Innovative Informal Sector Financing: Empirical Evidence from the Capital Sharing Model of Igbo Apprenticeship System in Nigeria

33 Pages Posted: 1 Mar 2021

See all articles by Adesoji Farayibi

Adesoji Farayibi

Centre for Allied Research and Economic Development (CARED); University of Ibadan, Ibadan, Nigeria

Date Written: February 12, 2021

Abstract

This article investigated the impact of Igbo Apprenticeship System (IAS) on informal sector businesses in Nigeria. IAS is an innovative indigenous informal sector financing approach among the Igbo people in Nigeria. The study conceptualized the capital sharing model of IAS in comparison with venture capital and modern incubation system. Using a household survey data collected from about 400 informal sector businesses randomly selected from Onitsha (Anambra state) and Aba (Abia states) in South-Eastern Nigeria, the study examined the effect of capital sharing model on small firm growth in Nigeria. The estimation technique was based on ordinary least square (OLS) method while the Probit regression was used as a robust check on the OLS estimates. Findings revealed that the businesses of apprentice-graduates, i.e. those who underwent IAS grew significantly in any of the three measures of growth used; unlike the businesses whose owners did not undergo IAS. Therefore, this study provided an empirical validation to the use of the capital sharing model of the Igbo Apprenticeship System as an innovative informal sector financing model in Nigeria. The study thus recommends a policy framework that supports this innovative informal sector financing in Nigeria. Also, the venture capital and modern incubation system can be extended to incorporate features of the capital sharing model of IAS. This would however require strengthening the informal sector business environment.

Keywords: Financial Innovation, Venture Capital, Igbo Apprenticeship System, Informal Sector

JEL Classification: G24, G29, G32, L26, L29, O17

Suggested Citation

Farayibi, Adesoji, Innovative Informal Sector Financing: Empirical Evidence from the Capital Sharing Model of Igbo Apprenticeship System in Nigeria (February 12, 2021). Available at SSRN: https://ssrn.com/abstract=3793924 or http://dx.doi.org/10.2139/ssrn.3793924

Adesoji Farayibi (Contact Author)

Centre for Allied Research and Economic Development (CARED) ( email )

Ibadan, Oyo State
Nigeria

University of Ibadan, Ibadan, Nigeria ( email )

Ibadan, Nigeria
Ibadan, Nigeria
Ibadan
Nigeria

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