THE ROLE OF TRADITIONAL SAVINGS AND LOAN INSTITUTIONS IN NIGERIA: EVIDENCE FROM DELTA STATE
ABSTRACT
This study examined the extent to which the informal financial sector mobilized savings for rural development in Nigeria using Delta State as a case study. The empirical analysis was performed using simple percentages and the statistical tool of Student T-test to determine the traditional savings and loans institutions contribution to development through their operations, access to funds, and developmental tendencies.
The questionnaires were randomly administered to 100 respondents using the stratified random sampling method to stratify along age and occupation in 10 Local Governments Areas selected based on type of geographical settlement from the three Senatorial District (North, Centre and  South) making up the 25 local government areas of Delta State. Analysis of the data collected during the study period reveals that rural dwellers repose a high level of confidence on the Traditional Savings and Loans Financial System; most rural dwellers have ready access to informal financial institutions than banks, funds mobilized are allocated to such activities as trading, farming and financing of formal education. This is ascertained from the prompt periodic savings and loan repayment made by clients.  
Informal financial institutions help greatly in improving the rural community by providing funds for activities such as business and agriculture that accelerate rural development. The major problems besetting the effective performance of these institutions however, include utter neglect and lack of official recognition of their activities, poor or inadequate capital base for effective operation, poor record keeping or crude accounting systems and mismanagement of funds by some of the managers. However, the advantages derivable from the informal  financial institutions (in terms of rural economic development and welfare) outweigh the disadvantages.
TABLE OF CONTENT
CHAPTER ONE
INTRODUCTION - - --- - - - - - - - - - - ------------------------- - - - - - - - - - - -
1.1    Backgrounds to the Study - - - - - - - - -- - - -------------- - - - - - - - - - - - -
1.2    Statement of the Research Problem  - - - ------------------- - - - - - - - - - - -
1.3    Objectives of the Study  --------------- - - - - - - -- - - - - -- - - - - - - - - -
1.4    Research Question
1.5    Hypothesis of the Study - - - -- - - -- - -- - -- - -- -- - - - - - - - - - -
1.6    Significance of the Study  - - - - - - - - - - - - - - - - - - - - - - - - - -----------
1.7    Scope of the Study  - - - - - - - - - - - - - - - - - - - - - - - - - - - - -------------
1.8    Limitations to the Study - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -----
CHAPTER TWO
LITERATURE REVIEW  - - - - - - - - - - - - - - - - - ---------------------- - - - -
2.1    Overview on History of Credits in Nigeria  - - - - - - - - - - - - - - -
2.2    Self-Help Savings and Credit Groups  - - - - - -- - - - - - - - - - - -  
2.3    The Concept of Traditional Savings and Loans Institutions (TSLI)
or  Esusu In Nigeria - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -       
2.4    Summary of the Merit and Problems of TSLI - - - - - - - - - -
2.5    Evidence from Nigeria  - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- -
CHAPTER THREE
METHODOLOGY OF THE STUDY - - - - - - - - - - - - - - - -
3.1    Preamble  - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - --
3.2    Research Design  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  
3.3    Population, Sample and Sampling Procedure - - - - - - - - - - - - - - - - - - -
3.4    Instrumentation and Administration of Instrument - - - - - - - - -  - -- - -
3.5    Validation and Reliability of Instrument  - - - - - - - - - - - - - - - -- - - - -
3.6    Method of Data Analysis  - - - - - - - - - - - - - - - - - - - - - - - - - -- - - -  - -
CHAPTER FOUR –
DATA PRESENTATION, ANALYSIS AND INTERPRETATION - - - - -

4.1    Bio-data Analysis - - - - - - -  - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4.2    The role of Traditional Savings and Loan Institutions and Analysis - - - -
    Relative Importance of Traditional loans and savings institutions
(TLSI) over Formal financial Institutions - -
    Rural Development through the Informal Financial Sector - - - ----- -
4.3    Test of Hypothesis
4.4    Discussion of Results  - - - - - - - - - - - - - ---------- - - - - - - - - - - - - - - -
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATIONS AND
CONCLUSIONS
5.1    Summary of Findings  - - - - - - - - - - - - - - - - - - --------- - - - - - - - - - - -
5.2     Conclusion  - - - - - - - - - - - - - - - - - - - ---------- - - - - - - - - ---------- - -
5.3    Recommendations - - - - - - - - - - - - - - - - - - - - ---------- - - - - - - -  - - -
5.4    Areas for Further Research
References  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Appendix
LIST OF TABLES
4.1    Analysis of Questionnaire Retrieved  - - - - - - - - - - - - - -- - - - - - - - -  
4.2    Distribution of Respondents by, Age , Sex and Occupation  - - - - - -  - -
4.3    Respondents who Patronize Formal and Informal Institutions - - - - - - - -
4.4    Distribution of Respondents Amongst Various IFS - - - - - - - - - - -  - - -
4.5    Duration of Membership of Respondents in Informal Financial Institutions
4.6    Respondents Reasons for Patronizing Informal Financial Institutions more than Banks  
4.7     Respondents Reasons for Patronizing Formal Financial Institutions - - -
4.8    Respondents’ Challenges (Costs) Of TLSIs - - - - - - - - - - - - - - - - - - - -
4.9    Respondents’ Challenges (Costs) of Formal Financial Institutions     -
4.10    Respondents Means of Securing Start-Up Capital  - - - - - - - - - - - - - - -
4.11    Respondents Application for Bank Loan Degree of Success - - - - - - - - -  
4.12    Respondents Application for Informal Loan and Degree of Success     -
4.13    Utilization Of Loans For Rural Development  - - - - - - - - - - - - - - - - - -
4.14    Advantages and Disadvantages in TSLI Participation---- -  - - - - - - - - -
4.15    Paired Samples T-Test Test - - - - - - - - - - - -- - - - - - - - - - -- - - - - -  - -
4.16    One-Sample Test for the Economic Benefits of TSLIs - - - - - - - - - - - -  
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
The development of a healthy national financial system is an important goal and catalyst for the broader goal of national economic development.  In this era of globalization, generating economic growth in developing countries while reducing poverty is a fundamental challenge. Largely lacking, is the recognition that financial decisions do not take place in isolation, but are influenced by various socio-cultural and economic factors (Walker and Patricia,1999). Over time inadequate supply of credit has been an important constraint on production in many developing countries where majority of the population lack access to financial services from formal institutions, either for credit or for savings. Therefore, making credit available, particularly to the rural poor and low income earners, is thus considered essential to alleviate poverty and promote economic development (Rulle, Bamie and Turay, 2008).
Many countries have introduced programs to develop rural credit institutions, aided by bilateral and multilateral donor agencies such as the World Bank and the (USAID) United States Agency for International Development (Iganiga , and Asemota., 2008). However, the efforts of national planners and experts to develop financial services for their nations' majorities have often failed since World War II (Adams, Graham and Von Pischke, 1984). Perhaps they fail because the workings of rural credit markets were not fully understood, and these interventions were undertaken because credit program were easier to implement than other policy such as land reform). A serious problem however confronting many developing countries is the savings gap, which essentially means that these countries find it difficult to finance investments needed for growth from domestic saving (Walker and Patricia, 1999).
This study is on Traditional Saving and Loan Institutions: a Cost Benefit Analysis. Savings and Loan Institutions are generally called Microfinance Institutions, which are either informal or formal in their operations. According to the Asian Development Bank (1998) Microfinance is the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and, their micro-enterprises. Microfinance services are provided by three types of sources:
•    Formal institutions, such as rural banks and cooperatives;
•    Semiformal institutions, such as non-government organizations; and
•    Informal sources such as money lenders and shopkeepers.
Informal microfinance is provided by traditional groups that work together for the mutual benefits of their members. The concept of informal microfinance describes those financing activities that are often unrecorded but take place outside official financial institutions, and consequently unregulated. Savings services allow savers to store excess liquidity for future use and to obtain returns on their investments. Credit services enable the use of anticipated income for current investment or consumption (ADB, 1998).
There is a massive gap between the low level of microfinance available from Formal Financial Institutions and the extensive worldwide demand for such financial services among low-income people. Consequently, a large number of rural dwellers and low-income earners in developing countries then rely on the informal financial system (such as the Traditional savings and Loan Institutions) for their financial services on account of its relatively low information, simplicity and flexibility in financial procedures. It represents a socio-cultural and socio-economic factor that the poor cannot live without, though; there are some inherent drawbacks in economies of scope and scale, maturity transformation, spatial transfer of savings, predominance of cash transactions and shallowness of intermediation ((Braverman and Guasch, 1989; Popiel, 1994).
This study was used to identify the merits and the demerits of these Informal Financial Institutions (Traditional Savings and Loan Institutions) and to measure its effects to a prospective customer with a view of ascertaining the reasons behind their patronage by both rural and urban dwellers in spite of the presence of modern Savings Institutions. The cost benefit analysis principle will be used in the course of this research work.
1.2    OBJECTIVE OF THE STUDY
The study seeks to:
1)     identify and assess the merit (advantage) and the demerit (disadvantage) of the Traditional Savings and Loan Institutions
2)     ascertain the social and economic benefit of the Traditional Savings and Loan Institutions to a prospective customer and the community.
3)     ascertain the role played by Traditional Savings and Loan Institutions in economic development of the rural areas.
4)     act as a means for recommending to policy makers the integrating of the activities of the Traditional Savings and Loan Institutions with the modern financial institutions
1.3    RESEARCH PROBLEM
The following are the questions formulated to guide this study.
General Research Question:
What are the effects or relevance of the activities of informal financial Institution vis-à-vis their merit and demerit to an individual in alleviating the poor from poverty by promoting their livelihood and developing the community.
Sub – Research Question:
1)    what are the economic cost in relation to the economic benefits of Traditional Savings and Loan Institutions?
2)    what role does the Traditional Savings and Loan Institutions play in the economic development of the rural areas?
3)    how substantial are the financial services of the Informal Financial Institutions for Micro Enterprises?
4)    why are these institutions still in vogue despite the availability of the Formal (modern) Financial Institutions?
1.4    HYPOTHESIS OF THE STUDY
Ho:    There are no significant social benefit derived from the Traditional Savings and Loan Institutions by an individual customer and the community.
Ho:    There are no significant economic benefit derived from the Informal Traditional Savings and Loan Institutions by an individual customer and the community.
Ho:    There is no significant role played by the Traditional Savings and Loan Institutions in the economic development of the rural and urban areas.
1.5    SIGNIFICANCE OF THE STUDY
One of the major ways to reduce poverty and improve the position of the poor is to encourage savings. Therefore it is hoped that at the end of this study, the finding will help to correct the ills militating against the effective performance of the Micro financial institutions in the rural areas.
It will also help to guide individuals in making decisions as regard to savings and loan on a short term basis and also guide policy makers in national financial decisions as well as the academia.
1.6    SCOPE OF THE STUDY
This study  addressed  the issues pertaining to Informal Financial Institutions in respect to: their type, mode of operation, the cost of using them, the benefit of using them, role played by them in economic development amongst others. As such it is design to cover the residents of Delta State, using ten (15) Local Government Area as the sample area which will include the rural dwellers and urban dwellers, low income earners and the self-employed etc.
1.7    LIMITATION OF THE STUDY
This research work will be limited by poor information gathering (primary data) from the field due to the poor attitude of most people towards information dissemination.
It will also be limited by the tool of analysis as it has its own constrain.
Apart from the above, it will further be limited by the sample size since only few cities or areas in Delta State will be covered, hence it is unlikely that the result obtained from this research will be valid for other cities or states in Nigeria.