Informal Financial Savings Practices to Facilitate Formal Financial Inclusion

Integrating informal group-based savings systems, into formal financial institutions represents a significant opportunity to promote financial inclusion for women, and women-led MSME’s. These traditional savings practices have provided an agelong platform for many women hesitant to engage with formal financial systems but require the financial boost that can only come from engaging with formal financial service providers.

This study explores the role of informal savings mechanisms, such as the group-based savings system called Ajo or Esusu in the south-west of Nigeria, in promoting financial inclusion in Nigeria, and particularly among women. It highlights the importance of informal savings as a viable alternative for fostering economic empowerment within communities of trust amongst marginalized groups, even in developed economies. The study also assesses the impact of Ajo/ Esusu on women’s financial behavior, access to formal banking services, and their economic livelihood based on their adopting a group-based micro savings culture. It provides insights into how informal savings systems drive financial inclusion and seeks to inform policy recommendations that harness the potential of informal financial practices for the benefit of low-income women and broader economic development objectives.