Daily Collector Systems and the Financing of Small Scale Rural Agribusiness in Delta State, Nigeria

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*Corresponding author: E-mail: lixmero40@yahoo.com;
British Journal of Applied Science & Technology
11(2): 1-6, 2015, Article no.BJAST.16878
ISSN: 2231-0843
SCIENCEDOMAIN international
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Daily Collector Systems and the Financing of Small
Scale Rural Agribusiness in Delta State, Nigeria
Achoja Felix Odemero
1*
,
Emaziye Peter Otunoruke
1
and Okeke Daniel Chukwujioke
2
1
Department of Agricultural Economics and Extension, Delta State University, Asaba Campus,
Nigeria.
2
Department of Agricultural Education, Nwafor Orizu College of Education, Nsugbe, Anambra State,
Nigeria.
Authors’ contributions
This work was carried out in collaboration between all authors. Author AFO designed the study,
performed the statistical analysis, wrote the protocol and wrote the first draft of the manuscript and
managed literature searches. Authors EPO and ODC
managed the analyses of the study and
literature searches. All authors read and approved the final manuscript.
Article Information
DOI: 10.9734/BJAST/2015/16878
Editor(s):
(1) Hui Li, School of Economics and Management, Zhejiang Normal University, China.
Reviewers:
(1)
Saikou E. Sanyang, Department of Agriculture, Regional Agricultural Directorate of North Bank Region, Kerewan,
Gambia.
(2)
David Ojo, University of Ibadan Post, Nigeria.
Complete Peer review History:
http://sciencedomain.org/review-history/10453
Received 17
th
February 2015
Accepted 20
th
May 2015
Published 9
th
August 2015
ABSTRACT
The effectiveness of indigenous daily collector system in terms of security and growth of savings of
smallholder agribusiness entrepreneurs has attracted the brilliant minds of Economists. This study
investigates the effectiveness of Indigenous Daily Deposit collector system in savings security and
mobilization, Structured questionnaire was used to collect primary data from 76 randomly selected
respondents (agribusiness entrepreneurs). Descriptive statistics were used to analyze data. The
result shows that one daily collector could service a mean of 25 daily depositors. Daily depositor
could save a mean of
N
9, 100 –
N
13,000 a month. Indigenous daily deposits system encourages
capital accumulation in small bits but continously. Daily depositors expressed preference and
confidence in the indigenous daily deposit system principally due to elimination of distance factor
and stringent protocols involved in conventional banking. Traditional daily deposit collector system
was rated effective (57.7%) in terms of security of savings, mobilization of savings and access to
Original Research Article

Odemero et al.; BJAST, 11(2): 1-6, 2015; Article no.BJAST.16878
2
deposits. The main constraints are low disposable income and irregular deposits. It was concluded
that indigenous daily deposit collector system is an effective complement of conventional banking
system. It was recommended that indigenous daily deposit collector system should be encouraged
to complement conventional banking system in financing agribusinesses in Nigeria.
Keywords: Effectiveness; indigenous; daily savings; investment; small scale agribusiness.
1. INTRODUCTION
The historical emphasis on credit in the micro
finance movement implicitly assumes that the
poor cannot save for investments, and must
therefore borrow at relatively high interest rates
for business development. Yet evidence on rural
saving behaviour from various nations has
indicated impressive propensities to save among
rural people. Rural households have a
substantial capacity and willingness for personal
saving. Their capacity to save is however
adversely influenced by rural financial markets.
The analysis of household saving behaviour is
not new. Rural households can save, but they
have low account balances, seasonal income,
remote location and non-cash assets. One of the
alternative development policy prescriptions for
encouraging savings lies in the design of
indigineous financial strategies to serve the
underserved needs of rural entrepreneurs.
Having the right financial services that is
conveniently available, might help them make
relevant investment choices.
No concluded study so far has been recorded in
literatures on the effectiveness of Daily deposit
systems (DDS) in serving the financially
underserved rural entrepreneurs in the
developing countries such as Nigeria. This study
therefore adopts a microeconomic approach in
investigating the effectiveness of daily financial
deposit for the development of small scale
agribusiness enterprises in Delta State.
The survival of any agribusiness enterprise in
Nigeria depends on how the owner(s) plans,
analyses, operates and manages sources of
financing. Agribusiness farm firms, include; fast
foods enterprises, leather enterprises, bakeries,
fisheries, piggeries, restaurants, poultries and the
related firms. They require massive attention and
support given fact that they are major sources of
employment just like the other non- agribusiness
enterprises. They have a higher capacity for
generating employment in Nigeria than some
large scale enterprises [1]. Indigenous saving
systems are important sources of domestic
capital formation via the mobilization and
productive channeling of private savings. Small
scale agribusiness play significant roles in the
local and national development and growth of
various economies, they often referred to as “the
engine of growth” and catalysts for socio
economic transformation of any country.
Strengthening agribusiness capital base through
daily saving system is vital to development [2].
The idea is that poor people can save and are
willing to save in order to meet life cycle needs,
cope with emergencies, acquire assets and
expand farm businesses. Most of these needs
require lump-sums, whereas, income of the poor
often comes in small installments (small scale
entrepreneurial income). Putting these ideas
together, it becomes clear that the poor have
uneven (irregular) cash flow, thus the need to
save and they have small income, thus small
capacity or ability to save.
What the small-scale entrepreneurs require is a
safe, convenient place to keep their small income
and a simple financial structure with which to
discipline the accumulation of lots of small sums
and their transformation into a large sum. A
variety of home grown (indigenous) mechanisms
including Rotating Savings and Credit
Associations (ROSCAs) and Deposit collectors
systems who charge the poor to collect their
savings. The effectiveness of Daily Deposit
System in terms convenience, security,
simplicity, liquidity and incentive deserves critical
investigation.
Small-scale agribusiness entrepreneurs are often
regarded as the financially underserved sector of
the economy. Consequently, small scale
enterprises remain small in scale of operation;
output is small, income is small and unable to
satisfy demand [3]. Expansion of the small and
medium scale enterprises would require financial
injection through internal and external financing.
External financing through credit scheme is often
difficult to access by small scale entrepreneurs
due to lack of collateral. The common alternative
is internal financing through saving mobilization.

Odemero et al.; BJAST, 11(2): 1-6, 2015; Article no.BJAST.16878
3
Savings through conventional banking is fraught
with some limitations such as distance and
stringent conditions. Informal rural financial
system such as Osusu, cooperative societies,
rotatory savings and credit associations and daily
deposit system. The various informal financial
system have their peculiarities and feature.
Deposit the relevance of daily deposit system in
the rural financial economy, there is little or no
study that describes its procedure, effectiveness
and constraints, particularly when compared with
conventional banking. [4] lamented that the
internal financial system which controls about
82% of money outside the conventional banking
system has made monetary policy ineffective, at
best.
A comprehensive investigation of daily deposit
system as a saving strategy will provide
information on the saving behaviour of small
scale agribusiness operators and how it
translates to saving mobilization. This study was
designed to fill this information gap on the
effectiveness of daily deposit as indigenous
saving method.
The broad objective of the study was to
investigate the security of daily deposit system in
saving mobilization among small scale
agribusiness entrepreneurs in the study area.
The specific objectives of the study were to:
(i). Describe the structure of indigenous daily
deposit system in the study area.
(ii). Determine the amount saved per month
through indigenous daily deposit system.
(iii). Assess the security of indigenous daily
savings deposit services.
(iv). Identify the constraints to indigenous daily
deposit system.
The study was guided with the following null
hypothesis.
Ho
1
: Daily deposit system is not effective in
capital accumulation and deposit security
among small scale agribusiness
entrepreneurs.
2. THEORETICAL FRAMEWORK
Part of the wealth saved can be utilized for
further expansion of production saving prevents
wastage or unnecessary usage on any form of
capital [5]. If all people can save, the aggregate
savings will increase, and aggregate investment
will increase.
Different theories of savings have been reviewed
by [6]; mathematical theory of saving,
contemporary theory of saving, life cycle theory
of saving, buffer stock theory of saving and
classical theory of saving were clearly analyzed
as exemplified by [7]. The life cycle theory of
saving stipulates that working class level of
saving increases with age, attains a maximum
point at retirement and begins to dwindle. To that
extent, savings depends on age of the saver.
This is probably due to the fact that consumption
patterns varies with age of the saver [6].
Indigenous daily saving systems are hinged on
the Buffer stock saving theory which stipulates
that households build up liquid savings in order
to cope with income variability or to withstand
income shocks. The buffer stock theory was
derived from inter temporal utility maximization.
The part of the income saved will flow back to the
economy through investment for the production
of consumable goods and services. The
conclusion is that savings mobilized outside the
conventional banking system will flow into the
economy through investment.
Capital is demanded by the investor because of it
productivity. The demand for capital is inversely
related to the rate of interest. The supply of
capital depend upon saving, rather upon the will
to save and the power to save of the community.
Some people save irrespective of the rate of
interest. They would continue to save even if the
rate of interest were zero. There are others who
save because the current rate of interest is just
enough to induce to the save.
To that extent, saving involves a sacrifice,
abstinence or waival of present consumption in
order to earn interest. The supply of loanable
funds comes from savings, dishoarding and bank
credit. Personal savings are the main source of
savings which depend upon the income level and
the willingness of people to save.
The effectiveness of savings programs can be
difficult to measure because, savings is hard to
capture in survey data and it is hard to isolate
savings from other financial services: few
institutions offer only savings services. Three
factors that particularly complicate savings
measurement are size, timing and diffusion.
Unlike credit inflows, which can be sizable
relative to household income savings flows can
be quite small and balances accumulate slowly.
Also, the timing of the change in behaviour and
outcome is less clear. For households, savings

Odemero et al.; BJAST, 11(2): 1-6, 2015; Article no.BJAST.16878
4
develop slowly through a small reduction in
consumption over time, with a large inflow later.
At some point the household will have built up
enough savings to protect themselves from
shocks (like sickness or unemployment) to pay
school fees, or to short a business. Researchers
need to measure savings balances at multiple
points over several years.
The last issue diffusion, is perhaps the most
important. Indigenous households save in all
different ways. In addition to formal savings
institutions, they may save cash at home, with
deposit collectors, within a savings club (such as
a ROSCA) or by lending to family members.
They may also save in non-cash assets such as
jewelry or livestock. An evaluation that failed to
capture these different savings systems could
understate savings rates, potentially leading to
incorrect conclusions about the impact of the
program.
3. RESEARCH METHODOLOGY
3.1 Description of the Study Area,
Sampling Procedure and Data
Collection Techniques
Delta state, Nigeria was the study area. The
occupation of the people in the rural area
includes smallscale agribusiness in livestocks,
fishing, crops subsector. There exist both formal
and informal financial institutions in the area.
Most of the formal financial institutions
(commercial banks) are located far away from
smallscale agribusiness operators.
Random sampling procedures was applied to
select the sample for the study. The selected
communities were, Ogbeogonogo market
quarters, Nnebisi road quarters, Umuaji quarters,
and camp 74 quarters. A total of nineteen (19)
respondents were selected in each selected
community/quarters. This gave a total number of
76 respondents that were sampled and studied.
Data for the study were obtained from primary
sources. The primary data were obtained,
using the structured questionnaire that were
administered to the respondents.
3.2 Data Analysis
Primary data collected, were analyzed with the
use of descriptive and inferetial statistical tools.
These include mean, percentage, frequency
distribution and tables. Data collected on
perception of respondents on effectiveness of
daily deposit collector system were measured on
Likert scale. Average score of 2.50 was set as
threshold. Beyond the threshold, responses were
considered significant.
4. RESULTS AND DISCUSSION
4.1 Structure of Daily Deposit System in
Delta State
The daily deposit system is composed of the
supply side and the demand side. The
indigenous daily collectors (savings service
providers) occupy the supply side while the small
scale business entrepreneurs occupy the
demand side of the savings service system. The
daily collectors collect deposits from daily deposit
contributors every day and return the
accumulated savings at the end of the month.
They do not charge interest on the deposits.
They however withhold one deposit per month as
an agreed fee. (i.e. 1/3 x 100/1 = 3.3%
commission). This study has demonstrated the
popularity of daily deposit collectors and offers
clear indications of the demand for their savings
services. It however offered insight into some of
the constraints on the daily savings deposit
services.
4.2 Perception of Respondents with
Respect to the Safety of Traditional
Daily Deposit System
Table 2 presents the distribution of respondents
perceptions on the effectiveness of traditional
daily deposit collector system in the study area.
The result indicates that majority, 40% (3.50)
strongly agreed that the traditional daily deposit
collector system is effective in terms of security
of their deposits. Majority of them 65.8% of
respondents in the positive affirmative that the
traditional daily deposit collector service is
preferable to the conventional banks, while
majority, 68.4% expressed confidence in the
saving services render by traditional daily deposit
collectors in the study area.
4.3 Constraints to Indigenous Savings/
Daily Deposit Services
Table 3 shows the distribution of the constraints
facing the effectiveness of indigenous daily
deposit system in the study area. The result
shows that low disposable income (52%) is the

Odemero et al.; BJAST, 11(2): 1-6, 2015; Article no.BJAST.16878
5
Table 1. Mean amount saved by small scale agribusiness entrepreneurs per month in
traditional daily deposit system
Amount saved per month
Frequency (n=76)
Percentage (%)
Traditional
Conventional
Indigenous
Conventional
N5,000 12 60 15.7 78.9
N5,100 – N1,000 10 5 13.15 6.5
N9,100 – N13,000
50
5
65.7
6.5
Above N13,000 4 6 5.2 7.8
76 76 100 100
(Source: Field Data 2013)
Table 2. Perception of savers about the effectiveness of traditional daily deposit system
Items
SDA
DA
UD
A
SA
Total
i. Is Traditional daily deposit
system safe?
10 (1.78) 7 (1.40) 3 (0.70) 16(1.71) 40 (3.50) 76
ii. Do you prefer traditional daily
deposit system to conventional
banks because proximity?
20 (2.00) 3 (0.70) 3 (0.70) 20(2.00) 30 (2.75) 76
iii. Are you confident in depositing
your savings with traditional daily
collector?
12 (1.81) 8 (1.67) 4 (0.71) 21(2.01) 31(2.79) 76
Source: Field Data 2013
Note: The values in parenthesis are the corresponding average scores for responses and any value equal and
greater than 2.50 is considered significant.
Where: SDA = Strongly disagree, DA = Disagree, A = Agree, SA = Strongly Agree, UD = Undecided
Table 3. Constraints to indigenous daily savings deposit services
S/No
Constraints
Frequency (n-76)
Percentage (n= 76)
1 Low disposable income of savers 40 52.0
2 High price paid for collector services 7 9.2
3 High risk of loss of savings 15 19.7
4 Saving services provided is faulty 7 9.2
5 Irregular deposit 7 9.2
6 Lack of access to credit 8 10.5
Total 76 100
Source: 2013 survey Data
major constraint facing the effectiveness of daily
deposit system. Other constraints include high
risk of loss of savings (19.7%), high price paid for
daily collectors services (9.7%), faulty services
provided (9.7%), irregular deposit (9.7%) and
lack of access to credit. The results of the study
indicate that the major constraint to indigenous
daily savings deposit services is low disposable
income of savers.
5.
CONCLUSION AND RECOMMENDA-
TIONS
From the result of the study, it was obvious that
the rural agribusiness entrepreneurs could
withdraw the amount they deposited at the end of
every financial cycle. The daily deposit system is
therefore considered as safe saving and credit
system. Rural household are not too poor to
save, that there is excess cash flow from income
and that those that do acquire additional income
do not spend it only on consumption. There was
evidence of the practice of partnership between
daily deposit collector and conventional banks in
the security of the fund contributed by rural
entrepreneurs. While they pull funds from rural
entrepreneurs and channel such funds to the
conventional banks, they depend on the
insurance policy and security apparatus of
conventional banks for fund security. It was
concluded that indigenous daily deposit collector
system in this regard, could effectively
complement conventional banking system in
rural Agribusiness financing.

Odemero et al.; BJAST, 11(2): 1-6, 2015; Article no.BJAST.16878
6
In order to promote the financing of small-scale
Agribusiness in the rural area, it is recommended
that:
Daily deposit system should be considered as an
enhancement strategy for rural development.
Technical training programs should be organized
in the form of seminar for both small scale
agribusiness entrepreneurs and daily deposit
collectors for possible improvement in the system
in the study area. Further studies should be
conducted on the saving and credit effectiveness
of indigenous daily deposit collector systems in
other pàrts of Nigeria.
COMPETING INTERESTS
Authors have declared that no competing
interests exist.
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