An investigation of the role of informal savings schemes in business sustainability in Okitipupa Local Government Area, Ondo State
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Background of the Study
Informal savings schemes play a crucial role in supporting business sustainability, especially in regions where formal financial services are limited. In Okitipupa Local Government Area, Ondo State, many entrepreneurs rely on community-based savings groups and informal financial networks to access capital for business operations. These schemes provide flexible funding options and serve as an important financial lifeline for small businesses (Adesina, 2023). Informal savings are often characterized by trust, social cohesion, and reciprocal arrangements, which help businesses navigate financial uncertainties (Adebola, 2024). Despite their benefits, these informal mechanisms face challenges such as mismanagement, limited scalability, and lack of regulatory oversight (Ola, 2025). This study investigates the role of informal savings schemes in enhancing business sustainability, examining their effectiveness in providing financial stability, supporting growth, and fostering community resilience.
Statement of the Problem
Small businesses in Okitipupa often struggle to secure formal financing, leading them to rely heavily on informal savings schemes. While these schemes offer much-needed capital, challenges such as mismanagement, limited funds, and lack of formal regulation threaten business sustainability (Babatunde, 2023). The absence of structured oversight may lead to inefficiencies that undermine the financial health of these businesses. This study examines the specific challenges associated with informal savings schemes and their impact on business sustainability in Okitipupa, with the goal of identifying measures to enhance their effectiveness.
Objectives of the Study:
To evaluate the role of informal savings schemes in supporting business sustainability.
To identify challenges and limitations of these schemes.
To propose strategies for enhancing the effectiveness of informal savings mechanisms.
Research Questions:
How do informal savings schemes contribute to business sustainability in Okitipupa?
What are the primary challenges associated with these schemes?
How can informal savings schemes be optimized to support business growth?
Research Hypotheses:
H1: Informal savings schemes positively influence business sustainability.
H2: Mismanagement significantly hampers the effectiveness of informal savings.
H3: Improved regulatory oversight can enhance the benefits of informal savings schemes.
Significance of the Study
This study is significant as it explores the critical role of informal savings schemes in promoting business sustainability in Okitipupa. The findings will benefit entrepreneurs and policymakers by offering insights into strengthening informal financial networks and supporting small business growth (Akinola, 2025).
Scope and Limitations of the Study:
This study is limited to investigating the role of informal savings schemes and their impact on business sustainability in Okitipupa Local Government Area, focusing exclusively on informal financial mechanisms.
Definitions of Terms:
Informal Savings Schemes: Unregulated financial practices involving community-based savings.
Business Sustainability: The capacity of a business to maintain operations over time.
Okitipupa Local Government Area: The administrative region in Ondo State where the study is conducted.
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