Constraints to Linkages Between Formal and Informal Financial Institutions in South Eastern Nigeria

Abstract

The study determined major constraints to linkages between formal and informal financial institutions in South Eastern Nigeria.  Multistage random sampling procedure was used to get 36 formal and 38 informal financial institutions for the study.  Two sets of structured questionnaire were employed to generate data.  The study was guided by one null hypothesis.  Data generated were analyzed using descriptive statistics and probit regression.  Formal financial institutions had 4 major constraints in linking with the informal viz: poor legal and regulatory systems, lack of confidence, problem of communication and poor capacity building in the informal sector.  Similarly the informal financial institutions’ major constraints in linking with the formal were: institutional rigidities, poor capacity building and inadequacies of regulatory systems.  Based on the constraints to linkages, the following recommendations were made; providing effective judicial system for protecting property rights and facilitating networking of all informal financial; institutions.