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Anything that has to do with finance can be digitized, be it saving, lending, management, investment, trading, buy now-pay later, payment and what-have-you. There is absolutely no financial sector that can’t be digitized or any area where technology can’t be adopted. However, opportunities in a cooperative society are yet to be tapped. 
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With the current decline of the nation’s economy and the world at large, the need to develop a system that guarantees savings with increased at the end of the period is pivotal. A cooperative society is not new nor is it unknown. It has been a financial practice for centuries back. It is even known by native names such as Esusu in Igbo and Ajo in Yoruba. Let us get a clearer picture of how this thing works by defining it. Esusu or Ajo is a form of savings club originally from the lands of the Yoruba, the Igbo, and other indigenous societies in Nigeria, and also in West Africa as well as in the Caribbeans. Individuals pool communal funds and funds are assigned on rotation. Despite several unicorns emerging from digital financing, this form of the financial system is yet to be tapped into. In this article, I discuss how this financial system can be turned into a business model and by extension a FinTech company. 
  • Understand The Legislation Governing Cooperative Society 

Building a digital cooperative society is different from any other financial service. This type of financial service, also known as alternative funding, has been captured under Nigerian law as cooperative societies. It is defined by the law as voluntary associations made up of individuals joined by a common bond and interest, who converge for the economic benefit of everyone in the group. Registering a cooperative society under Nigerian law is cheaper compared to a Limited Liability Company. Its registration costs are as low as 10,000 Naira, excluding other fees. Also, several benefits accrue to registering as a cooperative society. They include:
  • Freedom from the pressures of Tax regimes;
  • They can own, sell, lease and acquire movable and immovable properties; 
  • A cooperative savings society operates a form of democracy where all members are key decision-makers.
Cooperative societies can only possess a share capital of 50million Naira just as a co-operative microfinance bank.
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Finally, cooperative societies are related by the Nigerian Cooperative Societies Act at the Federal level through the Office of National Civil Registration at the Federal level or the State level in states like Lagos, the Director of Co-operatives at the Ministry of Commerce, Industry & Co-operatives.
  • Clarify Class, Status, And Number Of Membership 

Under Nigerian law, cooperative societies are organized in classes, and there is a minimum membership requirement at the point of registration. For example: 
  • An Agricultural Co-operative society – (50 members minimum).
  • A Savings and Credit society, the core focus of this article – (20 members minimum).
  • Specialized skill Co-operatives -(10 members minimum).
  • Multipurpose/General Co-operatives – (20 members minimum).
  • Other types of Co-operatives- 10 members minimum.
Also, under the law governing the establishment of cooperatives, 
  •  A member must be at least 15 years old.
  •  A board member must be at least 18 years old. 
  • Members of being of the same occupation or in the same line of business. For example, a doctor cannot be in the same cooperative society as a farmer. 
  • A member must show proof of the ability to pay the fees of the society and buy shares.
  • Build Your App

Just as we have defined esusu/ajo earlier on, we can then define a digital cooperative as a cooperative that operates virtually in terms of membership applications, cashless member contributions, and digital rendering of benefits associated with benefits such as loans. Hence, in the line with the definition, a digital ajo or esusu operates through an online platform, most likely to be an app. This app has to be registered as a trademark alongside its copyrights. It is to be registered with the required front-end and back-end development contract to avoid intellectual property rights infringement.
  • Register Your Company 

Registering your company gives you rights to operate in Nigeria. As we have seen in the first point, some institutions oversee the operation of cooperative societies. An average cooperative society takes a minimum of three months for it to be approved by the government. Afterward, Certificates of Registration are presented after a thorough investigation into its functionality to avoid registering and endorsing a platform that is used for criminal activities such as money laundering. Below are the requirements for the registration of a digital Co-operative Society.
  • An average of 10-man members are required as co-signatories to assent legitimacy;
  • The proposed name of the society (which will be confirmed by a Name search and approval);
  • The proposed office address/location of the Co-operative;
  • The objectives of the society;
  • The purposes or ends to which the monetary contribution pool of the society will be applied, kept, or invested;
  • Membership admission and conduct rules.
  • The society’s By-laws;
  • A feasibility report as to the operation guidelines of the Cooperative society;
  • Copies of a resolution passed at the first meeting of the Co-operative society with the Province Cooperative Officer in charge of registration(this must at least involve the appointment of a chairman, secretary, and treasurer of the Co-operative);
  • Letters of intent to join the society by prospective members of the society;
  • Official Stamp duty of the Co-operative to be presented after the Cooperative name approval;
  • Evidence of Registration fee payment.
  • Design A Detailed It Policy Including Password Policy

Building a financial service like digital esusu requires the builder or developer to follow a series of compliances. A digital cooperative society comes under the SCUML/AML/CFT/KYC compliance framework application. By the virtue of Co-operatives, a digital cooperative society is designated as a Non-financial Institution. Furthermore, a digital cooperative society’s data is protected by applying to the National Information Technology Development Agency (NITDA).
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There are basic rules for digital cooperative society, especially those engaged in Savings and Credit Societies.
  • A primary society will not be registered except if it is made up of a minimum of 10 members who are at least 21 years old.
  • The word “Co-operative” must be part of the name of the society to be registered.
  • A Cooperative Society CAN NOT give loans to non-members except as its by-laws provide, another Cooperative society.
  • A Cooperative Society dedicated to lending money to other registered societies is referred to as a Central Financing Society.
  • All conflicts arising from Cooperative Societies must first be subjected to arbitration.
  • Have Your Legal Team

When building a digital cooperative society, you need to employ the services of a lawyer. This is very pivotal as you will be a legal expert in the following areas:
  • The preparation of your Co-operative society registration application.
  • The preparation of the by-laws and objectives of your Co-operative society.
  • The documentation of the Front-end and Back-end development contracts of your app.
  • The request for SCUML certificates and the continuous rendering of AML/ CFT/KYC/STR/CTR returns.
  • The registration of your Co-operative’s Intellectual Properties such as your app.
  • The documentation of loan agreements involving your loan disbursements.
  • Acting as the first point of detached contact in the event of a dispute.
  • Rendering compulsory Data Protection Compliance returns to the NITDA.
  • Providing applicable Tax advisory services.
  • Executing liaison officer duties between your Co-operative and the Director of Co-operatives or the Office of National Civil Registration.
  • The provision of all Legal support services in the execution of Investment decisions of the cooperative.
  • Engaging in Debt Recovery services on behalf of your Cooperative society.
Source: Special acknowledgment to Tekkedia Institute  Featured Image Source: News24
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This article was first published on 26th May 2022


Nnaemeka is an academic scholar with a degree in History and International Studies from the University of Nigeria, Nsukka. He is also a creative writer, content creator, storyteller, and social analyst.

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