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COINTEGRATION ANALYSIS OF INFORMAL CREDIT MANAGEMENT: ASSESSING THE IMPACT OF INFORMAL FINANCE ON THE WELFARE OF RURAL DWELLERS (A STUDY OF DELTA NORTH RURAL COMMUNITIES IN DELTA STATE, NIGERIA)
ABSTRACT
This study applied the co-integration procedure to examine the extent of influence of informal credit on the welfare of rural dwellers. A field survey using the instrumentality of a structured questionnaire and in-depth interview was conducted to generate wide range of information on the operations of informal finance in Delta North region in Nigeria. 200 daily contributors (Adashi/Alero) were focused on from 16 districts of the regions in Delta State. From this population a sample of 4 local communities covering 2000 contributors to rotating savings and credit associations (ROSCAs) were selected through stratified sampling procedure. A model that profiles contributors’ social wellbeing was utilized, LM Test, Ramsey Test and Augmented Dickey Fuller techniques were used for data analysis for the period January 2009 to December 2010. Findings revealed that income excreted more significant effect on growth of informal finance in the rural communities during the review period. The other two variables consumption expenditure and property assets, as shown by the result, have negative effect on growth of informal finance, this thus implies that they are withdrawals to rural deposits. We, thus, recommend the need for aggressive improvement on rural income base through policy stimuli that is rural poor driven. This could enhance cash flow and create an incentive for improved mobilization of informal finance in Nigerian rural communities.
Keywords: informal finance, rotating savings and credit, co-integration, credit man management