The Sun News

Raise start-up capital with esusu, credit societies

Stories by Omodele Adigun

Getting credit is one of the major challenges facing micro enterprises in the country, but experts believe that small entrepreneurs can tackle it through informal channels.

These informal outlets include friends , family, money lenders and informal savings schemes such as Esusu and thrift societies.

Esusu, according to, is an informal rotating savings club, where a group of people get together and contribute an equal amount of money into a fund weekly, bi-weekly or monthly. The total pool, also known as a hand, is then paid to one member of the club on a previously agreed-upon schedule. The pool rotates until all members have received their share. Some use it to start businesses, others for big purchases, vacations, down payments on properties or cars and even to send children to universities.

How Esusu works

The group elects a treasurer who will collect the members’ contributions. He or she will also create a payout roster, or members can request to receive their hand at any given date during the cycle. Everyone agrees on how much and how often they want to contribute. For example, if 10 members are contributing N5000 a week, each week a member will receive a N50,000 hand or cash lump sum. The cycle begins again after 10 weeks. Any member who can afford it, can also double their contribution and get paid two hands in one cycle.

There is no interest to be collected, so you will always get out the exact amount that you put into the pot. The underbanked also use the model to escape the same lack of access to capital

The membership size, amount contributed and interval are usually agreed on by members These groups aid social interaction, give financial support and expose members to business opportunities due to their interdependent nature.

However, you need to decide at what point you will cash in the funds. If the purpose is to start a business, you could cash in once you have reached a specific target for your seed capital.


Since Esusu is not regulated by any laws and can, therefore, be risky if someone untrustworthy joins, make sure, if you are considering joining one, it is with people that you know well and trust. Usually, esusu members are from the same family or a close-knit community.

There are no legal paperwork or credit checks involved when starting esusu, all that have to protect you and your money is the familial trust between the members. So pick who you save with wisely.

However, to overcome the above challenges, Soji Apampa, the co-founder of the Convention on Business Integrity, which sponsors the Corporate Governance Rating System in partnership with the Nigerian Stock Exchange, once recommended in an online post,  that at the heart of every collective saving scheme is the clan nature of its members. And therefore, “all members of this ethical business clan should jealously guard entry into the clan to ensure that admitted members comply with the traditions of the clan. Such traditions include integrity, compliance, and transparency.”

A sociologist, Emile Durkheim, once defined a clan as an organic association that resembles a kin network but may not include blood relation. “Clans are characterized by a strong feeling of solidarity and are governed by long-held traditions.  In case of a deviance from the traditions of a clan, they are able to correct their members through peer pressure and there is an implicit understanding that if you benefit from the collective, the collective has a right to redress if you do something that is inimical to the collective,” she added.

However, notwithstanding these challenges, “sub-Saharan African entrepreneurs reduce their risk by belonging to more than one interdependent social group”, noted Bamidele Adekunle, an adjunct Professor at the University of Guelph, South Africa.And one of these groups is Cooperative and Thrift Societies.

He explains: “Cooperative thrift and credit societies can address some of the shortcomings of Esusu. These are member-based organisations that help members to address economic problems. The ultimate goal is to encourage thrift among the members and to meet the credit needs of people who might otherwise be exposed to exploitation. Members are known for strong commitment and participation in decision making.

“These societies mobilise local savings and administer credit to members, thereby encouraging thrift and entrepreneurial activity. They have relatively simple administrative processes and transaction costs are small and shared. Interest income from loans and return on investments may either be distributed to the members or reinvested in the society within a given period.

“These have made micro-entrepreneurs in some countries in sub-Saharan Africa competitive. I have witnessed this among the cocoa farmers and agricultural processors in southwestern Nigeria. These societies give more than credit facilities to members. They create a learning environment by giving technical support and aiding improved social interaction. They can deliver these services because:

They have both formal and informal attributes and are registered and recognised by the government; members contribute what they can afford and their savings and reputation serve as their collateral. There are usually social ties among members which makes it difficult for people to abscond from the repayment of their loans.

“Members can borrow twice or three times the amount they have in savings. The modality depends on the society.   The interest rate is five per cent and is deducted before the applicant receives the loan. Loan recipients are usually given a year to repay their debt. The recipient can continue to save while repaying the debt or take a break from savings till repayment is completed.

They invest in other business ventures and do profit sharing at the end of the year based on the share of each member. Although decision making is based on one vote per person, profit sharing is based on contribution.”

Forex: CBN introduces Form X for SMEs

As part of its determination to increase foreign exchange (forex) liquidity, improve access by Small and Medium Enterprises (SMEs) and retail businesses, the Central Bank of Nigeria (CBN) has introduced the use of Form X for SMEs that requires just basic documentation.

Confirming this, its spokesman, Mr Isaac Okorafor, said that the innovative  measure is intended to ease documentation challenges usually encountered by this category of businesses.

He explained that the new form, which must be completed by all SME applicants, requires the applicant to fill the form with a supporting application letter as well as beneficiary invoice and bank wire transfer.

The objective of the new guideline, he added,  is  to remove obstacles usually encountered by those whose forex needs for either visibles or invisibles were as small as or less than $10,000. He reiterated the apex bank’s determination to continue to ensure adequate supply of forex for genuine transactions in the coming days.

Recall that the apex bank early this month opened a special Forex window for SMEs to enable them import eligible finished and semi-finished items not exceeding $20,000 per quarter.

It explained that the  special intervention was necessitated by its findings that a large number of SMEs were being crowded out of the forex space by large firms.

According to Okorafor , “the sum of $20,000 per SME customer per quarter can be effected by telegraphic transfer subject to completion of Form M supported with proforma Invoice and the importer’s Bank Verification Number (BVN)

He added that all processing banks are to ensure that the importers submit relevant shipping documents not later than 60 days from the date of the transfer.

Information posted on the CBN website defines Small and Medium Scale Enterprises as enterprises that have asset base (excluding land) of between N5 million and N500 million and a labour force of between 11 and 300.

Okorafor disclosed that the CBN had begun the massive sale of foreign exchange in different sectors of the Forex market. Shortly after that, the apex bank, on Monday, April 10, offered $100 million to authorized dealers at the forex auction in the interbank wholesale window. The ank also sold $10,000 each to BDCs to meet the needs of low-end users in the country.

The spokesman said that the dealers in the wholesale segment will have value for their respective bids today, Tuesday

Access Bank CAR hits 21 %

Following its implementation of robust risk management framework, Capital Adequacy Ratio  (CAR ) of Access Bank Plc currently stands at 21 per cent and liquidityratio at 43 per cent.

The CAR for banks in Nigeria stands at 10 per cent and 15 per cent for national or regional banks with international banking licence respectively.

According to the stress test conducted by the Central Bank of Nigeria ( CBN ), three big banks have fallen below regulatory capital requirements.

Analysis of the bank’s result for the financial year ended December 31, 2016 showed stable assets quality with non-perfoming loans and cost of risk ratios at 2.1 per cent and 1.2 per cent respectively.

This low ratio demostrates the effectiveness of the bank’s risk management culture and prudent approach to lending.

Besides, the group delivered resilient performance in the year under review with overall results reflecting growth.

It recorded a total revenue of N381.3billion and profit before tax of N90billion, an increase of 13 per cent and 20 per cent respectively.

Supporting this growth was a 32 per cent year- on- year increase in net interest income of N13. 1 billion, compared to N105. 4 billion recorded in the corresponding period of 2015, demonstrating the sustainability of its core business.

The bank reported a non- interest growth of three per cent to N133 billion in 2016, compared to N129billion recorded in the same period of 2015, which was driven by strong increase in fees and commissions.

Speaking on the results, the Managing Director of the bank, Mr. Herbert Wigwe, explained that the revenue rose across all operating sections with significant support from the retail business, posting N12billion in profit before tax and contributing 11 per cent to the group result.

He said that the retail business also contributed 66 per cent growth in fees and commissions income ensuing from the increased adoption and utilization of e-channels and digital offerings.

Wigwe  said: “We grew deposits by 36 per cent year on year despite increasingly deposit market. Total deposits at year end of 2016 were N2.09trillion, reflecting our resilient efforts at growing market share.”


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