CHAPTER ONE

1.1 BACKGROUND TO THE STUDY

In the last two decades the link between financial intermediation and

economic growth has generated a great deal of interest among

academics, policy makers and economists around the world. Several

theoretical and empirical studies have addressed the potential links

between financial development and economic growth.

McKinnon (1973) and Shaw (1973) reported close association between

financial development and economic growth in a number of countries. In

recent years, voluminous empirical researches have further been

published which have shown that there is a relationship between financial

intermediation and economic growth.

Odedokun (1989) for Nigeria, Lyons and Murinde (1994) for Ghana,

Murinde and Eng (1994) for Singapore, Agung and Ford (1998) for

Indonesia and Wood (1993) for Barbados. Levine (1997) provides a

comprehensive review of some of the aforementioned literature and

based on this review Levine concluded as follows:

‘The preponderance of theoretical reasoning and empirical

evidence suggests a positive, first-order relationship between

financial development and economic growth. A growing body

of work would push even most sceptics toward the belief that

the development of financial markets and institutions is a

critical and inextricable part of the growth process and away

from the view that the financial system is an inconsequential

 side show, responding passively to economic growth and

industrialization. There is even evidence that the level of

financial development is a good predictor of future rates of

economic growth, capital accumulation, and technological

change’ (Levine, 1997: 688-689).

From this statement one could partially conclude that the debate on the

relationship between financial development and economic growth is

positive.

The process of financial intermediation which has been argued to

stimulate economic development involves the activities of different types

of institutions mainly classified into Bank Financial Intermediaries (BFIs)

and Non Bank Financial Intermediaries (NBFIs). BFIs mainly comprises of

all the various types of banks (commercial, Merchant, Development,

Microfinance, Universal etc.) while NBFIs comprises of Insurance

Companies, Stock Brokering firms, Investment companies, Primary

Mortgage Institutions (PMIs), savings and loans association, credit unions

and of course cooperative societies have been included in recent times as

part of these non bank financial intermediaries.

Generally a Cooperative society has been defined as the coming together

of people with common interests who work together voluntarily to meet

their common economic, social or even cultural needs through a jointly

owned and managed enterprise.

The emergence of cooperative societies as an informal type of financial

intermediary cannot but be traced back to time immemorial beginning

from the day individuals first joined hands for the advancement of

common pursuits in life (Samantaray, 2004)

Modern cooperative movement has observed by (Samantaray, 2004) to

have dated from the foundation of the Rochdale Equitable pioneers,

England in 1844

In Nigeria, the existence of cooperative societies is a rampant

phenomenon in that almost in every social and academic community and

even in some corporate environment there is a possibility of a cooperative

society in existence.

Like in every other country, cooperatives have been an important of the

economic development of Nigeria. Despite that fact that some of these

cooperatives have been successful while others failed in achieving their

goals, there has been no other institution that has brought people

together for a common cause like them.

According to Gwary and Gary (2003), cooperatives have been noted for

their role in enhancing the economic activities including agricultural

production, economic development, and social transformation especially

in the rural communities. They stated that despite the introduction and

long period of existence of cooperatives in Nigeria their performances

have remained weak.

In Nigeria, it has been observed that there are three major categories of

cooperatives which include the consumer cooperative, producers’

cooperative and the credit and thrift cooperative societies. Out of these

three categories, the most popular are the credit and thrift and consumer

cooperatives and they are mostly found in private organisation,

government parastatals or department as well as academic institutions

especially Universities and Polytechnics.

The cooperative societies found in tertiary institutions are majorly

established by staffs which could be either academic or non-academic

staff or perhaps both. The major goal of these cooperative similar to their

counterparts in non academic environment is to contribute immensely

towards the improvement of the economic wellbeing of its members.

However, recently there have been a lot of questions raised concerning

the establishment of cooperative thrift and credit societies as a financial

institution/intermediary forming an important part of any financial system.

Also the impacts and the performance of this type of financial

intermediary are not yet fully empirically ascertained.

1.2 STATEMENT OF THE PROBLEM

There have been a lot of controversies on the contributions of

cooperatives to the wellbeing of their members. Davies (n.d) pointed out

that Cooperatives are about enriching people and empowering people but
they are also about developing people but based on recent observation

made by various scholars it may not be so.

(Ahmad, 1983) and (White, 2000) observed that whilst community

building through cooperatives is highly relevant to the issues of anti

poverty and improving the conditions of marginal societies it has failed

more frequently than it has succeeded.

Much work has been done - although there is still controversy as to

whether financial development influences macroeconomic development-

on the role of financial sector as well as financial institutions and

intermediaries. However most of these studies were carried out without

ever considering the role and impact of cooperative societies as financial

intermediaries towards economic development. This is therefore the

interest of the researcher to study the role of cooperative societies as

financial intermediaries in economic development.

1.3 OBJECTIVES OF THE STUDY

It is therefore the objective of this study;

1. To examine the role played by cooperative societies as financial

intermediaries in the development of the economy.

2. To confirm whether cooperatives have any significant impact on

their members
 3. To examine the role played by cooperatives in the alleviation of

poverty as well as contributing to socio-economic development

4. To appraise the performance of RUN staff cooperative in the

achievement of their goals

1.4 RESEARCH QUESTIONS/HYPOTHESES

1.4.1 Research questions

1. What are the roles of cooperatives in the development of the

economy?

2. What are the benefits of cooperatives societies?

3. Do cooperative societies impact the savings habit of their members?

4. Do cooperatives contribute to the social and economic wellbeing of

their members?

5. Do cooperative societies enable members to enjoy available

investment and business opportunities?

6. Are cooperative societies relevant in the fight against poverty?

1.4.2 Hypotheses

H0A: Cooperative societies does not improve the savings habit of their

members
H1A: Cooperative societies improve the savings habit of their members

H0B: Cooperative efforts do not increase the purchasing power of their

members

H1B: Cooperative efforts increase the purchasing power of their members

H0C: Cooperative societies do not enable members to enjoy investment

opportunities

H1C: Cooperative societies do not enable members to enjoy investment

opportunities

H0D: Cooperative societies do not impact the social and economic

wellbeing of their members.

H1D: Cooperative societies impact the social and economic wellbeing of

their members

H0E: Cooperative finance is not relevant in the fight against poverty

H1E: Cooperative finance is relevant in the fight against poverty

1.5 SIGNIFICANCE OF THE STUDY

The significance of this study is highlighted as follows;

1. The result of this study will provide some basic data for economic

policymakers. The collection and analysis of comprehensive

cooperative data will help policy makers and community

development practitioners make more informed decisions regarding

 the support of cooperatives as alternative business development

options.

2. It will help to identify the loopholes and challenges of advancing

cooperative movement and development thereby revealing areas of

quick and urgent attention for corrective measures to be taken to

ensure development

3. This study will analyze the extent to which the core cooperative

principles and values are been practised and finally the work would

serve as a basis for further research and discussion.

4. The study hopes to verify whether the promotion of cooperative

efforts genuinely contribute to economic development and in line

with this identify further areas of improvement for it

5. It will also add to the existing body of knowledge available within

the literature as regarding the subject matter of this study as well as

point directions for further studies.

1.6 SCOPE AND LIMITATON OF THE STUDY

Time and financial constraint as well as the unwillingness of the

population members of this study could not allow the researcher to

include among the sample of the population sizeable representative

number of staff cooperative members from all organisations and tertiary

institutions operating cooperative societies in Nigeria.

Another major limitation to this study is the inability of the researcher to

obtain sufficient information to carry out an extensive review of existing

literatures on the topic being understudied

Based on the constraints, the data to be collected for measurement will be

limited to the members of the Redeemer’s University staff cooperative

thrift and credit society.

REFERENCES

1. Aziakpono, M (2000). Financial intermediaries and economic growth in

economic and monetary union: the case of SACU and CMA

2. U.S Overseas cooperative Development council, (2007). Cooperatives:

Pathways to economic, Democratic and Social development in the

Global economy

3. Iweli, K (2002). The role of cooperatives in community development.

Center of cooperatives Bulletin. University of Wisconsin. Issue number

3, September

4. Mwesigye, F (2008). The role of cooperatives in development. A

Presentation slide
5. Samantaray, P.C (2004). Hundred years of cooperative Movement,

Emerging Issues and Challenges. Orissa Review