TRADITIONAL FINANCIAL INSTITUTIONS
The traditional financial institutions came into existence several years before the establishment of modern banking system in many countries in the West African subregion. It involves the coming together of a group of people with common interest in the same place of work or community who mutually agree to pool their resources together in order to save, lend and manage money. These traditional financial institutions usually take the form of cooperative societies known as credit and thrift co-operative societies, which are given different names in different places, e.g. “ESUSU” or “NSUSU” in Yoruba, or “ETIO-UTU” in Igbo. It takes the form of association of people in the village, office, market, etc. who have mutually accepted to pool their resources together so as to save, manage and lend such money to its members when the need arises.
Functions of traditional financial institutions
- It encourages savings: Members, through the pooling of their resources together, are encouraged to save.
- Assists members to borrow: Members who are in need of money for whatever reason are permitted to borrow.
- It ensures proper management of funds: The saving and lending of funds to members assist the institution to manage their funds properly.
- Promotion of investment: Traditional financial institutions may decide to invest in viable businesses that can yield profit to the organisation.
- Assistance to members in time of need: Traditional financial institutions can assist members when they are in financial difficulties.