traditional financial institutions


are a type of financial hub organized by an individual that is not regulated by the government. these traditional financial institutions are often called daily pay, susu, daily collection or daily contribution

these types of local banking systems can equally loan money to their customers in good faith as they go from shop to shop as a daily routine.

The traditional financial institutions came into existence several years before the establishment of modem banking system in many countries in the West African sub-region.

these traditional financial bankers aren\’t paid wages or salaries but they have a fixed way of collecting their pay. In order to function properly the traditional financial institutions modelled a fixed daily.

fixed contribution system which involves the paying of a fixed amount of money daily for 30 days.

let\’s say you as a customer wants to be contributing $500, at the end of the month the first $500 contributed is taken as payment for the traditional banker

these financial institutions are locally organized by individuals with the aim of helping people to save their money through daily contributions.

traditional financial institutions and their function. In the traditional setting, there are ‘money lenders’ who make profits by charging interest on money lent to people.

Money lenders have surplus funds for lending and they usually charge very high interest rates.

what are traditional financial institutions?

There is a traditional banking system (‘Local Bank’) which is called various names in various languages.

In some cases the members contribute an agreed sum of money into a Fund on a regular basis such as on Sundays, the mark day of the area, or the month ending.

The contributions can be on a daily, weekly or monthly basis. From the fund, money can be lent to members or other persons and interest is charged.

At an agreed period (say during festivals, end of the year, etc) the members are re-paid their money together with their share of the interest or profit.

these are as follows

  1. Susu
  2. Ajo or daily pay
  3. Goldsmith
  4. co-operative drifts etc

These are just a few examples of traditional microfinance institutions in Nigeria.

The country has a vibrant microfinance sector, with several other banks and institutions providing microfinance services to promote inclusive financial growth and development.


 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 mender to save, lend and manage money.

Define money and capital market.

  Identify the types and functions of the institutions.

  Explain the types and features of securities.

  Explain the process of and requirements for accessing the capital market

  List the benefits of the capital market.

Demonstrate an understanding of the meaning, transaction and trading methods in the secondary market.

These traditional financial institutions usually take the form of co-operative 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 an 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 institution

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 business that can yield profit to the organizations

Assistance to members in time of need: Traditional financial institutions can assist members when they air difficulties.

  1. economic tools for nation building
  2. budgeting
  3. factors affecting the expansion of industries
  4. mineral resources and the mining industries
  5. demand and supply
  6. how companies raises funds for expansion

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