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This research is on Financial inclusion in Nigeria: the impact of collective investment schemes on low-income earners. This study investigates the impact of collective investment on the Income of Low-income earners in Nigeria. The income of 200 households in Yaba local Development Council Area analysis. Most of this data was from the primary source. All data collected were subjected to descriptive analysis, using frequency count and percentages. The research hypotheses were tested using the regression model. The finding of this study indicated that there is a significant relationship between collective investment and the income level of the low-income earners. The study concluded that on the micro level, collective investment schemes is seen as one of the ways through which earning could be enhance and poverty alleviated. This study tries to find out how collective investment schemes can help reduce poverty among young adults in the Yaba Local Development Area of Lagos states.

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This research is on Financial inclusion in Nigeria: the impact of collective investment schemes on low-income earners. The National Financial Inclusion Strategy (NFIS) was promulgated in the last quarter of 2012. It is a general financial inclusion programme me of the Central Bank of Nigeria (CBN), whose strategic objective is to curb financial exclusion in the country by setting a clear agenda to significantly increase access to, and use of formal financial products and services from 36.3 percent in 2010 to 70 percent in 2020. To achieve this feat, therefore, the programme me set up certain targets to be strategically met in terms of financial literacy, savings, microfinance bank branches, payments, automated teller machines (ATMs), point of sale (POS), pensions, insurance, and credit. These are to be pursued from 2012 to 2015 and subsequently to 2020; from which according to the programme me financial inclusion in the country would be increased up to at least 70 percent by the year 2020.

The problem of financial exclusion in the world is a situation that countries, especially the developing ones-like Nigeria can no longer ignore or treat with levity. A situation where a set of people for reasons outside their control, find it difficult or even impossible to access financial services as they may desire, call for both policy and academic attention. A report by the Enhancing Financial Innovation and Access (EFInA, 2010) indicates that the financially excluded people in Nigeria stood at 39.2 million representing 46.3 percent of the country’s adult population. Also, a total of 2.9 billion adults across the globe were reported to be financially excluded according to the same source. This underscores the enormous need for financial inclusion, first among the vulnerable groups (rural dwellers for instance) and in the country as a whole. This is what Nwankwo and Nwankwo (2014) argued that financial inclusion is critical to the attainment of poverty reduction, removal of barriers to economic participation of rural dwellers: women, youths, and those at the bottom of poverty. A crucial part of financial intermediation, which over the years has accepted the high, middle, and low-income earner into the financial market, is the Collective Investment Scheme. In 2018, the vision of the Fund Managers Association of Nigeria is to develop a multi-trillion naira Collective investment scheme industry in Nigeria. The Collective investment scheme (CIS) is an entity organized as an investment company, mutual fund or unit trust type that invests in securities, money market instruments, and other liquid financial assets. The funds are raised through the offering of units. The entity operates on the principle of risk spreading at the request of shareholders or the holders of shares buy back its shares at a price based on the net value of its assets (Trifonova & Trifonova 2016).

According to Kimani and Kisaka (2016), collective investment schemes are a crucial segment of the financial sector. They are specialized market players licensed to mobilize savings in financial assets and to enhance access to capital markets by small investors. As noted by the Kenyan Capital Market Act Cap 485 A and also the Capital Markets (Collective Investment Schemes) Regulations, 2001 stipulate that Unit trusts are the small investor’s answer to achieving wide investment diversification without the need of prohibitive sums of money. According to the Security and Exchange Commission (SEC), the Investments and Securities Act (ISA) No. 29 of 2007 (Section 153) defines the Collective investment scheme as “a scheme in whatever form, including an open-ended investment company, in pursuance of which members of the public are invited or permitted to invest money or other assets in a portfolio, and in terms of which; two or more investors contribute money or other assets to and hold a participatory interest, the investors share the risk and benefit of investment in proportion to their participatory interest in a portfolio of a scheme or on any other basis determined in the deed, but not a Collective investment scheme authorized by any other Act”.

In its development strategy, Nigeria strives to become a regional financial hub with a vibrant, efficient and globally competitive financial system to drive savings and investments. This, it is believed, will lead to a high and sustainable, but also broad-based economic growth. There is growing recognition in the current body of knowledge that increasing access to financial services has both private and social benefits. In addition to enhancing efficiency and stability, therefore, Agenda 2020 identifies the need to increase access to affordable financial services and products for a wider section of Nigerians, particularly poor, low-income households and micro-, small- and medium- scale enterprises (MSMEs). Poor and low-income households in informal urban settlements, small and micro-level businesses, rural areas, and women are therefore prioritized in the new vision for financial sector development (Finaccess, 2009).

Collective investment scheme facilitates the transformation of social capital into economic capital aimed at creating a framework within which communities could form schemes and mobilize savings from within themselves (Bebbington, 1999). The members of the schemes utilize their saved incomes to prudently invest in productive ventures in various sectors such as small-scale businesses and agricultural production. To be effective, the Collective investment scheme creates entrepreneurship culture among members of primary schemes in micro-businesses and agribusiness, thus making the rural poor more productive in generating income and eventually more likely to save. Wealth creation and poverty reduction have been proposed as effective antidotes to poverty. While the former may be described as preventive, the latter is more curative. Investment is a key player in wealth creation and one of the channels through which wealth can be created is mutual fund investment.

Collective investment scheme  also provide diversification, divisibility, low transaction costs, access to a broader array of assets, and professional management for the individual investor, factors that have propelled their popularity in the past decades, according to Saraoglu and Detlzer (2002). The Mission of collective investment scheme  is to sustainably empower ordinary Nigerian through member-owned investment schemes. To achieve its mission, activities are drawn based on the long-term objectives such as building a culture of saving and investment amongst indigenous Nigerian to create opportunities for urban and rural communities to access financial and market services; to create an entrepreneurial culture and develop small businesses management skills among beneficiaries (Hoy 2008).


As evidenced in most African countries, creating viable financial institutions in rural Nigeria is challenging. The majority of the rural population lives below the poverty line. The overall macroeconomic condition is not conducive to such development. Poverty affects rural Nigeria more than urban areas. The key constraints on capital are the absence of mobilization of local savings and lack of access to credit. There is a low rate of access to credits, between 9% and 16%, attributed to the inadequate number of microfinance service providers and underdeveloped infrastructure, which results in the high cost of credit service delivery (Abafita 2003).

Lack of clarity over the objective of the Collective investment scheme among the local authorities and politicians has created an environment of uncertainty that has led to the collapse of much Collective Investment scheme. This is coupled with the fact that the development of microfinance institutions (MFIs) in Nigeria is in its infancy stage. The existing formal or informal financial institutions do not yet serve the rural poor. The few microfinance institutions, which have been introduced by the government with support from development partners, and some NGOs have also been concentrated in urban and semi-urban areas. The savings and credit schemes and micro-credit institutions have not reached the rural poor for reasons such as high risk, high cost of service and a narrow market (Kishindo, 2000).

In an informal study by the researcher, it was found out that there exist many people who are willing to commit part of their income to invest but are not sure how to go about it. There are other people who earn a regular income and capable of saving part of their income for investment yet they do not have the motivation to do so. There are yet another group of people, who have the excess money to invest, are aware of various investment vehicles but do not have the time to approach investment companies to strike a deal. It is against this background that decided to have extensive research to find out if investment in collective investment schemes can enhance wealth creation amongst low-income earners.

There are no in-depth studies on the assessment of the impact of collective investment initiative activities on households’ income and credit. Therefore, this study will fill the gap and make policy recommendations as regards the rural financial services development, credit institutions accessibility to rural poor, and the introduction of savings groups among the rural poor. The study is aimed at studying the impact of the collective investment scheme on low-income earners in Nigeria.


The underlying objective of the study is to assess the influence of collective investment activities on low-income earners. This has been done first by exploring the theory behind investment portfolio, and specifically the collective investment portfolio, to establish how it significantly contributes to wealth creation amongst low-income earners.

The specific objectives of the study are as follows:

  1. To identify the extent to which collective investment scheme has gained popularity amongst low-income earners’ in Nigeria
  2. To determine the impact of collective investment activities on incomes of low-income earners’
  • To find out the strategies of improving low-income earners’ income.


The study would address the following questions:

  1. To what extent has collective investment scheme gained popularity amongst low-income earners’ in Nigeria within the Yaba Local Council Development Area in Lagos State?
  2. What is the impact of collective investment activities on the income of low-income earners?
  3. What are the strategies for improving low-income earners’ income?


The study tested the following null hypotheses

Ho1; There is no significant relationship between low-income earners’ knowledge and awareness of collective investment schemes and their participation in the,.

Ho2;  Collective investment scheme do not have a significant impact on the income of low income earners.


The study would focus on the Influence of the collective investment scheme on low-income earners. The confines of the research, however, be restricted to households, members and non-members of the Collective investment scheme in Yaba local council development area (LCDA) of Lagos Mainland Local Government Area, Lagos Nigeria. Yaba was chosen because it inhibits people from varied backgrounds. Respondents from the formal and informal sectors can easily be accessed. Geographically, the LCDA consists of urban and rural communities, therefore results from the study would show a true picture of what exists in reality and it will be convenient due to the cost of moving from one location to another. Yaba was also selected because the researcher is conversant with the location.

Again, the specified age bracket (18 to 50) is chosen because that range represents the active workforce; whose investment can cover relatively longer periods before attaining the compulsory retiring age of sixty (60) for Nigerian workers.


The practical way of providing financial services to the rural poor is through rejuvenating and creating more community-based investment vehicles that focus on the participation of the poor, especially poor women. According to Ayele (2015), the poor are eager and determined to save if the opportunity is made available. They can be organized and take leadership. They require more guidance, training, and financial development assistance than the urban and semi-urban MFI clients do, but they offer the advantage that they can easily be mobilized into groups that can give loans to people in their communities and recover the money with interest. Such intervention requires long-term institutional and financial support. Small, poor communities cannot become sustainable in a short period due to their small size, low absorptive capacity, high illiteracy, and lack of exposure to the MFI’s best practices (Skovdal, 2001).

The findings will also assist the communities in the study area to know their stand in terms of the extent to which the collective investment schemes operating in their area, contribute towards the promotion of saving culture among the communities through the investments idle funds which are always used up in social and cultural practices such as funerals, naming ceremonies, marriage ceremonies, and fundraising activities in religious organizations, thereby putting pressure in the resources of the low-income earners. To avoid being referred to as not sociable, some people grudgingly accept the invitation to such function and are forced to make donations that were not budgeted for and sometimes pledge to make cash donations at a later date. This whittles away the resources of such people. The communities will be able to establish whether participation in collective investment schemes increases their savings, hence income levels.

Many institutional and organizational arrangements encourage the delivery of financial products to promote investments in rural communities.  As a good number of Nigerians are financial illiterates, the study’s focus and its findings will assist to sensitize the communities whether these collective investment schemes are having good practices to move rural communities out of poverty. This will finally call for deliberate government policy and strategies to mobilize savings including from rural poor households in the study area to increase resources for investment building on the study findings as to the basis.

The finding of the study is to create awareness of the availability of investment vehicles through which people can pursue to create wealth and hence reduce poverty in the economy. Without conscious efforts by the employed and even the unemployed alike, it would be difficult to get money to invest.

The findings would help readers to cultivate the habit of creating surplus funds for investment purposes. It would also be useful to investment managers to improve upon their services as it would help them know what investment and potential investors require from their managers.


Financial Inclusion: Financial inclusion is defined as the availability and equality of opportunities to access financial services. It refers to a process by which disadvantaged and low-income segments of society can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products.

Collective Investment Scheme: Collective Investment Scheme is an arranged pool of funds managed on behalf of investors by a professional money manager which may invest in; Ventures capital, Portfolio of stocks Bonds and other securities. Subscribers in investment scheme receive shares or units that represent the investor’s pro-rata share of the pool of fund assets.

Low-Income Earners: Low-income earners (persons at risk of poverty) are considered those whose household’s disposable money income per consumption unit (so-called equivalent income) is lower than 60 per cent of the equivalent median money income of all households. The proportion of the population falling below this income limit is called the low income rate (at-risk-of-poverty-rate).

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