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Esusu: A Growing Alternative To Conventional Banking?
NO doubt, the nation’s financial landscape has evolved over time. Since the debut of the first financial institution in Nigeria over ten decades ago, activities and various attempts at financial intermediaries have continued to grow in this part of the globe.
Interestingly, various developments and reforms witnessed in the sector have made competition among players keener, more competitive and interesting. For instance, it is worthy of note that today’s banking is fast going beyond the banking halls. In other words, unlike in the distant past when banking activities were limited to the banking halls, modern innovations and global trends are fast bringing banking to the doorsteps of the customers.
“No bank in this new dispensation expects to sit back and get results. They are gradually prospecting for customers. Hence, the intense aggression noticed among operators of late, are some of these strategies of shoring up their capital base,” said a banker, while speaking with Banking on developments in the nation’s banking sector.
Curiously, as intense as the competition to mop up capital seems to be, not a few believe the nation’s banks are still not really discharging their financial intermediary role effectively, a development which has given rise to factors that have re-defined the nation’s banking landscape.
For instance, the increasing popularity and acceptance of Esusu, a form of an economic institution common among traditional communities oin Nigeria, as an alternative banking has been ascribed to some of these developments in the nation’s financial sector of late.
Undoubtedly, Esusu, a fund to which a group of individuals make fixed contributions of money at fixed intervals with total amount contributed by the entire groups assigned to each of the members in rotation, is becoming increasingly popular among individuals and corporate bodies, as a form of shoring up their financial fortunes and enhancing their economic powers.
Interestingly, unlike in the past when such a form of informal banking was limited to the unlettered individuals in the society, the bug is fast catching on with the elite and even corporate organisations that would, hitherto, not touch the idea with a long spoon.
“It is a reflection of the signs of the time. It is apparent that every attempt at reaching the unbanked in the society and empower them in the past had failed,” argued Shola, a Business Administration graduate from The Polytechnic of Ibadan, who now runs a small business centre in Ikeja, Lagos State.
According to him, he had to resort to a weekly contribution with some other business owners within the complex, where his business is situated, since every attempt to improve his business fortunes through all the conventional banking initiatives had not yielded the desired results.
“There was a time I opened some accounts with some micro-finance banks in the neighbourhood because I felt the micro- finance scheme was actually meant for businesses like mine, but unfortunately, the accounts I opened with the banks went down the drains because as promising as the bank looked then, it went under within few months of being in operation,” he stated.
However, Shola is not alone. Raheem also decided to organise a form of informal banking with his friends, when there was a pressing need to meet some domestic projects.
“I wanted to change my vehicle and I knew it would be very difficult for me to save up the money. I had to enter into this Esusu banking initiative and within a few months, I was able to raise money to buy another vehicle; something that would have been impossible with the conventional banking,” he stated.
A banker and finance expert, Mr. Biyi Adesuyi, agrees with the fact that this unconventional form of banking is increasingly becoming popular in this part of the world.
This he attributed to lack of confidence in the nation’s conventional banks.
“Some people believe in the Esusu arrangement because they don’t require documentation for opening of an account, filling a form for deposit or withdrawal.
“Besides, they know themselves. So, it makes the informal arrangement very easy. Decisions are taken more quickly and it is easier for members to get access to funds to meet their needs than getting such funds at the conventional banks,” he said.
While he agrees that the arrangement is increasingly sweeping the rugs off the feet of the nation’s conventional financial institutions, especially the micro-finance banks, he, however, believes that it is not without its own risks.
“It is easy to lose money and the victim would not be able to seek redress. While it is safer to organise such things among a group of friends, it is very risky to do so with those people that have their own Esusu organisations.
“We’ve witnessed cases where those mobile bankers, who go out to collect such funds from their clients on a daily basis, make away with the money, leaving those that have contributed the funds gnashing their teeth,” he argued.
Adesuyi also believes that the implications of the growing number of these Esusu organisations for the economy are very grave.
“It is a reflection of the inadequacies of the formal banking system, in the sense that their services are not tailored to suit the unique needs of the people. And it also means that a huge volume of bankable funds go with this,” he stated.
Not a few believe that the regulatory authorities and the nation’s financial institutions would have to re-invent the products in their portfolio to be able to meet the needs of this type of people. This, they believe, is the only way to check the growing number of Esusu organisations competing for every micro-finance space with the conventional banks.
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