This Traditional Approach Encourages a Savings Culture Among Nigeria’s Smallholder Farmers

by Toluwalemi Oluwadare on 15 Feb 2019 • 1 comments
5 min read

Smallholder farmers in Nigeria are mostly low-income people, whose needs are far more than what they earn. Many smallholder farmers in Nigeria attempt to save but are faced with the daunting challenges that come with saving. How then can we encourage a savings culture among Nigeria’s smallholder farmers?

Before we get into the most important aspect of this article, it is important to distinguish the difference between the terms saving and savings. Saving and savings are commonly misused words. Saving is the act of putting money away (usually in an account) for future use. Savings, however, is the actual quantity of funds in that account. 

Savings culture is the habit of spending less than you earn in income, and placing the rest into a reserve account for later use. Putting money aside for tomorrow regardless of your needs or how much you earn is very important. Savings can help reduce poverty and boost the farmer’s creditworthiness. It also provides funds for families to support children and business. The ability to manage money for productive use provides resources needed to farm and help farmers achieve maximum outputs.

So, what traditional approach can encourage a savings culture among Nigeria's smallholder farmers?

Cooperative society savings scheme is a long-established system of saving that plays a significant impact in encouraging savings culture among smallholder farmers in Nigeria. 

According to FAO,  a cooperative is an autonomous association of women and men, who unite voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise (FAO, 2012). 

Cooperative savings among Nigeria’s smallholders involves an independent association where farmers pool their financial resources together to achieve goals (e.g. financial services) that they may not otherwise be able to meet themselves. The main aim of establishing a cooperative is to pursue profits while addressing the needs and interests of the members simultaneously. In addition, a member is free to join or end to be a member at will, based on the rules guiding the cooperative.

As members of a cooperative, smallholders must contribute an amount regularly, (most times monthly) that is agreed on at weekly or monthly meetings and a ballot is usually used to decide the individual who will be the recipient of the contribution. For instance, if there are 10 members in a group and each contributes ₦1000, the recipient will receive ₦10,000. The rotation will continue until all members get paid. This gives them membership privilege to get access to loan promptly. Their contributions also serve as collateral and fellow contributors are accepted as guarantors

In Nigeria, cooperative savings for smallholder farmers are usually set up by the state or government, financial bodies and credit organizations. The Cooperative Societies in Nigeria are regulated by the Nigerian Co-Operative Societies Act which is a Federal Law. In some rural communities, the smallholder farmers come together and set up one themselves.

How Does Cooperative Savings Encourage Nigeria's Smallholder Farmers?

Boosts Self-Esteem

Cooperative savings give smallholder farmers a sense of self-esteem. They develop self-esteem as “part owners” of the program because of the compulsory savings that they take part in, and they do not want the program to collapse. Farmers have the benefit from cooperatives as an individual to get access to loans either in cash or in the form of goods. This affords them the privilege to freely express themselves on any issue about the scheme at the cooperative meetings. The savings grant them confidence when in need of a loan facility because the basic need has been met.

The use of savings as a determinant for loan amount makes them increase their savings and cut frivolous spendings such as leisure drinking and lavish entertainment of guests. This brings about self-esteem, a sense of belonging and responsibility among members.

Encourages Economic Growth and Development

These societies give more than credit facilities to members. They create a learning environment by giving technical support and aiding improved social interaction. Members are also able to get access to services, economic opportunities and other non-economic opportunities. Cooperatives also provide farmers with training on production and post-harvest handling, as well as education in literacy, business or marketing that can build their human capital.

In addition, the basic concept of cooperatives is based on values of democracy, equality and equity, which can play a particularly strong role in empowering women.

Ease of Saving

The ease of saving is a reason that encourages savings culture among Nigeria’s smallholders.
Cooperative savings save the farmers the stress involved in getting loans from banks in Nigeria due to lack of collateral requirements and inadequate banking network in the rural areas. They have the membership privilege to get access to loan promptly either in cash or in the form of goods. Easy access to loans has helped many smallholder farmers achieve improved welfare. Also, the interest rate and repayment terms are not as crushing as that of the banks. 

Farmers in cooperatives have more bargaining power, lower transaction costs in getting loans, and better access to information. Cooperatives that are effectively organised can form a collective voice to advocate for farmers’ needs and enable them access services at more affordable prices that can help them increase their yields, sales and profits.

At Crop2Cash, our mission is to turn the businesses of smallholder farmers to profitable ventures and on the path to profitability, smallholder farmers need digital tools that can make it easy for them to save and access loans. We will be rolling out a pilot of our product with some smallholder farmers in the Northern region of Nigeria in the next few weeks and we will be sharing more of what we have learnt on our blog. Subscribe here.

“Do not save what is left after spending, but spend what is left after savings”
–Warren Buffet

Related Articles


Agriculture for Impact (A4I) 2015, Agricultural cooperatives. Available at: <> [Accessed 15 February 2019]

Oluyombo, Onafowokan. (2013). Impact of Cooperative Societies Savings Scheme in Rural Finance: Some Evidence from Nigeria. Economic Review – Journal of Economics and Business,. XI. 77-88. 10.2139/ssrn.2885353. 

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  1. Bami

    18 Feb 2019 AT 16:00 PM

    Great piece thanks ...

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