Ajo adako is a financial rescue plan/contribution indigenous to the Yoruba ethnic group from south-western, Nigeria. It is a financial plan which entails informal savings and contributions from members based on mutual trust and an oath of allegiance. This financial model is mostly practised among low and middle-income earners and has helped lift many out of poverty, provide daily needs, among other benefits.
The “Ajo Adako” has long since spread to other parts of Nigeria and outside the shores of Nigeria. It is referred to ‘Adashe’ in the north, ‘Etoto/Esusu’ in the East, ‘bam’ by the Tivs, ‘Tontine’ in Cameroon and Niger, Liberia, Democratic Republic of Congo. In Afro-Caribbean Jamaica, it’s called ‘partner’, and ‘syndicate’ in other Afro-Caribbean Islands.
Noteworthy is the gender dimension of ajo adako as it is mostly organised and managed by women. Also, the recognition of ‘ajo adako’ as a form of financial/money institution by the World Bank (https://microdata.worldbank.org/index.php/catalog/1952/datafile/F27/V846|)
The dynamics, structure, types, and benefits will be further discussed below:
It is a system where a group of people agree to pay a specific amount on specific days. The total is then taken in turn by members until the rotation is completed. The system is then relaunched based on demand. There is no thrift collector arrangement in this type of contribution, only an appointed leader/manager who holds members accountable to pay their dues as and when due.
Here is an analysis of the structure of “ajo adako”
Agreement: Supposing 10 people agree to pay N5000 every month to participate in the “ajo adako” contribution, a raffle is drawn to know when each member will be given their contribution.
How it works;
This month: Mr. A takes is given the contribution of the other ten members, this means N5000 x 10=N50,000
Next month, MR A and the other 8 members will contribute, and MR B will then be paid N50,000. The third month, MR A and MR B and seven others will contribute for MR C to total the same amount of N50,000, this continues till the tenth moth where MR J who is the last person will be given his contribution.
This system has helped lift many people out of poverty. It has been the secret for the high success rate among the indigenous Yoruba businesses. The high literacy level among the Yorubas is also attributed to this system as many parents engage in this contribution to finance their children’s education both at home and abroad. Research attests to this fact.
As earlier stated, a similar arrangement has since been adopted in other countries. In Europe for instance, the tontine arrangement was patented by the inventor F.P Dousset in 1791 and several projects have since been funded using this model in England. Some notable tontine-funded projects include:
- Richmond Bridge, across the river Thames west of London, was financed using the tontine model in 1774.
- The Tontine Hotel in Ironbridge, Shropshire, stands prominently at one end of the Iron Bridge from which the town takes its name: it was built between 1780–84 by the proprietors of the bridge to accommodate tourists who came to view this wonder of the industrial age.
- The Tontine Hotel and Assembly rooms, Glasgow, were funded through tontines of 1781 and 1796.
- The first Freemasons’ Hall, London. Subscribers were able to nominate someone other than themselves as the person on whose life the share was staked. After the subscriber’s death, they could leave their share to that person, or anyone else. The scheme raised £5,000 but cost £21,750 in interest over its 87-year life.
- The Tontine Hotel, Greenock, Inverclyde, Scotland, was built in 1803.
- The Cleveland Tontine hotel, near Ingleby Arncliffe, North Yorkshire, originally a coaching inn on the Yarm to Thirsk turnpike road, was financed using the tontine approach in 1804.
This approach could be replicated by African regional governments such as ECOWAS, SADC, AFDB South-Western governments in Nigeria, among others, although in a more advanced approach. I think it will help member states contribute to the building of infrastructures, execution of developmental projects, building industries among others in their respective countries, rather than obtaining loans from international organisations and incurring debts for future generations.
For better understanding of this rich financial system, it will be nice to explain the different types of ajo or those that have a similar structure to the ajo adako and the differences between them.
This is a form of daily contribution mostly practised by low-income earners such as artisans and petty traders, aimed at furthering both the individual and group’s interest. It is coordinated by a thrift collector popularly known as ‘alajo’. This form of contribution is based on choice as individuals decide the daily or weekly contribution and then pay the thrift collector. The thrift collector then gathers the contributions from members and save the money until when needed or the end of the month as the case may be. Oftentimes, the informal rule is the thrift collector often takes the first contribution as a form of his payment for the services rendered. Nowadays, due to the inception of formal financial institutions (banks) in Nigeria, the thrift collector deposits the contribution into the bank and withdraws it when needed. Thus, there is a link between the formal and informal economy.
The significance of the ‘alajo’ and ajo is reflected in the popular saying ”Alajo Shomolu’’ (the Shomolu thrift collector) this is to depict how smart or mathematically sound a person, as Alajo Shomolu was said to be able to effortlessly, identify the contributors and their contribution off-hand without mistakes.
As the name depicts, ‘Egbe’ means an association or clan thus ‘ajo egbe’ is the financial contribution/savings between members having similar interests, occupations, religion, etc. They could be farmers, fashion designers, churches, mosques association. These group members decide to contribute an equal amount often during association meetings which could be weekly, fortnightly, monthly as the case may be. This is based on mutual trust and an oath of allegiance, which makes members bound to contribute and not default in their payments. It takes different approaches, the contributions could be used to help members when in need, help the growth of the association, or loan a member or members as and when needed.
Alajeseku: This is also known as cooperative. Cooperative is a contribution focused on the common goal of enhancing the corporate and individual welfare of their members through periodic savings which could be monthly, bi-monthly, and offering loans to members with minimal interest, as and when required. Alajeseku/cooperatives also invest in profit-making ventures and share profit among members at the end of a financial year.