t h e provis ion f o r
f i e l d c a s h i e r ' s s igna tu re .
Apart from these cards i s sued , t h e c o l l e c t o r
- 51 - maintains a correspond-ing entry in the register he
carries along,
At the back of the 'Pass cardf is also written
the guidelines or the rules governing such a savings
scheme. Below is an extract of guidelines found
at the back of one of such cards:
1 . This pass Book costs 50k and it serves for two
years.
2. Whatever you pay for a day is our commission for
a month. b
3. Emergency withdrawals is only once a week,
4. The M/D reserves the right to order any sub-
scriber to close his/her account in case of
misbehaviour
Management I!
Another example follows below(frorn yet
another card) :
I1Rules and Regulation:
1. Withdrawal can only be made by the oubocr5bers
in person and on production of the pass book.
In case of unavoidable absence of the subscri-
ber, his written order, satisfactorily authen-
ticated and accompanied by the pass book will
suffice.
2, The pass book is 50k and it serves you for one
year.
3. Commission: Whatever you pay for a day is our c
commission for a month. Emergency withdrawal is
only once a week.
COMMISSION
Instead of paying interest to the contributors
at the end of the month as the modern banks do in
savings accounts, the collector charges commiss-
ion on the contributors for services rendered. b
As shown in the guideline above, the amount of comm-
ission charged each contributor depends on how much
the contributor saves everyday. For example, a
contributor who saves one Naira (~1.00) every day
pays B1.00 commission everymonth. The implication
of this is that even if the contributor in a thirty
he-day-month contributes H1.00 only for one day
and defaults for the rest of the days; that H1.00
contributed automatically belongs to the collector.
If on the other hand he/she consistently contribu-
ted H1.OO everyday for the thirty-one days, at
the end of the month he/she receives $830.00 while
W~1.00 forms the collectorfs commission.
FUNCTIONS OF TI33 COLLECTORS
The collector serves both as a saver as well as
a money lender.
A s a saver , he c o l l e c t s t he con t r ibu tor ' s
money f o r safe-keeping u n t i l he/she needs i t a t t he
end of the month o r a t emergency o r a t o ther times.
A s a money lender , the c o l l e c t o r gives bo-bh
out r igh t loans t o app l i ca t s a s wel l a s extending
overdra f t s t o customers. There i s no f ixed i n t e r e s t
charge s t ruc tu re f o r t he loans and advances. dow-
ever , i n t e r e s t charges a r e usua l ly 10% per month
and such loans a r e very short-term i n nature , not
exceeding th ree months. b
Before one q u a l i f i e s f o r a loan o r overdraf t ,
he/she must be e i t h e r a good customer t o the co l l -
e c to r o r be very wel l known t o him. The person
must be seen t o have both good charac te r and ade-
quate proof of repayment a b i l i t y . Amount o f money
loaned out depends on fund a v a i l a b i l i t y and the
amount t he con t r ibu tor saves.
APPLECATION OF COLLECTIONS:
Collect ions made everyda.~ i s e i t h e r used i n
giving loans t o app l ican ts o r banked (savings
accounts) .
I n order t o avoid being asked t o open current
accounts by t h e i r bankers, the co l l ec to r s usua l ly
have accounts i n d i f f e r en t banks. This i s t o control
the frequency of t h e i r withdrawals from t h e i r accounts
and also to cut down on the volume of money deposi-
ted in such savings account.
Interest received from such savings accounts
with the banks form yet another source of income to
the collector apart from commissions.
OTHER FUNCTIONS
Apart from savings and lending functions the
collectors also render some other special-
ized personal services to customers such as:
(a) extending accident aid to transporter-custom$rs.
In other words, a taxi-driver, for example who
saves with a particular collector may have an acci-
denJ6 with his taxi; the collector at times, gives
aid to such a victim if need be.
(b) Emergency Withdrawal: Even though this is limi-
ted to once a week, that is another of such personal
services rendered. A saver may be hard-pressed,
even at night; he simply goes to the collectors
house for emergency witlidrnv~al. Usually, an emer-
gency withdrawal card is provided, (which looks
like the illustration below), for that purpose:
Emergency Withdrawal Card I
Month
Jean .
Remarks Date & Amount
REceivers signature or right thumb imp- ression ---I ..---I--
2. CHRISTNLllS THRIFT FUND
This is the informal financial organisation
found to be very common among the ministry workers.
As the name indicates, this type of savings scheme b
has as its main objective, saving towards Christmas
festivities. This resembles the type of savings
scheme organised among the Muslims of the Northern
States towards the major musli~ festivals especially
the Id-el-Kabirf whereby Muslims save over the years
towards the purcha.se of rams for the celebration of
the big feast.
Christmas thrift fund among the ministry work-
ers surveryed usually starts in January of every
year with the first round of contribution, while
the last contribution of the year comes up in
October. This is to ehable members get their money
back in November for all necessary purchases for the
ChristmasCelebration before prices of items begin to
rise.
OPERATIONS
The fund
Chairman, the
ings are held
first meeting
normally, has three officers - the Secretary and the Treasurer. Meet-
usually three times in a year - the comes up in January to agree ox the
models of activities for the year; the second meet-
ing, called the half year meeting comes up around
April or May or June to assess progress made. The
last one comes up in octobcr or November to distribute
collections and interests.
There is always a written constitution which
provides for the activities carried out. Usually,
a minirnwn amount to be con-fributed each time b
(monthly) is mutually agreed upon. A maxina is also established beyond which contributions each time
should not go. Between these lower and upper
limits an individual can decide on how much to con- tribute. \That happens in that at the end of the
month, on receiving the month's pay, each contribu-
tor goes to the collector who is either the secret- ary or the Treasurer(wh0 is also the financial Sec-
retary) to pay his/her dues. To clearly appreciate the workings of the rRund,
it may be necessary to look at the christmas thrift
Fund as operated by each of the three ministries
surveyed.
(a) MINISTRY OF PINANCX AND XOMOMIC PLANNING
In this ministry, the informal institution
is called Christmas Fund Thrift. This was started
in 1977 with the prkmary objective of helping int- erested workers in the various units to save towards
Christmas festival. The idea behind establishing the
fund was to avert the problems which workers are
exposed to by going to the money lenders to borrow.
MEMBERSHIP: AJ6thBegthe beginning of the year,
the secretary issues a circular to all the workers
in the various units of the ministry calling on
interested members to apply for membership. Appli-
cations stop with the end of January when first con-
tributions for the year are made. Membership has
fluctuated since 1980 between 32 and 46. Below is
a break down of membership since 1980
1980 32 members 1984 n.a
1981 39 11 1985 34
1982 46 11 1986 37
1983 37 11 1987 33
members
I t
I t
Source: The fund's files -- One thing to be learnt from this fluctuating
mdmbership structure is that somebody who is a mem-
ber this year may decide not to be a member next year.
The 1984 figure was not given above because that was
the year when workers were moved out of office,
during some logistical restructuring, and workers
were not sure of sta.ying together, so, the fund was
not organised in 1984.
CONTRIBUTIONS: The minimum contribution that could be
made by any member is H5.00, while the maximum is
H50.00. This contribution as much as possible must
be consistently made by any member to qualify for all
benefits. No law binds any member to be consistent
in amount paid. In other words, one can contribute
H10.00 this month, and next month contribute 2315.00,
provided that one does not exceed the bounds.
LOANS:- Apart from saving for members towards
Christmas purchases, the thrift organisation uses
contributions made by members to extend loans to both
members and non-members. Loans are given at 5$ int-
erest for one month and usually, one is expected to b
pay back the loan after one month or at least be
servicing the loans. However, every outstanding
loan must be paid back before the day of reckoning
when contributors will want their money back.
obtain any loan, an applicant
must produce two sureties who must be members of the
fund. An applicant must also be adjudged to be of
good character before any fund is committed into
loan to him or her.
APPLICATION FOR LOAN: Application for loans
must be formally written and addressed to Officers
of the fund via the Secretary. These applications
are then considered on their merits and allocation
is made on first come first served basis. Loans are
made out from each month's contribution, the balance
of which is paid into a savings account in the bank.
BENEFITS: Apart from the safe-keeping of ones sav-
ings, the thrift fund also pays interest on the money
saved. The money used in paying interests comes
from interests paid by both the banks and the
borrowers from the fund. One's contribution for the
period determines the amount of interest he or she
gets. However, it is only those who consistently
pay their contributions that get interests. Any-
one who defaults for three consecutive months is
denied the interests benefit. B
Members are also entitled to the credit faci-
lities offered by the fund.
SANCTIONS:- Apart from inpounding on a contributor's
interests, should he or she default for three conse- -_-.
cutive times, another check on the credit facilities
is the ceasure of a contributors contributions a h
should a borrower he suretied or guaranteed defa-
ult in payment. Also, those who have been found
to be defaulting in contributions over the years
are not admitted in subsequent years.
DISTINCTIVE CHARACTERISTICS: Some distinctive
characteristics found in the christmas thrift fund
of ministry of Finance include the following:
i. Meetings are held only two times a year - Janu- ary and October.
ii. Interest charges on loans are the same for both
members and non-members at 5$,
iii. There is proper documentation of all their deal-
ings because of permanency in the tenure of Officers.
iv. They advertise formerly, through circulars for
membership,
Table below shows the activities of the organ-
isation from 1980 to 1986, apart from 1984.
Year
1980
1981
1982
1983
I984
1986
Table ... 2 - ACTIVITY-FIGURXS Sau. in Bank
(3
Int . on Loan (4)
225.50
273 .OO
290.45 . .
291 9 1 5
240.50
183.50
b
nt , from Bank (5)
237.00
546.00
572 . 00 542.00
467 00
337 00 Sources: The funds files.
Return: This is the rate of return per H1.00 of
contribution for the 10 months period,
This is got by ( ) - I = Return,
NOTE Conts=contributiong,Sav=savings9 Int= Interest. -
(b) MINISTRY OF WORKS AND HOUSING.
It is simply called Christmas Fund1 in the Mini-
stry of works and Housing.
This fund as orgainsed by the ministry is al-
most the same thing with what obtains in the mini-
stry of Finance. However, there are some differnces
that are wort@y of note:
(i) There is no formal advertisement for members
through circular as in ministry of Finance. It is b
through personal contact that new members are got.
(ii) The maximum amount that could be contributed
by anyone at a time is H200.00; minimum is H5.00:
(iii) Maximum loan to be extended to organisations
is B3,000.00, while it is H300.00 to individuals
(iv) Interest on loans to members in 10% per month
while it is 15% for non-members.
(v) There is an application form for loans which
a loan applicant must fill before being considered.
(vi) Meetings are held, three times a year.
(vii) Application for membership is addressed to
thc Chairman, Christmas Fund; which is then
scrccncd by the Bxecutive body (of three). After
considerations, the applicant is invited for inter-
view following which he or she is accepted or re-
jected.
( (viii) Membership is open to only the married men
and women.
Membership [ ] End of year meeting holds in first week of Novemebr where the contributions with interest are d
disbursed to contributors.
(x) Membership stands aJc 87 now but the upper limit
of 100 has been mutually agreed upon beyound which
membership should not go.
(xi) Contributions are not saved in the bank. b
(c) MINISTRY OF ESTABLISmNTS
It is also called Christmas Fund in this mini-
stry. The sponsors are the pensions section of the
ministry of Establishment though membership is open
to all interested persons irrespective of section
Distinctive Characteristics Include:
(i) bfinimum contribution per month is B1.00 while
the maximum is H30.00. In otherwords, it is low
keyed.
(ii) You can be a member of the fund without cont-
ributing. In which case you are entitled only to
loan (credit facility) benefits. Though loans are
often extended to outsiders, tha.t is very rare to
find.
(iii) Interest on loans is lowest - 22A per month.
(iv) Maximum loan to any person is W700,OO though
discretion is often employed in exceptional, despe-
rate cases.
(v) Membership is about 60 and is restricted.
This is another infoymal financial organisa-
tion found to be very common among the workers of the
institutions of higher learning surveryed:University
of Nigeria, Enugu Campus; Anambra State University
of Technology, Enugu Campus and Institute of b
Management and Technology, Enugu.
This This kind of informal financial arrangement
differs from the othe:-. two already explained in the
following ways.
(i) The contributions revolve among members. That
is assuming there are three members contributing
W50,OO per month, after each month's contribution,
one of the members takes it. THis goes in rotation
until all have benefited from the contributions.
(ii) The contributions are not invested in any form
That is, it is neither loaned out nor saved in the
bank. However, the person whose turn it is to collect
may choose on his or her own accord to loan it out
or save it in the bank.
(iii) Because it is not invested in any form, it
is not interest earning.
Membership in the ones surveyed is relatively
very small. Not exceeding 12. The reason is so
that each member must at least benefit from the
the from the contributions once in the year.
OPERATION
Operation this kind of informal financial organ-
isation is over simplificd. Thrkre is not much organ-
isation involved. This is a scenario whereby friends
or co-workers(who also are friendly) come together,
out of mutual understanding, and agree on amount tobe
contributed each month. As much as possible, the amounts
contributed are uniform. In otherwords, as~uming thme
are five people cont~ibu-ting H50.00. All five members
must pay H50.00 every month for the five months running.
This is for ease of accounting.
However, investigation revealed that there arises
3 situation whereby one member may decide to be cont-
ributing 'double' in which case, the person turns out
to be a double shareholder. The implication is tha.t in
hea&count9 members maybe five in number but there exists
six shares. This double shareholder contributes twice
what every other person contributes every month.When it
comes to his or her turn to take the revolving contr%
ution every inember of the group also pays double(twice)
what they have been paying, to compensate for his or
her double payments.
This form of the % l z @ d f 5 ~ K I ~ . i financial Arrangem-
ent is so typical of the traditional financial organ-
isations that the word 'ISUSU1 has come to be synon-
ymous with informal financial organisation. The arr-
angement is so informal that one hardly recognizes their
existence. It is often treated as a top secret among
the members, unlike the other informal groups already
described, which in one or the other try to formalize
their activities.
Prom the surveys conducted and through the resp-
onses Lo the queztionair3s Gistributed, six ISUSU1b
groups were discovered among th? three institutions of
higher learning, Membership strengths and amounts
contributed by these six groups are given below
TABLE . . . 3 ISUSU DISTRIBUTION
0 Number of Persons Amount Contributed
2 4 50.00 3 5 100.00 4 6 50 00 5 10 60.00 6 12 50.00
These isusu groups also exist among the ministry
workers in addition to the thrift funds, as inter-
view with some of them revealed, but not as conmon
as they are in higher institutions.
CHAPTER FIVE
"Af te r a l l i f we a r e u n c l e a r about what it is we
a r e r e a l l y seek ing , no advances i n a n a l y t i c a l t echn iques
whatsoever a r e going: t o h e l p u s ve ry muchE' - F;.N. I-Ioag,
This chapter i s made up of two major p a r t s . The
f i r s t p a r t d e a l s wi th tlle p r e s e n t a t i o n and a n a l y s i s of
d a t a provided by t h e respondents t o t h e q u e s t i o n n a i r e
d i s t r i b u t e d . Phe d a t a a r e p r e sen t ed i n t a b u l a r forms , with some explana tory n o t e s fo l lowing each t a b l e t o
make t h e i n fo rma t ion provided by t h e t a b l e s c l e a r e r .
The second p a r t of t h e chap te r d e a l s wi th t h e
t e s t of hypotheses . The f o u r hypotheses e a r l i e r s t a t e d
i n t h e i n t r o d u c t o r y chap te r of t h i s r e p o r t w i l l be t e s t e d
u s i n g t h e r e l e v a n t i n fo rma t ion provid2d i n p a r t 0112 above.
The s t a t i s t i c a l t z s t s enumerated i n c h a p t e r t h r e e w i l l be
employed f a r t h e t e s t s ,
To avoid making t h i s t e s t s of hypotheses s e c t i o n
look bulky, t a b l e s f o r t h e s t a t i s t i c s employed and t h e
workings t l i c r eo f , a r e t r e a t e d i n t h e appendices.
t he researcher or through the informal l eader ( s ) of the
informal f i nanc i a l organisat ions who iden t i f i ed competent hands
t o fill the quest ionaire. For example, a l l t h i r t y (30)
quest ionai re administered t o the market t r ade r s were administered
face t o face (by the researcher) t o them.
A 1 1 ninety (90) quest ionaire were properly f i l l e d and
s o , the re was none t o be discounted. So, the presenta t ion
and ana lys i s t ha t follow w i l l be based purely on the 90
respondents.
TABLE 5 - QUESTION - 1
DISTRIBUTION OF RESPONDENTS BY SEX
ORGANISATION
mmT S MINISTRIm
SCHOOLS
PEFXENTAGE OF TOTAL
PERCENTAGE BF If OTAL
Table above shows tha t out of t he 90 respondents
f i f t y t h r ee (53) representing 59% of the respondents were m l e
Bhile t h i r t y f seven (37) Pepreienting tWe balance of 4l%;were
f e m l e . Male respondents were :re.2&tmQa more. i n markets and
minis t r ies than i f i s ~ h o o l s whiEe f eml'e respohdent4s 'were x -
n e h t i v e l y more i n schools - though overal l , .male respondents
outnumber female respondents i n a l l t h r ee types of organisat ions
surveved .
DISTRIBUTION OF RESPONDENTS BY MARITAL STAUS
ORGANISAT I O N
MARKETS
MINISTERS
SCHOOLS
PERCENTAGE OF TOTAL -
SINGLE - 12
8
8 - 28 -
I I
PERCENTAGE OF ,
TOTAL -
The Table above shows t h a t sixty-two (62) out of t h e 90 b
respondents were married men and women, while twenty-eight ' I
j
(28) a re bachelors and s p i n s t e r s . I n percentages, married . I 1
respondents r ep resen t 68.9% of a l l respondents while s i n g l e
indiv iduals claim t h e balance of 31.10%. This shows t h a t
married respondents outnumber t h e unmarried ones,
TABLE . -7 - QUESTION 3
INCOME DISTRI.BUTION OF THE RESPONDENTS
3000 and abov
MINISTRIES
BY FRE- . QUENCY -
SCHOOLS
BY FKE- Q U r n C Y -
. - .. 6
5 5 7 7 - 2=0=
PERCENTAGE
OF TOTAL
See Appendix.3 For conversion of incomes t o absolute values.
Table above shows t h a t none of the respondents from both school and minis t r ies earn income below 81 000 .oo. This is
i n agreement with minimum monthly income regula t ion of W125.00
which l e m e s one with a n income per annum of a t l e a s t H I , 500.00
before t ax .
However, among the market t r ade r s some respondents were
earning income per annwn of below t h i s minimum. For example,
eleven ( 1 1 ) out of the t h i r t y (30) respondents from the
market indicated tha t they m e r e earning below 8 1 000.00 per b
annum, Though t h i s maybe as a r e s u l t of subject ive f ac to r s
i n the minds of t he respondents. Among these below
minimum-inc ome earners ' were the pet it t r ade r s and school
chi ldren who work t o s u s t a i n themselves i n school.
TABLE . . 8 - QUESTION 4 -
DISTRIBUTION OF I'LIIRRIED REBPONDENTS BY NUMBE1R OF CHILDREN
above 6 ------- None . . . . . . . . . . Total
This shows t h a t of the sixty-two (62 Imr r i ed respondents
57 represenJ~ing 91 .9$ of the respondents get a t most four (4 )
children. Only 5 (o r 8.176) have more than 4 children.
There were s i g n i f i c a n t income v a r i a b i l i t y among
members of v a r i o u s in formal f i n a n c i a l groups. The
d a i l y c o n t r i b u t o r s i n t h e mwket p l a c e s were mainly
people of very low income, 896 of t h e market
respondents were below ~2,000.CO p e r nrmum income,
whi le over 60% of t h e i n in i s t ry rind school workers
i n ~ s u s u 2nd ch r i s tmas t h r l f t funds were i n incomes
p e r armum of over ~ 2 , 0 0 0 . 0 0
Though t h e s e respondents t3al0ng t o one form df
in fo rma l group o r t h e o t h e r , m a j o r i t y of them s t i l l
do n o t p r e f e r in formal groups t o banks.
ina ally, t h e s e i n f o r n a l groups have t h e i r own
p e c u l i a r i t i e s , n o t only among groups of i n s t i t u t i o n s
b u t a l s o w l t h i n e x h group of i n s t i t u t i o n s , i n t h e
ways they 3 r e organised,
TABLE. . .9 - WESTION 10- RANKING OF REASONS -- FOB JOINING TI33 GROUPS - -- --
REAS ON FRZQUENCY PERCENTAGE
CONVENIZNCX 42 46.67%
Low INCONE 37 41 *ll$
BANKS ATTITUDE - 1 1 12~22%
90 100 . 00% It could be seen from the above able th:lt 42
out of t he 90 rcspondcnto, representing 46.67% of
the total ranked ccnvcnience highest as the nlairv
reason for joining the informal group. The second
in importance is low income with 77 as frequency
or 41.7% of the repondcnts while the one with the
least frequency is banks attitude. This seem to
suggest that banks1 attitude is not a major factor
that influences people into resorting to informal
groups. It may be, honever, that the respondents
have not had the opportunity fo going to the banks
to be in a position to assess their attitudes.
The fact remains that banks attitude is not a major
reason for joining informal groups according to
the responses.
TABLE ... 10 -QUESTION 14 - PREFERElSCT CF INFORJUL GROUPS TO BANKS.
"YPE OF ORGATJISATIOTX &.A RKET S MINISTRIES SCHOOLS
Table above shows that 41 respondents (or 45.56%) 6f the respondents ansercd 'yes1 to the question as
to whether they prefer informal financial organisa-
tion to banks. The balance (49) representing 54.44% of the respondents answered 'Nof. In other words,
majority of the respondents, even though they
belong to one kind of informal financial organisa-
tion or the other, still rccognisers the superioriw
of banking services over those rendered by the
informal groups.
This seems to conform with the responses on
the ranking of rezsons question where respondents b
ranking banks attitude as the most responsible f
factor came least. This last table above, therefom
togzther with thz table cited above still accords hhe
banking industry its place, even though marginally.
5 2 TEXT OF .HYPOTHESES 5,2,l HYPOTHESIS a 1
(i) STATYKENT OF HYPOTHZSIS
Ho, There is no significant income variability
among members of differnet informal fina-
ncial organisntions,
HI,: There is a significant income variability
among member's of different informal fina
ncial organisations,
(ii) TEST STATISTIC.
(iii) LEVEL OF SIGNIFICANCE &) = 0.05
(iv) For = 0.05,
CRITICAL KSGION (CR) :/F =0.05/ 3.74 Figure 4
From the computations in Appendix . 4. the following values of sum of squares resulted:
(i) Total variability sum of squares = 505.496
( i i ) Between o r g a n i s a t i o n a l v a r i a b i l i t y sum of
s q u s r e = 434 ,862 ,
( i i i ) Within orgclnisa t i o n a l v ~ r i a b i l i t y sum of
squzce = 70.634;
V i t h cor responding degrce of freedom of 1 4 ,
1 2 and 2 r e s p c c t i v c l y , t h e fol lovr ing 'ANOVA'
t a b l e f o r a n a l y s i s r e s u l t e d :
TABLE ... 1 1
ANALYSIS OF VARI,l,1MCE TABLE
Between
ii. Withi
505.496 - From t h e Ana lys i s of v c ~ r i a n c e t a b l e above, i t
could be s een t h a t t h e observed F - r a t i o from our
computation i s 3 6 0 9 3 9 .
T h i s f a l l s w e l l i n lo t h e c r i t i c a l Region (cR.)
s i g n 3 So, we r e j e c t t h e n u l l hypothes in (Ho) t h a t
" t h e r e i s no s i g n i f i c a n t income v a r i a b i l i t y among
members of d i f f o r n t i n f o r m a l f i n a n c i a l o r g a n i s a t i o n
Ifand accept t h e a l t e r n a t i v e hypothesis ( H I ) which i s
t h a t : " t h e r e i s a a i [ ;nif ic2nt income ~ a r i a b i l i t y
among t h e members of d i f f e r e n t informal f i n a n c i a l
orgnnisa t ions .
Therefore, we conclude t h a t a t 5$ l e v e l of
s i g n i f i c a n c e ( = 0.05) , t h e r e e x i s t s s i g n i f i c a n t
income v a r i a b i l i t y among t h e var ious informal
f i n a n c i a l o rgan i sa t ion .
This could a l s o be evidenced by observing
t h e apparen t ly very l o w income p r o p e n s i t i e s of t h e b
major i ty of t h e d a i l y c o n t r i b u t o r s i n t h e t h r e e
markets surveyed. That i s t o day, t h a t ma jo r i ty of
those market t r a d e r s who cng3ge i n d a i l y contr ibu-
t i o n ar.2 of lowcr income than t h e members of o t h e r
informal f i n z n c i a l groups.
5 .2 .2 HYPOTHESIS . . .2
(0 STATEMENT OF HYPOTHESIS
H02 Daily I n c o m has no s i g n i f i c a n t i n f l u e n c e
on t h e amount con t r ibu ted by t h e d a i l y
c o n t r i b u t o r s .
HI2 Daily income 11;:s a s i g n i f i c a n t in f luence
on t h e amount con t r ibu ted by t h e d a i l y
c o n t r i b u t o r s .
( i i ) TEST STATISTIC.
(iii) LEVEL OF SIGNIPICANCX ( ) = 0.05
(iv) For =0.05,
CRITICAL RBGION (CR) : /t =0.05/ 2,048
Figure 5
(v) Prom the comput~tions chow in appendix.5. the b
following values emerged.
b, E w h i c h reprcsonts the magnitude of influ-
ence of income on hily contribution &BxGKZXgE8x%a
that is, the degree of cl2sticity of daily contribu-
tion to changes in income - 7 = -0.0132864
Ob, = 0.0576
g- 0, repr~3sents the standard error of 6,
Then oLir observed t will be:
Since observed t (-0.231) is less than the
value of t,28 = 0.025 which is /2.048/, then we
ssy that observed t falls mithing the acceptance
region.
Therefore, we accept the null hypothesis (HO)
vhich is that: I1Daily income has no significant
influence on the amount contribhted by the Daily
contributorsfs1 and reject the alternative hypoth-
esis which is that IyDaily income has a significat
influznce on the amount contributed by the 'daily
Contributors "I.
We then conclude that at 5% level of signifi-
cance ( M = 0.05)~ income ha1j no significant
influence on the amount coctributed by the daily,
contributors. In other word-s, other considerations
outside income influence the induvidual's decision
to save Hx at any point in time. Such other
factors may be pnychologicrl, for example: fear
that the collector nay not be trustworthy; or it
could well be that the market trader has many
other problems to be solved with daily income that
little is available to be saved. Whatever be the
reason, the fact remains that daily income has no
signifimt influence on the amount of daily cont-
ributions.
5.2.3 HYPOTHESIS 3
(i) STATEMENT OF HYPOTHESIS
H03: Members of Informal financial organisa-
tions do not prefer informal groups to
banks.
H:3dembero of' informal financial organis-
ations preper informal groups to banks.
(ii) TEST STATISTIC
(iv> LEVEL OF SIGKIFICANCE (19) = 0.05
(iv) For = 0.05
CRITICAL W G I O R (CR):/ =0.05/ 5.991
Figure 6
To %est this hypothesis, %zble ... on responses to question . . . . (Question on preference of informd groups to banks) will be used.
OBSERVED PREFEKENC3 OF INFORn'IAL GROUPS TO BANKS
YES v
NO -- MARKETS 1 1 19
TOTAL - 30
MINISTRIES 18 12 30
SCHOOLS 12 - 18 - 30 - TOTAL 4 1 4- 9 - - -- x2 = Chi - Square
Oij = Observed frequency
Ei j = Expected frcciucncy
For expected frequencies see appendix.6.
COhlPUT KTIOIT OF OBSBRVBD x2
2 Since observed X (3.853) is less than the
table value of x2nhich is 5.991, then we say that
observed x2 falls within tho acceptance region. Therefore, we accept thc null hypothesis (110)
t h ~ t is : Members of the informal financial organ-
isations do not perfer informal groups to banks".
This mcnna rejecting the alternative hypothesis (H;)
that they (members of informpl groups) prefer infor-
mal groups to banks.
We then conclude th't evcn though t h e s e i n d i v i -
d u a l s were fount? be longing t o one form of i n f o r m a l
f i n a n c i a l group o r t h e o t h e r , t h e y d i d no t l o s e s i g h t
of t h e f a c t t h a t banks r e n d c r b e t t e r s e r v i c e s and
s o a r e s u p e r i o r t o i n fo rma l groups.
5.2.4
( i )
( i i )
( i i i )
( i d
STATEMENT OF HYPOTHESIS
Ho4: Ra te of Re turns on t h e c o n t r i b u t i o n s
of t h e members of C h ~ i s t m a s Fund dpes
n o t depend s i g n i f i c a n t l y on anounts
c o n t r i b u t e d over t h e pe r iod .
H 1 4 ' Ra te of Re turns on t h e c o n t r i b u t i o n s
of the rncmbern of Chris tmas Fund
depend s i g n i f i c a n t l y on amounts cont-
r ibu ted . over t h e pe r iod .
TEST STATISTIC
LEVEL OF SIGNIFICANCE ( C%') = 0.05
For d= 0.05
CRITICAL REGION(CR):I t* =0.05/7, 2.776.
F i g u r e 7
(v) Prom the computations shown in appendix . 7
The following values emerged:
- b l - O.2600444
6 - - 0.9011501 br 9
Where bl = degree of elasticity of returns to
contribution.
= the standard error size.
0.9011501
It; could. be seen then that observed t (0.289)is
less than the table value.(t+ =0.05 = 2.776).
Therefore we accept the null hypothesis which
is that: 'rate of returns on the contributions of
the members of thc Christmas Fund (in the Ninistry
of Finance examined) does not depend signific~ntly on
amounts contributed.
It ma-y be that rate of return depends more on
fund application - that is, how the contributions
are applied in lams and savings in the banks.
CHAPTER SIX
6.1 RESEARCH DEDUCTIONS
With the ob jec t ives s e t ou t to be accomplished by
t h i s study i n mind the following f indings were made i n
the various objeckive areas:
I N C I D E X C E AND WASONS FOR CQ-*jISTEn'CE - IJI TH BANKS
1. I t w a s found ou t from swvcy tha t these iiiformal
T i n a n c i ~ l org,?nisa%ions p r o l i f e r a t e a,mng
studied,
me. informal f inanc ia l organisat ions
the i n s t i tu t ions b
a r e orgcmised
i n Pine with t h e pa t te rn of income streams of the mvms.
For ins tance , among the t rnders who iden t i fy w i t h informal
f inancizl arrangements, the one that i s common with them
i s the dPily contr ibution t~ype of informal organisations.
This i s because, t h e i r incomes come on d a i l y basis , Among
the. s a l a r i e d umrkers, on the other hand, t h e i ~ own types
of: fhdForma1 gnoups are organised on monthly bas is
agree3 with the pe r iod ic i t y of % h d r remunerations, To this
extent , we can say that! there ex i s t s va r i a t i ons o f these
informal groups based on both the n a t u ~ e o f organisa%ion
and the ' income stream, I 'l ' inistries a d i n s t i t u t i o n s of
higher learning a r e more s tab le I n nature than markeas en8
so, t h o f inanc ia l arrnngcments a r e accordingly orga,nise$.
The market place- i s an aggregation of people no t very
w e l l known to ecch o ther , end 9 tnadert s stray i n a market
could be ifeltermbed overnight.
O'f the f i v e tines of informal organisaliions i8mti f i&
by Onyemachi (1987) as given i n the review of l & t e r a t u r e ,
ihm were found to be very common i n tba organisat ions
mvsye3, These tw r r c tlzc -3ypes A and C.
Type- A which h e cal led the ro tc t ing cr edi % as so ciaMons
[whereby each member pays i n some spec i f i c mount of
money into a cornnu311 fund, fol.lowing which the amom-$
colloctieif i s h a d e d over to members i n ro t a t i on vnC'il a l l
havs b e n e f i t k e g vrzs found to be very common among the
hieher i n s ti k t i o n workers, Membership i n each group
ranges fnom _? to 1 2 i n the ones recognized.
The type C form of informal organisat ions (which i s
orgmised i n such a tray t h n t a ~ e s p e c t e d and tmstwor-tjhy
member co l l ec t s contribu'diol~s from a l l members e t r egu la r
intervals . Thesemoneys ?.re l e f t i n the custody of the.
chosen honest person u n t i l the agreed. tfime when the amounts
a r e d i s t r i b u t ed- to individv.=?l s a cco rcfing to how they
con~ributked' were also prevalent =among the market!- t?mders
and thc ministry workers. I n thc .markets: pe r iod ic i t y of
col lec t ion i s Waily1I and so i t i s cal led da i ly contribution,
while i n the) min is t r i es , pe r iod ic i t y i s monthly, and it
i s ca l led Christmas fmd. Agreed mme f o r 61 s t a i h t 5 o n
o f col lec t ions to owners i n the markets i s monthly, while
i n the min is t i res , i t i s between October ending and f i rs t
week o f November of every year,
I1 I t wss found ou t th2.t bhere i s a s ign i f i can t income
v a r i a b i l i t y mong members of d i f f e r en t informel groups,
t es t ing with F- distri-bu-Lion t c s t c?.t 5% l e v e l of signific,mcc,
For example those who engpge i n da i ly contr ibution i n the
mm-kcts were found to he p r c d ~ n i n m t & y poople of low income
80% of such con t~7 ibubr s W C ~ O below NX)00,00 annual income,
while ~?emondcntk i n the s m c cctcgory of ~ m u a l ingome-
i n the min i s t r i e s m d schools cons t i tu te 40% and 37%
~ e s p e c t i v d y ,
111 Among the da i ly c o n t r i b u b r s i n the markets, da i ly
income was found to have no s ign i f ican t inf luence on t h e
amunt contributed daily. Testing with s -hdent I$-
6lstribu-tiion t e s t a t 5$ l e v e l of s ignif icance, i t w-s found
o u t t h a t the measurc of responsiveness of contr ibutions In
income ('th2.t i s phe e las t j ic i ty measurc) which was a.
negative n l u e (-0.0133) hc?d no s ign i f ican t influence on
$ai ly c o n t r i h u o n . Ordinx-i ly one > m i l d bc inclined- b
belicve thnt the nega t iv i ty ~f tho c lzs t ' i c i ty co-efficien-b
suggests inverse r d s - e o n s h i p o r influence tjemm t h e t w o
parameters, Ibwever, the t e s t conducted proved the view
o therwise;
I V Among the] con t r ibu to r s o r mcmbe~s of the Christmas
f u n d o f t h e minis t ry o f f i n m c e Economic P lmning ,
examinntion of t h e i r recorGs revc3-led 'chat r e t u r n s to
members i n the form o f i n t e r c s t payment i s n o t s i g n i f i c a n t l y
dependent on volumc of cont r ibut ions , By r e t u r n s we mean
the r n t e of r c t u r n s 2nd not abso lu te i n t e r e s t ps.yment& A
t e s t carlried o u t using student - t d i s t r i b u t i o n tes-b a%- ,
5% l e v e l of significance shoved t h e t t h e r a t e of r c spons ive~ .
n e s s o f r e t u r n s to cont r ibut ion , (which i s 0.26)' i s no t
s i g n i f i c a n t enough. Flay be thtgt r a t e of reD"urn depends b
on t h e e f f i c i ency of use o r appI ica t ion o f con t r ibu t ions
b e h ~ e e n loans- 2nd savings i n the bank.
V The st'udy a l s o revcalcd t h a t u s e r s of informal f i n a n c i a l
o rgan i sa t ions do no t prcferl such informal f i n a n c i a l 2 organ i sa t ions to the bmks. Testing with X - contingency
tinble 2.t 5% l e v e l o f s ign i f i cance , i t wf,s found o u t kthat
among t h e 90 respmden t s , banks were s t i l l p re fe red to %e
inform21 groups n o t minding th2,b these individ'unls belong
thesc informal groaps. About: 55% o f t h e respondenfks,
made o u t r i g h t confession th2 t t hey do not p r e f e r i n f o m a l
grou@s to Bsnks,
V I On r m s o n s f o r tlzc continued co-existence of -these
informal f i n a n c i c l o rgan i sc t ions with t h e motIern Eanking
i n s t i t u t i o n s , i t w2.s found o u t t h a t convenience and low
income were ranked h ighes t as being the. m-jor reasons*
While 46'.7% of the respondents rmked conveniencer highestt,
41.1% rank& low income highes t , Only 12.2% r x ~ k e d Ranks1
at t i i lhde highest , I t could the re fo re be said- %ha%
convenience znd low income o f t h e members of informal
ffinancial organisakions a r c t he major- masons f o r %he
continue8 co- exis tence of thc two i n s t i h t i o n s .
VII Other reasons given f o r t h e continued survival o f the
informal gmups extrgcted from the ques t iona i re responses
a r e a s following:
(i] I t provides oppor tun i t i e s f o r ge t t i ng loans. b
( i i ) 1% encowages savings mong those %rho camnot go to bank.
f i i i ) ' I t i s 'more reliable; st mnturi ty you g e t your money.
('ivy I t provid'es per s o n 3 scrvices.
(v) I t proviaes i n t e r e s t s oppor-ilmity f o r income %a% vmuld hme B e r n bo&r6sd(cunong minis t ry workers)
(vi)' A3- m a - b u r i t y , t he mney 20 t comes I su rp r i s ing ly1 ,
These o the r rensons, though *ey sound l i k e importance
of informal f i nanc i a l o r g m i s a t i o n , were some of the reasons
adhr,mced by t h e respondents, why they jo in o r fomn such
groups. Pibweve~, i t m u s t - b e noted t h t the r e i s no c l e a m
cut d i s t i n c t i v e l i n e bet~reen reasons 2nd' importsncc, foll
eventually, we ffYn6 ou t t h a t reasons f o r c x i s ~ e n c c , of any
i n s t i t u t i o n a r e secn i n t h e i r importance to the bene f i c i a r i e s
Thcse reasons, however, were no t given across t he board,
by a l l .%Wee types of' i n f o m a l groups surveyed. For example,
oppor tuni ty f o r g e t t i n g IbLanl m.s given as a reason on ly
by t h e Christmes Fund members and s p a t i a l l y by t h e 8 a i l y
cont r ibutors . The reason t h a t i t encoumges s a v i n g s was
given by almost a l l respondents, I n % e r c s t s oppor tuni ty
ex i s t on ly among tho, Christmas Fund members,
OPERATIONS I N TEXMS OF SERVICFS REPJDERED:
VIII From t h e .surveyg i t was found- o u t t h a t t h e s e ~ v i c e s
rendered a r e almost' s imi la r to those o t h e r reasons l i s t e d
a b v e , why the informal groups have continued to co-exis t
w i t h banks , These include: Encouragqent o f saving@;
extonding lonns to both members m d nm-menbcrs r t i n t e r e s t
r a t e s ranging from 3 9 ; to 15% on amount borrowed peF month;
~ e n ~ e m person81 se rv ices ( f o r c x q l e : t h e c o l l c c t o r i n
t h e d a i l y con t r ibu t ions v z r i cty opens h i s doors to customers
even n t n i g h t s to makc emergency wi thdra tn ls ; ag2-in, t h e
c o l l e c t o r s go ro~.md to c o l l e c t t h e s e savings from t h e savers) ;
the Christmas Fund v a r i e t y p c y s i n t e r e s t on m o u n t s
cont r ibuted depending on t h e ?mount o f income, a v ~ . i l a b l c from
loans and savings i n banks.
I X A s per the- o rgen i sa t ion o r managanent of t h e s e informal
groups-, d i f f e rences abownd n o t on ly among d i f f e r e n t types
of informal gyoups b u t a l s o wi th in the same types of inform21
groups. For example i n the Chdstmas Fun3 v a r i e t y , d i f f e rences
&st i n t h e way they m e managed. W i l e some. heve meetings
Iiw times a year- ( e g , Ministry of Finance. type), other h ~ v e
meetings three times a yerr ( e g . Ministr ies of kJor2cs mcT
%using 'and Estr?blishmcnts types)'. There a r e differences
i n the way colSections a r e applied, While i n the ministry
Works ma' I-lousing type, loans arc given to members a t
10% i n t e r e s t r ~ t e per month a n d to o u t s i d e r s a t 15%; i n t h e
min is t r ies of Finance ,and Elstablishrnmts, there i s no
as t inc t ion Between members and non-members i n i n t e re s t ' on
Som charges; i t is 5% 2nd 3% in the l a s t t ~ m min is t r ies
mentioned r cspectively, i r~rcspcc t ive of membership s ta tus ,
Hbwever, r l l three forms of Christinas Fund have. th ree
o f f i ce r s each; hmey upper a n d lower l i m i t s of m n t h l y
contributions and- sharc out ' i n t e r e s t incomes together w i t h
mounts contrtbutcd a t thc end of the period,
h n g the 6a i ly contr ibutors and Is'ustiz(Rotztory
cr&f t associz-%ions i n higher ins t i tu t ions) ' , there. a r e no
formal o rgmisa t ions o r i n t e r e s t s on mounts contributed,
Instead, i n the a a i l y contribution var ie ty , t h e colllectors
charge i n t e r e s t s on the contributors f o r the services
X The performances of these ini'ormnl f incmcial organisat ions
were found to be r e l a t i v e l y s ~ t i s f a c t o r y , though there a r e
some problems bpe&tW; smooth operations,
I n the da i ly ccmtribution vnrie'dy, there a r e many
col lectors opcrnting within and around a l l the markets 2nd'
other- puSlic p laces i n Enugu p e r t i c u l a r l y i n Motor parks,
among h o t e l i e r s 2nd other a r t i s m s . This prol i fera tYon
of the d a i l y con t r ibu to r s makes t he se rv ices they render
eva i l ab l e to those who seek them. Among the cont r ibutors ,
t he r e were r e p o r t s of sn t i s f ac to ry performance o f t h e
co l l e c to r s , i r r c s p e c t i v c of tho bad ones amonp, them, The
co l l c c t o r s interviewed b c l l e v d among themselves that t h e i r
job i s ,a worthwhile b u s i ~ ~ c s s md expressed. sat isfoct i ion
with t h e i r pcrformanccs.
The I susu (Ro t o to ry c rcEi t nssocia t ion) vnrietiy was
d s o found to bc h e l p k g enough i n the s m i n g s m b i l i z n t i c n
ef for ts . The arreng emcnt has immcnsdy eided members (vho
w u l d , otherwise, have not been ab l e t o secure loans from
the bmk) obkzin the nccded funds fo r t h e i r va r i ous needs.
The one type of informal f i n m c i a l o rgan i sa t ion which
seem to have o u t performed o t h e r s i n rendering se rv ices
to members i n the Christmzs Fund which had r e m e r e d se rv ices
d m s t s imi lar to the se rv ices rendered by t h e mod ern
banking i n s t i t u t i o m to mmbcrs i n terms o f savings, c r e d i t
extension m d i n t e r e s t - p n y m c n t ~
These. informal f i n z n c i d o r g m i s ~ ? t i o n s genera l ly
have ?.idod membcrs obt2,in necdcd fund fo r the following
uses,,
(:i) Payment o f f ixed ob l i ga t i ons l i k e house r en t s , 'shed" o r shop rents , school f ees and o the r user charges.
(ii) Bwlchases of some fixed a s s e t s l i k e home furniture! an& other oquipments.
t i i t)) G e t mney to support business capital.
(iv) Ib embark upon bullcllng projects,
(v$ Po buy food-stuffs tha t could- l a s t longer periods.
td) TO get enough lroney to make purchases during h&ijoP fegtivabs Like Christmas.
2b &mbark stnal scale agp icmturq
To! g o t brilk money which could then be saved in the bank fo r interests .
To the extent that these informal f inancial organ4satims
aid.' the achlcvement of these tasks, i t cauls be said' thatf
performance has been encouraging,
P 'A 0 s E'M 4: XI These informal f inancial armngements arex not wlthou%
pmblems, These a re certJain plroblems indieaUed' by respond'ents
as mnfronULng %hem i n vc-rious, mys:
(i) Defaults by members themselves:- This pmblem was
reported more by members of t h d s u m g r o u p , According
to them, members: have not always pa id the i r clues pmmp t l y
and sometimes, accord3ng t o them, same- r e fuse qaying . - entireay
a f t e r they mu& have collectefl t he i r own share&
((it)' Infideli ty: This was another problem reporteg
q e c h l l y among the 8'aily contributors, They c i t e d
instances of occasions &en some fake col lectors have come
tb market' to colIect the i r mncys only to dim-ppear from Ithe
market af Ver some months of apparently r e l i a b l e services.p - These i n f i d e l s made a m y with huge qams of money baonging
to contributors o f various c a t e - ' ~ r i e s . Yhis frau8ulen8
tendencies o f the fake co l lec tors have t e n ~ e d to dampen the
confidence- h i ther to mposed on the colIoctors, The
contributors now do doubt the s ince r i t y of %Ilos;s who -..
paraik %emselves as v d i b c o l l ~ ~ c t o m . The result' af
this, doubtt i n the minds of thcso mcrket tracYers has Been
t h a t they now- d r z s t i c a l l y rcdi~ce the amount of t h e i r daf ly
income they stzkkc to m y m e co l lec tor i This may be ' fo r . the ins ignif i cen t re la t ionsh ip exist ing
between da i ly income 2nd t h e da i ly contriButions mong
these da i ly contrilh;ztor<
C i i i ) ' Defcult i n Repaying L o p i s Ek=mwed: This pmbEm
is very common 'among t h e Christmas Fund var ie ty , Tho
respondents reported thnt borrowers from the i r funas Had
not always paid back the i r l o m s pmmptly when they me due,
The implicat?ion of this i s tha t the. funds do not! g ive loans
as much as they could, due to fear o f defaulU9 with %.he
r e s u l t s t h a t they f a i l to capture the i n t e r e s t s o f f w d
t3y these loans wfiich a r e higher than what bsnks pay.
Also, due to fear of default , it i s not every member of
the^ funds thnt ag ree to guar rmtee pospective bor~owers
for fear of staking his o r her zccumulatcd' smings ,
(iv) Another protnem which cuts across the various Uypese
of infoma1 organisations is the problem that Uhis
'compulsory' form o)f savings scheme represented by these
organi sations leaves one with letm disposable income
af %er- paying the dues a t the end of every m n t h
especially those who belong i n more than one of such
organisations.
On t h e d d e of the, col lectors i n the dai ly
contribution form of infomnal org,ani sations, the i r
problem i s basically that of suspiciono They have not b
dtvays found. i t easy to convince: the market bad'ersr;
and other potential customers tha t they a re on t h e i r
lega l business and so e re no fnke collectors. This
i s as a r e s u l t of the frnudulent deeds of the' a b i o u s
co l l ec to r s i n the past. There i s no way of identifying
who i s 3. r-5. 'and authentic ool lectors anB who is a ffaks
one especially when dealing with i l l i t e r a t e s , The
r e s u l t of t h i s suspicion i s tha t t h e collectors do not
hme as many customers as they would otherwise- have,
In the l i g h t of the problems enumerated an6 also
inview of other research findings already mcntione8, the
following recommendations a rc being made for mcking t h e
informal f inancial organisation operationally e x i err an8
more effici'ent:
I On the problem of members not being able to pay their
ciZzes pmmptly especially mong the vcrious isusu groups,
i t msy be t h a t thc>proportion of onet s monthly income 0
being dmsnded i s too high with the r e s u l t that? members
find- i t d i f f i c u l t to par t with such amounts of money
every month, I t i s therefore being recommend& t h a t
aBi l i ty tb pay should be considmcsd, most importantly,
on dcciaing on how much to pay, It' i s a known f a c t thatt
even though two people m y 'tje earning the same thing, the
f a c t remains t h a t the^ marginal propensity to save (MPS)'
of individuals vary. A scenario whereby someebody a
earning U200.00 per. mnth i s required to c o n ~ i b u t e ' N ~ 0 . 0 0
to a fund ' i s too 6emanding. That leaves theperson wilth
XLFO.00 assuming Wat thc individual belongs to only one
group. Although a n individucl may have l e s s pmblans i n
some mnths, yet i n some other monUhs problems mcy mar
up to require immcdiatc solutions; This problem i s
when there- a rc relc?.tively l a rge number of people i n a
gmup with %he resu l t that! i t tnkes longer 'lime Before i-tt
r o b t e s to every menbe&.
W e therefore recommend that i n addit ion to
considering a b i l i t y to pay, before forming a group
and- before decid'ing on amunt to f i x , gMups should
as much as poss ible be re19tive'ly small. 5 or 6 i n a
group may be i d e a l m d 15 - 20% b f m n t h l y income may
,also be m idea l proportion of members'' income to be
committed i n t o such arangcmcnts a t any po in t i n t i m e ,
Hbwever, individuals who f e e l they can save lnore may
join more than one group. 0
IT, On the problem of fraudulent p rac t ices by some
fake col lectors , i t is rccommendkd tha t more control
mmsures be introduced to check the nefarious
a c t i v i t i e s of these- 'dupest , The ilfea of requir ing
tha t co l lec tors simply register- with the ministry of
T r c d e a n d obtain a l icencc i s not am adequate control
measure. The l o c a l government au tho r i t i e s should i n f a c t
be extensively u t i l i z e d to achieve m r e control over
the a c t i v i t i e s of the da i ly collectors, The Ministry
of 'Eradc i s too f a r remveii from the masses t!o
d f ectuate m y mecmingful control.
The loca l government a u t h o r i t i e s should be permit tea
tb taka absolute control of the reg'ulation of the
a c t i v i t i e s o f those collectors. I n addit ion to the
l oca l government contml , the var bus marke-tl- councils
(or- managmen-t au thor i t i es ) where they exist9 shouI&
help check the, a c t i v i t i e s of these co l l ec to r s i n the
markets which a r e t h e i r mzin places of operation. For
example, a f t e r obtaining l i cence From t h e l oca l governmat
authori ty, a collector. must a lso obthin a permit from tihe --
market au thr i -Uies Eefore Begi-g operation.
&so9 ' these co l lec tors musk be re@dred tb have , -.-
a;n access ible head-office t d t h i d e n t i f i a b l e mrkfbrce
(who should e i t h e r be t h e i r r e l c t i o n s o r people very t r i l
known to them). The requircmen-tf -that the workforce> Bs 0
very w e l l known people i s made tz~ f o r e s t a l a s i t ua t ion
whereby agents a f t e r col lec t ing a day' s contr ibution
d'isappears to unkn~wn dest inat ions as have been witnessed
i n the :.. pad-. .,.
FYnalXy, contr ibutors must not s t a r t -up savings
w i t h anybody who i s not known to them. I t i s recommen8ecT
tha t contr ibutors f i r s t go tx the c a l l e c b r f s head -o f fk
o r branch o f f i c e i n i t i a l l y to obta in the cards before
making subsequent contrcLbutions. m e cards so obthine8
mst be found to carry , a l l id-cnt i f ica t ion mar"lcs of the
reg i s te red col lec tor incluf ing home ad8~ess . A l l t he se
marks must Be duely rcg i s te red with the au tho r i t i e s
concernd.
I11 On the pmblcmof defau l t s i n repaying loslns brrowed'
among the Chris'cmas Funds, i t is being recommended' thett
more d i rec t measures on the borrowers be taken, These
mm.suu?es which must be inbued into a k a n covenant sha l l
be given to m y loan applicant. The covenant may require
thatt a person plcdges h i s salary for a given number of
months which wi l l be s-ubstmtial ly higher th,m the Loan
being applied for. This wi1.l semre as a detemnt k
aefault , In te rna l arrmgements s h o ~ l d , i n adai t ion ih
such convenants, be mace with the pziymasters of such
applicants ('with signed' consents of the applic&tis) tb
tlransfer the sa la r ies of such an cppf icant, i n case o f b
deafault, to the fund, This measure m,zy be -&ken where it
is no longer feasible to f ind two members of the fund' .tfo
guarantee an applic,mtr I t is hoped thatt oases of diefaults
wil? be grossly minimized with th i s a l t e rna t ive measure.
IT Since i t i s t h e d'uty of government ( a t Ell1 levels)'
b ester f o r the geneml welfare of i t s c i t izens , g o v - m a t t
should- see it as i t s obligation to help f a c i l i t a t e these
savings mobilization e f fo r t s of the c i t izenry through the
fo 110 wing means::
(i)' Mass enlightenment cmpnign to educate themilsses on thwneed to sav c , especially i n these informirf groups, given thfi t available knking f m i l i ti es are insuff ic ient ,
('it); Intensified regulation of the a c t i v i t i e s of the registered collectors vrho organise savings fo r the market traders. Charcctel- probity of intending col lectors must b e estkblished before they a r e accorrl'ed recognition,
Mobile informal ' bankst balLed l o c c l governmenti MDblle savings Fund ( M W should- b e estkb1ishe-d by the various loca l government m t h o r i t i e s tb p e n e h t e a l l the nooks m d corners of t h e i r aree?s: of j u r i ~ i c ~ o n to o r g m i s e savings through iden t i f i ab l e government workfomes. This w i l l introdhce a kin8 of competi-t'ion between loca l a u t h o r i t i e s and' p r iva t e col lectors and so encourage efficiency.
V, The commercial bmks should not see t h e s e - l oca l savings
i n s t i t u t i o n s as cons ti tut'ing th rea t to t he i r business.
They shou;ld re ther see them as co-workers i n t he same 'vine
yard,' and- give them every encouragement b go aheo.d; For
errrample, the commercial banks should not i n s i s t t h a t these
l o c a l savings co l lec tors should open up current a c c o w L
them when the i r c c t i v i t i e s a r e discover'ed, Instead, they
should help than work ou t m d d i t i e s f o r operating such
s ~ v i n g s accounts to meet dopositorst needsi Flefflble t i m e
deposit/savings model b mntch the deposit/with&raml pa t t e rns
of these co l lec tors should be designed by the commercial
banks,
Alternatively, the commercial bmks should embark upon
mobile savings schemes f o r the market t raders to provise f o r
the convenience which they c i ted a s t h e mst i n f l u e n t i a l
reason for joining informs1 groups, This d'irect lopm
markee operation' by the commercial banks may also r e s u l t
in to E! healthy competition w i t h the p r iva t e co l l ec to r s an8
e lso l o c a l authority% savings scheme when i t is established.
VI- . Again, the government should come up with pol icy
statements on how to trmt a y o n e caught engaging i n any
szvings organisat ion with the aim of defrauding the
public, For ex2mple, i n adai t ion to munting mass
enlightenment campaign on the needs f o r sxving with t h e
informal organisat ions, government should a lso emphasize
on the punishments m a i t i n g m y person caught i n
fraud%ulent pmct ' ices, Such punishmcxlCs b ha prescriBe
should be, severe enough to 6 e t e ~ ,my attemp* by anyone
initLvi&al to engage i n such i l l egg1 ects . b
VII Final ly , i n t h i s era of unemployment among school - leaverrs mcouragemen~- should be given to tho, genuine young
schoo1 l a i v e r s , who could even organise- these activii2ies-
more , e f f i c i e n t l y th,m t h e current thalf-educat?&t
collc;crtnrs, to o rgan ise such smings scheme, Kowwe"r,
liighter regulatory measures should then be htm6uceff
check the tendency to defrau8,
G 3 COXCLUSI ON :
This study se t - ou t t o mhieve; among o t h e r ob jecmvw,
tihe d&emination of t h e incidence of -be informal f i nanc i a l
~ r g ~ m i s a t i o n s and to exmine t h e i r m t i v i t i e s * where they
ex i s t= It ms found ou t t h c t these o rgmis~? .e ions
ac tua l ly p r o l i f e r a t s i n tho se lcctcd organise%ions
surveyed. The o rgmisa t ion were found to b e e x i s a n g s i d e
By s t d e with t he modern banking i n s t i t u t i o n s due mainly
to the uniqueness of the se rv ices they render such as
personal services; encourngmenB o f savings, and savings
mobilization from surplus: economic mi t s to d e f i c i t
economic u n i t s through provision of c r e d i t f a c i l i t i e s ,
However, i t tms fourid th2.t the vmious informal
f i n a n c i d organisat ions i n Dne way o r the o the r have some
stumbling Blocks i n t h e i r b ids to perform a e i r fmc.tfions.
Such problems a s def2-ults 2nd frau8ulence were ident i f ied .
I t was then recommen$ai t h c t n u hands (includink
t!hose of the members themselves, the govermment 2nd' the
banks)' must be on deck to encoumge these savings
mobilization informal. organisa t ions -t;o be more viable.
- 100 - 6.4 AREAS FOR FURFIHER RESEARCq:
The current study hns only surveyed t h r e e groups
of i n s t i t u t i o n s i n Enugu, 2nd the survey i n no way claims
any exhaustive study o f these i n s t i l h t i o n s , A s c resulti
of this, the current s k m could be said to be highly
l i m i t & i n scope.
E ' n g R e r e f o r e a p i l o t study, much i s s t i l l leftk
to be research& upon. Some o f these s r c m f o r fu r ther
r es emch include.
To have n d d e r look at' the various groups of i n s t i t u t i o n s not only i n Enugu but also outsidte the c i ty , 0
To iden t i fy other types of informal fin,wcial organisat ions exis tent , q ~ r t from the three forms iden t i f i ed i n the study.
To f ind the actual determinants of savings mong the members of t he informal f inanc ia l sector ,
To adv3nce fur ther recsons for the continued co- existence of the informol f i nanc ia l groups $nth the sophist icated modern banking institu-Hons.
To es tab l i sh modali t ies f o r i n t e g r a t h g the, formal 2nd inform2.1 f inanc ia l sectors f o r mae ef fec t ive and se t i s fcc tory s2.vings mobilization,
To f ind las t ing solut ions to the problems conf'mnting the operat ions of the vmious informal f inanc ia l group s-*
- -la2 - APPENDIX 2.
CONVERSION O F DAILY INCOMES OF
MARKET TRADERS T O ATYjLVAL IRJCOPES ASSUl?PTION
ASSUMFT I ONS :
i. We a r e gcing t o assume a 6-day week
ii. \,[e a r e assuming a 4-week month
iii. We assume a l s o 13-month year (Lunar months)
iv . ye f i n a l l y assume cons is tency i n earn ing s ~ b t ~ n
such incomes.
Given t h e s e a s sup t ions then we a r r i v e a t
t h e following:
* wmber of working days i n a year = 6x4x13=312 days -. This 312 days s h a l l then be used t o mul t ip ly each
d a i l y income of t h e respondents t o a r r i v e a t t h e
annual income : 6
DAILY I N C C > E ( Y ) ANNUAL
m \qorking Days Income M
1 .OO -31 2 31 2
2.00 31 2 624
Frequency
4 *
ANNUAL INCOME I N RANGES:
PI\ - I 22wE4Ja
3000 and- above -. .. 6 3 L
B APPENDIX 3
1 C1ONVERSIOR OF INCOiYX RYNGES TO AlSSOLUTE , V A L U S
To do the, conversion, we e r e going to employ the
c lass marks of the ranges tc~ compute the abmlute values'
of the income. The c lass marks a r e the m i d d l e ( m i 8 ) '
marks of the ranges.
Income Rm~g T
3000 and above
Markets Ministf ies Scboou Fr-eouenc! Fawuenc. Freauency -
ABSOLUTE. INCOME V&'ITE.S:
-5 MNpc bURKET FREQUENCY MINISTRIES FrnrnCY
II x CLASS MARK X ~ ~ A S ~ R K
TABILE FOR ANALYSIS (INCOKE IN PBl 1lARKETS --- MINISTRIES SCfDOLS
NLOOO B3,750 PJ7, 500
5250 15,750 8,750
5000' 11,250 11,750
15000 11,000 19 9 250
21000 29 250 23,000
scmoz S
X CLASS MARK
COMPUTATION OF OBSEKWD F-RATIO SUM OF SQUERES."
MARICETS MINISTRIES -Vn- T-- . T ,000 3 9750
5,250 15,750
5,000 11,250 15,ocrcr 11,000 21 ,oo-0 a ,000
Divi tfe t h ~ o u g h
arrive. at!- the t a b l e
s See Appendix. . . L
by TO00 t o computation; m d
5 el0 w: m
MINISTRIES -r s CHO OL s fa)"
SUM OF SQUARES
- 106-
APPENDIX 5
COPPUTAT1 ON OF THE REC4ESSI ON PARAMETERS 0
(USING THE MATRIX METHOD)
The elations ship is:
Y t = Dai ly Cont r ibu t ion
Xt = Dai ly ~ncorne
Regressing Dai ly c o n t r i b u t i o n on Dai ly Income b
t hen , w e have:-
va lues of yt and xt were obta ined through
in t e rv i ews wi th t h e d a i l y c o n t r i b u t o r s i n t h e
t h r e e msrkets surveyed.
The fo l lowing t o t a l s r e s u l t from t h e t a b l e below:
VARI ANC E:
6uZ = I1 $E -'B X P n -k
109 - APPENDIX,. .6
CQI'PUTATION OF EXPECTED FREOUEWCLES OF PREFERENCE OF m- FORMAL GROUPS TO BAN-KS-
RECrRESSING RATE OF RETURNS IN CIBISTM,AS FUND TO AMOUNT -- GorJllRIBUTED FOR THE YEAR:
X - h u n t &in EJ): contributed for the ye*
U S I N G MATRIX METHOD THEN, WE PRCCEED
1 + T h e T r a n s p o s e ~ a t r i x (X X)
Sign
+
I -1 INVERSE WiTRIX (X X)
VARIANCE (
1 1 ylY? - - Bj X P
Dea? Sir/Madam,
tJe are current ly embarking upon a, s%ul iy on the
informal f i nanc i a l organisc.tions i n Enugu, The shm
i s purely f o r academic purpose and ' we a r e gi-g you
every assurance t h a t a l l information supplied through
t h i s quest ionaire w i l l be used s t r i c t i ly fo r the' study b
and no thing more t h m that . Therefore, we a r e imploring
you to do answer tihe questions t ha t follow i n a l l
s incer i ty .
Thanks,
A. Personal Bata: Tick (I/),
1. What i s your sex? a. Male 5. Female 0 2, Marital stiatus a. Nwried 13. s i n g l e
J. t h a t i s , y o u r m u 2 1 income?
. Hbw many. chi ldren have you?
a. 1 - 3 /7 $ , 6' /7
Data on Enformal F i n m c i a l Organisat5on:
5. What type of Informal Financial Organisation
do you belong to? .......................... 6; Do you have any specia l name f o r the type)
of organi s-ation? ( Supply t h e name. i f any):. .,, . . * . . 0 . . 0 ~ ~ . 0 ~ . 0 0 W . ~ ~ ~ * D * D O * * ~ * ~ * * ~ O * O ~ ~ O ~ ~ *
What i s the per iod ic i ty of your contribution?
a, Daily Lz b, Weekly a c. Pbnthly 0 d, Annually
b
............. e. Any other? (1IPle2-se specify)'
..... Rbw mu& do yov contr ibute each time? W K...
............. a (i)' Hbw mmy Ore you i n 2 group? ,
( i i ) Break the number i n to male and f'emal
Male ..................... FEMALE a a a a a . a a a a o m m m a a . ~ m . *
Which of these reasons most influence* your de t i s ion
join the- group you are now in? ,
a, Convenience U b, LOW income! L C 7 c, Bankst a t t i t u d e /7 What other reasons do you have f o r joining the group?
12, What services a re rend-ered by your organlsation?
13. How i s the organisation conducted?
a, l b l d meetings
b, Collector goes round to col lect & W e have our o f f i ce r s
I$. Pn your opinion, do you prefer s,uch o r g a i s a t i o n
t o banks? yes
15. that ' problems do you have type of organisation? @
( S t a t e themy ....................................
1. PIow do you apply the collect'ions you made?
a. We give i t out i n loan t o non-members b ' b. We give i t out to members i n rotat ion
c. I t i s given back to me a t the mcT
d. Any other my? Specify a.........................
17. Row h ~ e you used the money got from these a.ssociations?
Specify ......o...O............O...........O.....
B ' I B L I O G R A P H P
ABe, S,I, t'Nigmi.cn Farmers an6 The i r F i ~ a n c e Broblems" CBN Seminar Bmer on AmLc+ture IBadm 198q.
Adeyeye, S A , The Co-ogerntive h v m e n t i n N j neria- Pest~rdav, Todnv and T b m o m o ~ ( Co Ming en: Vand enhaen and Rup-recht 1978)' :
b d e n e r , S, 'The Social '2nd Economic S inn i f i cmce 05 the Contribution Club amenga Section of
Bedi , R,D. -- Theory: R i s t o r ~ and P r a c t i c e of Q- oneration ?rd, eq.(Indie.o Pr-d7jhe-tf Mess , Meernt 1962>.
Bhatt , V.V.
Bourne, G m ~ t o m : l%tructure 2nd Performance of ? *
Jarwdican R w d Financial Marketsv So cinl-2nd Economic Stuaiea Volme 3 T%xBer .11 M n r ch 19 8ye '
Bur&, EcTmrdf I,- $on.srumer F i p ~ n c e (Newyork: H ~ r c o u r t Brace Joranovich Hnc. 19'79,
8, Calvwt, R,G, The Law and PrincilsIes o f @-o era t ions (Unpublished Work - London 19 !? 9)l. Quoted i n Enugu Consultants Report No 6 1961,
9, Donaldson, Elvin c t n l ? orsonal Finance 6 th od ~ g & ~ ~ o " r ~ ) ~ o n a l d Bresa Company ~ 9 7 7 ) ' .
l o , F, A, 0. f'Agricul tm21 Credit Through Co-op era'cives and o therbIns-tit 'utions F.A,O. k m i c u l t u r a ~ Studies No 68 1967
J
11. F,A,Oe "Co-op e rz t ive Thrif -t: Credit and Marketing i n Economicallv Underllevelowed Co unt r iesM
12, India, Committee ef Direction: R g m r t o f IT-
VaIume III kmBav 19 & Rural Credit S w e v I
14. Marlin, Peter:
-.- rF i sca l and Monetary BmOTems in Developing Siktes CRew Pbrk:f967JW
"Agricul%ural Credit a d Finance i n Africa Ro W e r Fowid'a.tions, Bwust 1972,
Finmci .a l S of C e (Canada: bkcmiilan 1
"
The S ign i f icmco of Nan-Bank Financial Intermed'i,?ries i n the) Carib- f (Englmd: Unwin Brothers Ltd P972)
I;nvestmer& Decisions Evaluation of Pro jec t s ~ n d Secur i t i es (Bondon= Cassell Limited 1983).
19. Otkceffe, NPJ: Ristory of tho Co-operative Thrift and Credit Movement ('kook 7) 11973*
22, Onyemachi, S.U.
Finsnci2.1 I n s ti tu t ions fo r The Mobilization of Resources f o r llnvcstmcnt and Consumption i n RwaI Areas, It ('Unpublished Work) . The f o u 8 a t i o n s of N i g e r i a t a F inancia l In f r a s t ruc t ondo don: Croom Helen Limited 198
Financial I n s t i t u t i o n s and Markets ( Eb ston: Houghton Miffl in Cbmpzny
$t. Pbwell, ELlis 1. Ehmlution f The Monev 1785 - i+pe Markat
&ondon. Frank Cass and Cornpay Limited 1966) ,
25. Stricklmd,C,F, lt&wrt on the Introduction o f Co-o~erzt ivc Societies in to Nigeria Lagos Government Pr inter 1934
- 119 - V I T A
M r . cha r l es ~berechukwu F.0. udogu was born i n t o
t h e family of l a t e M r . ranc cis ogbonnanya udogu and
Mrs. F e l i c i a Oyeji ~ d o g u ( l i v i n g ) on the 3rd day of
Apr i l , 1961 a t p o r t - ~ a r c o u r t i n Rivers s t a t e .
He s t a r t e d h i s primary education immediately
a f t e r t h e Nigerian c i v i l war i n January, 1970 a t
c e n t r a l School ~ z i n i f i t e i n Aguata Local Government
Area of Anzmbra S t a t e . ~ h i l e s t i l l i n primay f i v e i n b
1974, he took h i s common m t r a n c e Examination and
gained admission t o do h i s secondary education a t
cha r les d id h i s secondary e d u c a t i ~ n from September
1974 t o June, 1979 when he took h i s \vest African
school c e r t i f i c a t e ~xamina t i on and came out i n ~ i v i s i o n
one D i s t i n c t i m .
on f a i l u r e t o securc admission t o do law a t t h e
un ive r s i t y of Cabba r i n September of t he same year
(1979) he proceeded t o Ananbra S t a t e College of A r t s
and Science okoh (AcASO) t o pursue a Higher School
C e r t i f i c a t e Course. However, on enter ing &he col lege ,
cha r ies was insp i red t o switch over t o Business profesion
t h a t he entered f o r t h e J.M.E. ( j o i n t Matr iculat ion
Examination) of 1980, Ee gained admission t h i s time
t o read Business Management a t t h e Universi ty of Nigeria
Nsukka (MVN).
H e went i n f c r t h e un ive r s i t y education i n
octobcr 1980 f i n i s h i n g up h i s undergraduate s t ud i e s
i n t h e same ~anagement i n June, 1984. A t t h e r e l e a se
of June, 1984 Degree Examination of Uwijp Charles was
deblared t he b e s t s tudent i n p~anagernent and a l s o t h e
f a c u l t y be s t s tudent f o r the 1983/84 sess ion - winning th ree academic p r i z e s viz .
Departmental award f o r be s t s tuden t i n Management
1984.
Lever Brothers (Nigeria) Ltd. p r i e e f o r t h e
b e s t s tuden t i n t he Faculty of Business fi
Administration 1983/84 sess ion
p . ~ . (Nigeria) ~ t d trophy f o r t he be s t graduating
s tuden t i n the Faculty of Business Administration
1983/84 sess ion ,
He d id h i s one year of t ~ a t i o n a l Service i n Kwara
S t a t e of Nigeria i n t he 1984/85 s e rv i ce year ,
Charles met h i s f i r s t major disappointment i n h i s
academic ca ree r when on f i n i sh ing h i s youth Service
i n 1985, he f a i l e d t o secure any job. He s tayed a
jobless graduate f 3r t h e whole of 1985/86 when he
eventual ly decided t o go back t o the un ive r s i t y t o do
a post-Graduate course i n Finance.
By the grace of God, he i s f i n i s h i n g i n PBA
(Finance) This l986/87 session.
pqr. Charles Amat3 L. G .A
E.F.0. U ~ O ~ U h a i l s of Anambra S t a t e ,
from
REFERENCES
Marlin, Peter :
Mi l le r , L.F,
Neufeld, E.P.
I r Odle, L A ,
Okafor FoOq
. O1keeffe, NPJ:
L Okon j o , Kanene :
. Polakoff, MoE*
C Powell, E l l i s I,
, St r i ck land , C.F,
F inanc ia l Aspects of Dev h a s t Afrlca (Munchen: We I
v e r l a g 1 gr(0)
f lAgr icul tura l Credi t and Finance i n Africaf1 Rockefel ler Foundations, August vcr
Financia l System of Canada (Canada: =Illan 1g1/2)
The s i g ~ i f i c a n c e of Non-Bank F inanc ia l Intermediar ies i n t h e Caribean (England: Unwin Brothers Ltd 1972)
Investment Decisions Evaluation of -- Pro jec t s nnd Secu r i t i e s (London: , Casse l l Llmitzd 1983).
History of the Co-operative T h r i f t and Credi t Movement (book 7) 1973.
F inancia l I n s t i t u t i o n s f o r The Mobilization of Resources f o r Investment and Consumption i n Rural Areas .I1 (unpublished Work),
The foundations of Niger ia ' s F i n m c i a l ?Lnfrastructure (London: Croom Helen Limited 1980).
f fCredi t Associations and Co-o~era t ive Credi t Soc i e t i e sv Business ~ i k e s Monday 18 May 1987,
F inancia l I n s t i t u t i o n s arid Markets (Boston: Houghton Miff l i n Company 1970).
Evolution of t h e Money Market - 15 . ondon. b ' r d k Cass and Com~anv
"Report on the Inteoduction of Co-operative Soc i e t i e s i n t o ~ i g e r i a Lagos Government P r i n t e r 1934.
![Imitations of Roman Republican 'denarii' : new metallurgical data / B.W. Woytek ... [et al.]](https://img.dokumen.tips/doc/110x75/577c83b91a28abe054b5f390/imitations-of-roman-republican-denarii-new-metallurgical-data-.jpg)
