As I was writing this piece, I got a news alert concerning what was happening in Ukraine, which further lent credence to crux of this piece. Set up in 2021 to facilitate more agricultural lending through the country’s credit unions (cooperatives), and having disbursed $4.36 million, a further $1.5 million is being distributed to micro, small and medium-sized businesses in Ukraine through a credit union liquidity fund to ensure that, notwithstanding the ongoing war between the country and Russia, food production and its security is sustained.
The fund is being delivered in coordination with the Credit for Agriculture Producers in cooperation with the World Council of Credit Unions and US Agency for International Development. The funding initiative further saw the launch of a four-year project to increase credit union (cooperative movement) liquidity for business financing, improve the enabling environment for credit unions, deepen the technical capacity of credit unions, and address the specific challenges of women and other vulnerable populations in accessing financing for business development.
When it comes to fighting unemployment, the role of the informal sector cannot be overlooked. The informal sector where mostly one-man businesses hold sway and which include activities like domestic work, petty trading and street vending, controls up to 58.2 percent of the Nigeria’s GDP, thereby making the sector a major contributor to the Nigerian economy. Not only in Nigeria, the informal sector (businesses using unregulated employment practices) in the United Kingdom are estimated to generate about 12 percent of Britain’s gross domestic product. It is believed that this informal sector activities sustain about two and a half million workers (9% of the private sector workforce). Japan’s informal economy is estimated to be 9.6 percent which represents approximately $604 billion, while that of China, though experiencing loose monitoring, notches between 12.7 percent and 23.5 percent of the country’s GDP. Australia’s is estimated to be 9.9 percent, while New Zealand’s figure is about 10.1 percent of the country’s GDP. In the European Union, though varied from region to region, the informal sector is around 15 percent to 25 percent aggregate.
From the revelation above, it is clear that no country that is serious about its economic development and growth joke with the informal sector that is populated by micro and small businesses. As a result of the unwieldy nature of this sector, policy makers have discovered the need to manage the sector’s significant business population by working with the cooperative movement who have nearly all informal sector players as their members. The regular commercial banks have no plan for this sector other than to be mobilising deposits from them. There are no financing products that suit the cooperatives; and anyone that approaches any of the commercial banks is positioning its movement to loan facilities at cut-throat rates. Even the specialised bank, the Bank of Industry, does not have any plan to capture the cooperatives. This being the case, the cooperatives, a very significant business movement in any country, need a specialised financial institution of their own in Nigeria, especially at this period of economic reformation.
The Cooperative Bank of Kenya is the bank dedicated to financing cooperatives that are agricultural societies in Kenya.
It is through the activities of the Co-Op bank that Kenya has been performing agricultural wonders through the cooperatives by providing funding in the form of loans, investments, and other services for the co-op movements and their micro, small and medium-sized enterprise members. Its tool for effective discharge of this duty is the cross-guarantee system that only cooperatives can provide.
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With the roles that cooperative movements play in organising the informal sector to engage and boost the economy, Nigeria needs to bring back the cooperative bank. A mistake had been made during the time of banking consolidation by allowing the Cooperative Bank to be subsumed into regular commercial banks instead of allowing them to stand as the specialized bank that they were supposed to be. This error in judgement must be rectified at this critical juncture in the life of the Nigerian economy if the country is really serious about its local production, especially the stimulation of the informal sector and the agribusiness industry.
. Ola Emmanuel is a business planning consultant and founder of Leacent Incorporated Trustee, a network of entrepreneurs and group of industrial cooperatives. He works with a team of international consultants to conceptualise and plan agribusiness and housing projects. As a certified trainer authorised to use the International Labour Organisation’s enterprise development modules, he trains entrepreneurs and organises workshops and seminars for potential and practising entrepreneurs as well as business managers and cooperatives. He also speaks and facilitates at leadership and management workshops on invitation. His book, Business Plan Made Easy: Step by Step Guide On How To Turn Your Idea To Profitable Business’ is the latest of the books authored by him. Tel: +234(0)9068602954 (Call and SMS), +234(0)8023257707 (WhatsApp only).