INFORMAL FINANCIAL INSTITUTIONS AS CATALYST FOR ENTREPRENEURSHIP DEVELOPMENT IN NIGERIA: A CASE STUDY OF OSUN STATE

This paper examined the extent the informal financial sector has contributed to the development of entrepreneurship in Nigeria. It, thus, appraises the effectiveness of the informal financial institutions in contributing to finance for productive investment and development of entrepreneurship in Nigeria, focusing on Osun State as a case study. A critical analysis of primary data collected from field survey and questionnaires administered on about one hundred and fifty entrepreneurs in Osun State shows the relative importance of the informal financial sector over its formal financial institutions in mobilizing funds for entrepreneurship development. Data gathered were analyzed through descriptive statistics in the form of tables and percentages. It was, however, found that Ajo appears to be the most prominent among the family of informal financial institutions, while money lending is declining in importance. Most entrepreneurs still prefer informal institutions to banks. Funds mobilized are effectively allocated to such activities as business expansion, trading, purchase of equipment, Business support, savings and income, financing of formal and informal education, etc. and therefore, suggests that Informal financial institutions should be given proper recognition and adequate consideration in the nation’s financial system. To this effect, government should redesign her regulatory policies to formalize and standardize the operations of the major institutions in the informal financial sector. However, such regulations should not be framed in a way that will totally cripple or paralyze institutions’ activities, but effectively enhance their performance for maximum contribution to development.