Business Sense

Recently, the issue of co-operatives and its inherent benefits as a tool for enhancing financial inclusion was again brought to the fore, when the Enhancing Financial Innovation and Access (EFInA), a financial sector development organisation that promotes financial inclusion in Nigeria, hosted an Innovation Forum to highlight opportunities for using co-operatives as a channel for enhancing financial inclusion in Nigeria.

Cooperative societies all over the globe have been seen as one of the ways of reaching out to the un-banked and the neglected in the society, and not a few have come to see it as an alternative to the regular banking, since it, in most cases, provides members of the group the financial incentives, without the rigours usually experienced in banking halls.

Traditional co-operatives are common throughout Nigeria, but these groups tend to be small, with a common bond based on membership of a kinship, societal and/or professional group.

According to the Federal Department of Co-operatives, as at 2010, there were over 80,000 co-operative groups with over 1.4 million members in 605 local government areas in Nigeria. The EFInA Access to Financial Services in Nigeria 2010 Survey also revealed that almost 26.0 per cent (21.9 million) of Nigerian adults used informal groups including co-operatives; and for 17.4 per cent (14.8 million) of the adult population, informal groups are their only means of access to financial services.

However, there has been limited systematic data on the co-operative sector in Nigeria, which hinders effective engagement with the sector.  It is, therefore, difficult to determine the optimal strategy for expanding and deepening financial services to and through co-operatives. To improve stakeholder understanding of the co-operative sector and their potential for enhancing financial inclusion in Nigeria, EFInA undertook an in-depth study (qualitative and quantitative) of the sector in three states - Enugu, Kebbi and Oyo. Findings from the survey were disseminated and discussed by panellists and participants from co-operative groups, industry regulators, development finance institutions, micro-finance banks and deposit money banks at the innovation forum recently.

While expressing her view on the issue at the forum, the Chief Executive Officer, EFInA,  Ms. Modupe Ladipo,  noted that there is a core and dedicated following of co-operatives in  Enugu, Kebbi and Oyo states, which is probably also replicated across Nigeria. Members, she stated, regularly save and have a real demand for loans.

“Our data revealed that the 700 members interviewed in these three states saved over N243 million annually; and that the 150 managers interviewed, managed a loan portfolio of N122 million. Therefore, there is a significant potential for co-operatives to make a bigger impact among those who are un-banked or under-served. If optimised, co-operatives can be a force in empowering rural communities, farmers, women and micro entrepreneurs throughout Nigeria,” she stated.

In his own contribution, one of the keynote speakers at the event, the Minister of Co-operative Development and Marketing, Kenya, Honourable Joseph Nyagah, shared insights on how effective regulations can support the growth and development of co-operatives and maximise their impact on financial inclusion.

Kenya boasts a rich pedigree in the area of using co-operatives as tools for financial inclusion. For instance, its Savings and Credit Cooperative (SACCO) is the most dynamic and largest in Africa. At the end of 2011, there were 14,126 registered co-operatives – serving over 10 million members in Kenya.

He emphasised that the role of government should be to create a conducive environment for growth and development of co-operatives through effective policies, while also overseeing development and administration of co-operative legislation and regulations.

“Co-operatives remain important in providing access to finance, and in particular credit to low income individuals given the rising cost of lending by banks,” he stated.

Another speaker, who is the Dean, Faculty of Co-operative and Community Development, Moshi University College of Co-operatives and Business Studies (MUCCoBS), Tanzania, Christian Malamsha, noted that co-operative colleges can be used to strengthen the competence of co-operatives and their managers.

This, he argued, would assist in accelerating the uptake of formal financial products in the co-operative sector.

“Co-operative colleges should identify, develop and review programmes continuously, to ensure that the training needs of co-operatives are met,” he stated.

While emphasising the importance of co-operatives as a tool for enhancing financial inclusion, especially in Nigeria, the Chief Executive Officer of Wealthgate Advisor, Mr. Adebiyi Adesuyi, believes it has become imperative for the government to support co-operatives in Nigeria, since it is the only financial system that accommodates the otherwise neglected in the society.

“Though co-operative societies are common here, especially the Producers Co-operatives and the Consumer Co-operatives, but they are not as impressive as what obtains in Israel (the Isreali Kibbutz), regarded as one of the most successful modem collective societies today.

“There, the level of co-operation among members is total and members of these co-opoerative societies, popularly known as the Kibbutz, are ready to sacrifice for the benefits of the larger society. And I think that is a major reason why the country has continued to do well, in spite of being in the desert,” he argued.

Mr. Adesuyi would, however, not see it as a threat to the conventional financial institutions since most of the funds mopped up from these different individuals and organisations by these collective societies will still find their ways into those banks’ vaults.

“Every co-operative has an account with the regular banks. While they keep their funds with the banks and generate interests on them, the banks also have the opportunity of using such funds for lending. So I think it is a mutually-beneficial arrangement,” he stated.

Interestingly, a virile co-operative system might be the key needed to unlock the nation’s huge potential. For instance, with the micro-finance scheme, introduced by the Central Bank of Nigeria sometimes ago not making the required impact and the conventional banks still ‘tight-fisted’ in the area of granting credit facilities to Nigerians, a little more encouragement may make co-operatives one of the most sought-after in the  nation’s finance sector.