The Model For Linking Savings And Credit Groups With Banks In Akwa Ibom State, Nigeria

Abstract

This paper assessed the operation of the financial linkage of self-help groups with banks in Nigeria, which was introduced in 1991 to enhance the performance of loans guaranteed under the Agricultural Credit Guarantee Fund Scheme [ACGFS]. It utilized simple statistical tools and the multiple regression analyses to assess the lending and savings component of the linkage. The results show that project choices of some groups are correlated: groups only sign documents that members are jointly liable to the banks but in actual fact, the operation of the linkage does not encourage joint liability of groups in loan repayment; and groups are generally effective in making the mandatory savings when they have not obtained the loans. The linkage program will greatly be enhanced if the design of the linkage encourages joint liability in loan repayment and if the savings instrument is adequately flexible such that groups can use part of the mandatory savings to repay loans when group income falls short of the group's financial obligations. Key Words: Financial Linkage, Self-Help groups, Joint liability,Banks. (Global Journal of Pure and Applied Sciences: 2002 8(2): 245-252)