Recently, the Central Bank of Nigeria announced some new changes to the norms regarding businesses, commercial banks, and their activities.
Starting with the increase of Value Added Tax (VAT) to 7.5% from 5% and then the new charges to be placed on deposits and withdrawal of funds from banks, one would say that the economy is not friendly to people in the grassroots. What this means is that the expenses incurred by individuals and corporations alike, to be part of the modern banking system, has increased.
This brings us to the question, aren’t the banks supposed to encourage savings and investment? How come there are charges on depositing funds which might be intended for savings? If I have to pay to save my own money, I might as well keep it in my “kolo”.
ESUSU
Esusu (also known as ajo in Yoruba or adashe in Hausa) is believed to have come from Yoruba descent. It is simply a platform for a group of people to contribute and save money for their collective or individual benefit.
Looking at all the questions coming up because of these new charges, it might be safe to say that the traditional saving system known as esusu stands a chance of gaining credence henceforth. Think of esusu as a platform that allows you save your money without incurring the limitless charges imposed by the commercial banks and now, the Central Bank of Nigeria.
On the side of the policies improving a cashless economy, esusu also takes the cash from your palms regularly. So technically, it is “cashless” in nature even though it does not allow for other financial transactions. This esusu reduces the amount of cash in circulation so, it literally seems as though it is a win-win situation for the “cashless” intentions of the Central Bank.
DIFFERENT WAYS ESUSU OPERATES
Esusu also has different types and ways it operates. For some people, it is a savings contribution. The people in the group contribute an equal amount of money each and rotate the withdrawal accordingly. This means that in a group of 12 people contributing N10,000 monthly for a year, each person will get the chance to withdraw N120,000 each before the year runs out. So, they get to deposit without charges and withdraw the bulk sum without charges too.
The other type of esusu is an avenue where the people on that platform contribute regularly to top their accounts. Most times the condition is that they maintain a certain amount contributed regularly. It might also involve them not withdrawing from the account until a certain time and the account custodian gets about 1% or 2% of the total amount.
Let it also be known that these custodians to pick up these contributions by themselves and do not charge on deposits. So, you see why the commercial banks might have lost their grassroots customers?
IS ESUSU THE ALTERNATIVE?
If you have been reading from the beginning, by now you would think that esusu is superior right? Now hear this, esusu in its nature encourages only savings. It is a micro part of the economic system, but it is strictly for savings and no other financial activities. Bear in mind also that in most situations, the funds left with these micro-financial operators are without collateral or insurance.
The system is not also popular for investing except issuing unsecured loans to its members and contributors at little interest. There are stories of people who deposit money and the custodian dies or disappears and the rest is history. It deals basically on trust and familiarity, these two are not good for business.
In the face of all these charges coming from the financial institutions and banks, and the uncertainty and insecurity of funds in the traditional esusu system, one may begin to wonder which way to go in Nigeria. One would have thought that the use of commercial banks would ease out some of these challenges. The truth is, yes it did, but at a very high cost. The bank services have become a charade of what it was thought to be.
In primary school during business studies, we were taught the different types of bank accounts. In it were the savings account, current account, and fixed deposit account.
I still recall being taught that the savings account was for low-income earners and that it is fashioned for savings and investment as there are incentives in the form of interest to people who operate a savings account. The current account does not attract interest and the fixed account attracts the highest interest as it does not allow for free withdrawal at will.
In contrast to this, in actual operations, banks now suffocate account owners with outrageous charges. Many of which these account owners are not aware of. The fixed deposit meant for savings is now a joke as the interest rate is less than the charges incurred on the account.
All of these brings to the question, is the banking sector designed for the people in the same economy or for some other purposes? Are they now agents of refined exploitation from the masses? Needless to say that all of these downsides of commercial banking have led to an exclusion of grassroots and microeconomic operators as a result of outrageous requirements and charges.
With these troubles faced by account owners in commercial banks, it is still not safe to keep your money all to yourself. Turning to the traditional esusu system to save money is also not a sure way as it only allows you to save little fractions without easing out regular transactions not to talk of international activities.
SOLUTION
The solution could be to stick to the esusu for savings and find out ways to make the deposits secure while maintaining bank accounts with commercial banks. This might lead to a trade-off as the charges avoided by using esusu could be expended by paying charges at the bank for the people that use both platforms.
In all, the commercial banks have their flaws as much as the esusu system. However, the esusu system does not seem to be the perfect alternative to tackle the hurdles from commercial banks.
