The role of institutional trust in the formalization of women’s savings and loans groups: Experiences from the Nigeria for Women Project

Introduction

Development practitioners often seek to formalize and institutionalize community economic development initiatives to more easily deliver financial and institutional support (Igalla et al., 2021), promote sustainability (de Hoop et al., 2023; Clift, 1990), strengthen social cohesion (Anderson & Francois, 2008), and efficiently achieve impact at scale (Baliwada et al., 2017; Opondo et al., 2011). Particularly for economic initiatives, formalization through state institutions can lend legitimacy to development programs and provide necessary social and economic protection (Xheneti et al., 2017).

In recent years, savings and credit groups, including village savings and loan associations and self-help groups have gained considerable traction within the development community for their potential to provide poor and marginalized populations, especially those living just above or close to the poverty line, with accessible credit (Hendricks & Chidiac, 2011), livelihood development (Osei-Fosu et al., 2019), and social support (Ibarguen, 2014; Musinguzi, 2016). These voluntary groups, often comprised of a majority or only women, provide financial and social support to members while offering a platform for participants to save money and receive low-risk credit (Desai et al., 2022). Although such groups were initially informal, national governments such as India, Kenya, Nigeria, and Uganda have promoted savings and loan groups in their countries through formal state-led programs (Namisango et al., 2022). The formalization of savings and loan groups shows considerable promise to enable the extreme poor to overcome poverty and to make progress toward the UN Sustainable Development Goals (Volmer, 2016).

Savings group formalization is not a uniform process and may involve registering groups with the government or an organization, providing resources (e.g., technical staff, loans, grants), instituting a training curriculum, and/or establishing fixed procedures to govern the groups (Tafa, 2019; Volmer, 2016). Though formalization can enable development actors to more efficiently implement, support, and scale-up savings and loan groups, the process introduces a new institutional or organizational actor into these traditionally informal, community-based structures (Baden & Pionetti, 2011; Tafa, 2019). For this reason, formalization initiatives can face challenges gaining the acceptance and participation of members, especially in contexts where groups were initially built from the bottom up.

Existing literature does little to explore the process of formalization and, particularly, the role of trust. Most of the literature on the formalization of livelihood support focuses on the benefits and drawbacks of formal and informal economies (Nelson & de Bruijn, 2005; Putzel et al., 2015; Xheneti et al., 2017). For example, research in Kenya demonstrated that the formalization of savings groups positively affected group financial performance (Kirui & Onyuma, 2019). Meanwhile, anthropological work in Tanzania highlighted how formalization can affect in-group functioning by suggesting that stricter savings and loans rituals lead members to interact with the group in different ways (Green, 2019). These studies highlight the way formalization shifts social dynamics within savings groups and supports greater economic benefits for participants, but they crucially overlook the formalization process itself and fail to highlight the trust landscape which underlies the success of formalized interventions.

In this paper, we address this important gap by examining the savings group formalization efforts of the Nigeria for Women Project (NFWP), a federal initiative to promote women’s livelihoods, economic empowerment, and gender equality in 32 states in Nigeria. (The project is currently scaled up across 32 states in Nigeria, but this study focuses on the initial pilot across six states.) Evidence from across the world, particularly from India and from sub-Saharan Africa, indicates that such groups, comprised primarily of women, can have positive effects on financial inclusion, asset ownership, women’s agency, food security, and resilience to economic shocks (Adegbite et al., 2022; Barooah et al., 2020; Brody et al., 2017; de Hoop et al., 2022b; Desai et al., 2019; Gugerty et al., 2019; Gash & Odell, 2013). We focus particularly on the role of institutional trust within the formalization process. Using qualitative data collected in two waves in 2022 and 2023, we investigate how the NFWP encountered mistrust in its effort to formalize women’s groups, highlight strategies used by the NFWP to overcome community-level mistrust, and examine the success of these strategies and public perceptions of the project over time.

The study provides evidence for the initial causes of skepticism toward the project and present promising strategies for gaining community buy-in for women’s group formalization efforts in Nigeria. These findings may apply to other savings group formalization projects and community-based interventions in Nigeria and beyond, in cases where institutional mistrust poses a challenge to the implementation of crucial livelihood supports. In this way, the paper contributes to an emerging literature on the role of trust in the formation of savings groups in Africa and self-help groups in India (e.g., Jakimow and Kilby, 2006; Kumar et al., 2018; Nichols, 2021).

Literature

Scholars and development professionals have long recognized the role of trust in facilitating (or impeding) community-based interventions. For instance, in the public health field, researchers have sought to understand how to improve the uptake and acceptance of vaccinations and epidemic response, among others (ARK, 2018; Enria et al., 2021; Gupta et al., 2021; Limani et al., 2018; Mayhew et al., 2021; Tsai et al., 2017, 2020; Yang & Huang, 2021). Other studies have noted the importance of gaining community trust for institutionalized digital inclusion projects (Madon et al., 2009). Within such studies, authors indicate that although some dynamics of trust are similar across cultures, many factors related to trust are highly contextual (Kaasa & Andriani, 2022; Saunders et al., 2010). For instance, Saunders et al. (2010) asserted that respect for authority plays a more important role in collectivist cultures like Nigeria. Nichols (2021) found that long-standing savings and loan groups operating in economically stable areas in India exhibited higher levels of trust in implementing organizations than did more early-stage groups operating in areas with higher levels of poverty. To draw out the nuances of a given trust landscape, some academics have differentiated between “personalized” or interpersonal forms of trust and “civic or institutional” trust, a distinction that is also useful for understanding dynamics of formalization (Aggarwal et al., 2015; Bachmann, 2018; Epstein & Yuthas, 2011; Sabhlok, 2011; Sztompka, 1999).

Regarding savings and loan groups, there is ample evidence to indicate that personalized, in-group trust affects their functioning and long-term sustainability. Because such groups rely on the cooperation of members, for example, to save and loan to one another, peer trust is vital to the smooth functioning of these groups (Anderson et al., 2014; Molyneux et al., 2007; Nasir, 2021; Nawaz, 2017; Pradeep & Rakshitha, 2016). Research has highlighted how higher levels of trust between group members can improve loan repayment rates and strengthen the economic impact of savings groups (Anderson et al., 2014; Hunter et al., 2020). High levels of personalized trust can also facilitate the impact of women’s savings groups on economic and women’s empowerment outcomes (Epstein & Yuthas, 2011; Sabhlok, 2011; Satish, 2001). By contrast, low levels of in-group trust can undermine group success; issues like corruption, theft, and elite capture can fuel mistrust and contribute to the failure of some savings and loan groups (Molyneux et al., 2007; de Cordier, 2009). While these studies indicate the relevance of personalized trust in savings group interventions, less is known about how institutional trust affects these groups. While institutional trust may be less relevant for informal savings and loan groups, it is of key importance to formalization initiatives such as the NFWP. The transition from informal to formal structures requires members to trust not only their personal relationships, but also the implementing institution (de Hoop et al., 2022a). If institutional trust is weak, members may resist formalization due to fears of corruption, exclusion, or exploitation.

Within the literature on formalization, research indicates several challenges for a program such as the NFWP. For instance, Putzel et al. (2015) found that formalizing an already informal structure, such as existing savings and loan groups, introduces a risk of elite capture and can generate negative effects for women or other marginalized groups. Formalization can also limit access of the poor, women, and other marginalized populations who may have better access to the informal economy (Nelson & de Bruijn, 2005; Xheneti et al., 2017). Despite challenges to formalization within the Nigerian context, research from Ilorin, Nigeria found women to be more open to formalization of savings groups than men (Abdul-Yakeen & Gatawa, 2015), thus presenting an opportunity for the NFWP.

The NFWP is an initiative of the Government of Nigeria supported by a $500 million credit from the World Bank ($100 million at the time of this study). The program aims to establish new women’s saving and loan groups and transform existing informal women’s or mixed-gender groups into formal, women-only groups, called women’s affinity groups (WAGs). WAGs are formal savings groups that provide programming in four areas: the development of social capital, the building of livelihoods, the creation of partnerships, and messaging about gender and other social norms. The NFWP aims to improve women’s livelihood opportunities and facilitate women’s access to economic markets by mobilizing them into WAGs.

Since 2019, the Federal Government of Nigeria and the World Bank have implemented the NFWP across six states of Nigeria– Ogun, Taraba, Kebbi, Abia, Niger, and Akwa Ibom– with efforts underway to scale up the program to over 32 new states starting in 2024. NFWP implementation in the original six states has proceeded in several phases, beginning with WAG formation. Following the formation of new WAGs, the project extended a full package of training, including savings and credit group management and administration. In the subsequent phase, WAG members received training on personal finance, entrepreneurship, and business management. The NFWP also disbursed small grants to women who presented viable business plans. In addition, Livelihood Collectives (cottage industries) were formed by members of WAG across similar value chains supported with operating costs, equipment and technical assistance.

While there is little scholarly evidence on institutional trust toward savings group formalization interventions, NFWP implementers anticipated some challenges because, as project planners wrote, “the Nigerian landscape is replete with bad experiences of microfinance and defaults in savings and loans schemes” (World Bank, 2018, p. 28). Indeed, literature on institutional trust in the Nigerian context has documented mistrust toward local and federal governments, primarily as it relates to elections and service delivery (Aluko, 2017; Ahmad et al., 2015; David-West et al., 2021; Majekodunmi, 2012; Omotesho et al., 2015; Page & Wando, 2022; Salisu et al., 2023; Yahya, 2006). These authors broadly characterize Nigeria, especially its northern regions, as “low-trust settings” where “citizens believe authorities are predatory or malevolent” (Tsai et al., 2020, p. 3). David-West et al. (2021) echoed this, writing of Nigeria’s financial sector, “there is a systemic distrust of government led initiatives … many of the unbanked poor would rather trust local schemes they can relate with” (p. 22). In their synthesis of the literature on trust, Saunders et al. (2010) noted that people often weigh evidence that erodes trust more heavily than evidence to the contrary, thus presenting an especially steep hurdle for the NFWP to overcome. Chukwuma et al. (2019) meanwhile examined strategies to build trust in public services in Nigeria and suggested that service providers who share identities related to “ethnicity and religious affiliation” are more likely to be trusted (p. 2). Together, these authors illustrate the importance of understanding the nuances of institutional trust in Nigeria and learning from the way that the NFWP encountered and navigated trust-related challenges.

Methods

The findings in this paper are based on qualitative data collected in early 2022 and late 2023 as part of a mixed-methods impact evaluation of the NFWP. We employed three core qualitative data collection methods:

In the first wave of data collection, Akwa Ibom had not yet been selected for inclusion in the project, so it was omitted from data collection. In the second wave, we visited all six states. In both rounds, we purposively selected two LGAs and one ward per LGA. Of the two wards sampled in each state, one was an urban environment, and one was more rural. In total, we collected qualitative data from 10 wards across five states during the first data collection round, and we visited 12 wards across six states during the second data collection round. The qualitative sample for the first round of data collection comprised six FGDs and four IDIs with beneficiary respondents per ward, for a total of 30 FGDs and 20 IDIs. During the second round of data collection, we conducted one FGD with WAG members in each ward, and we alternated between IDIs with members and non-members, conducting six of each in the total sample. The number of KIIs differed between the two rounds as we included additional project staff during a second data collection round, for a total of 41 KIIs during the first round of data collection and 60 KIIs during the second round of data collection. Table 1 summarizes the sampling of FGDs, IDIs, and KIIs across both rounds of data collection.

We prepared the data collection instruments in advance of each data collection mission, in collaboration with key project stakeholders. The questionnaires covered a wide range of topics relevant to the broader NFWP evaluation, including participant experiences with WAGs, perceptions of community gender norms, challenges and facilitators of NFWP implementation, and the perceived benefits and costs of WAGs. Next, we trained interviewers and piloted the research tools in a non-research site before conducting each field mission. In the field, data collection teams gained the informed consent of all participants before facilitating a semi-structured discussion based on the questionnaires. Data collectors recorded their conversations, which took place in English or one of the three major local languages in Nigeria (Hausa, Igbo or Yoruba). Using audio recordings, enumerators transcribed and translated the data into English.

We then analyzed the qualitative transcripts following an iterative process of coding, analysis, and summation. We developed a coding structure based on our interview protocols and deductively coded all transcripts. We also inductively added themes to the codebook as they arose in the data. We used thematic analysis to identify patterns, deviations, and major themes in the qualitative data. We further conducted sub-sample analyses to identify any thematic patterns across treatment areas, states, and regions as well as urban and rural areas. A subset of findings was reported in the baseline and midline reports for the evaluation of the NFWP (de Hoop et al., 2022b; de Hoop et al., 2025), while we selected a more focused set of thematic findings for this paper.

This project was reviewed and approved by the AIR Institutional Review Board (IRB00000436), which is registered with the Office of Human Research Protection as a research institution (IORG0000260) and conducts research under its own Federalwide Assurance (FWA00003952). We also received IRB approval from the National Health Research Ethics Committee, Nigeria. We obtained written informed consent from all research participants.

Findings

We organize our findings into three sections which roughly correlate to the time progression of the project. Saunders et al. (2010) offer a five-stage model for trust development, namely context, opening stance, early encounters, breakthrough or breakdown, and consequences. This analysis of the NFWP provides a case study of institutional trust development through the first three stages: First, we present findings on how community members perceived the NFWP upon its initial rollout. Next, we examine strategies the project used in the recruitment phase to overcome community mistrust. Finally, we highlight how trust transformed over time through the implementation of the project.

Discussion & Conclusion

The evidence presented in this paper illustrates how practitioners who aim to implement savings groups or comparable women’s self-help groups must account for the broader context of institutional trust and mistrust in the areas in which savings and loan groups operate– ideally during the recruitment and group formation phase. For projects such as the NFWP, which operates in a low-trust context and relies heavily on community members’ willingness to form WAGs, institutional trust proved to be both a key hurdle and opportunity to successfully implement the project. Our paper highlights how institutional mistrust can undermine savings group formalization initiatives, particularly in the earlier stages of trust formation within groups as outlined by Saunders et al. (2010): the initial context, the opening stance to sensitize potential members, and the early experiences with the program. The findings suggest that understanding the complex interplay between personalized trust inherent in informal women's groups and the institutional trust required for formalized groups was crucial in the development of NFWP strategies to generate trust.

For the NFWP, the primary driver of community members’ initial mistrust was negative past experiences with other livelihood interventions including other savings and loan group programs and microfinance initiatives. Although such negative experiences can be especially difficult to overcome as related to trust (Saunders et al., 2010), NFWP implementers employed several strategies to generate trust in a way that addressed the key drivers of institutional mistrust including community mobilization, transparent processes, and consistent implementation. Consistent with existing literature showing that experiences with service provision significantly shape citizens’ views of the government (Kaasa & Andriani, 2022; Lavallée et al., 2008), we found that individual perspectives on the government shaped attitudes toward NFWP both by building trust and sowing fear in the project. Although we are not alone in observing the lack of trust toward government actors in Nigeria (Majekodunmi, 2012; Page & Wando, 2022; Salisu et al., 2023; Yahya, 2006), our data indicated that the NFWP’s affiliation with the government legitimized the program and encouraged participation for some women. From these findings, we identified three key implications to guide implementers in their approach to designing the formation phase of formalized savings group projects.

First, conducting community mobilization prior to implementation allows an initiative to cultivate the buy-in and community ownership from key leaders and champions. In the Nigerian context, formalizing women’s groups required external mediation such as the engagement of respected local leaders to balance personalized trust with institutional trust during transition. While the NFWP employed multiple awareness-raising strategies for the program such as radio messaging and announcements at the local markets, the engagement of influential religious and community leaders most saliently contributed to building trust among community members, who often noted the importance of these champions in shaping their views of the program. This strategy of first winning trust of respected community members aligns with literature indicating that collectivist cultures like Nigeria particularly value the views of authority figures in trust-generating processes (Saunders et al., 2010), as well as examples of trust-building within the formalization process of other types of development initiatives (Madon et al., 2009).

Second, providing multiple opportunities for people to join over time allows implementers to show early positive outcomes from participating and to prove that the project intends to stay over the long term. Sabhlok (2011) terms this the “demonstration effect,” or the fact that examples of a well-performing project can encourage non-participants to join later. In the NFWP, some women reported that they waited to observe the WAGs before joining, a delay which allowed them to see the project’s positive results among those who joined in the first recruitment wave. Importantly, this method of mobilizing trust only matters if the project design, particularly at the recruitment phase, allows for participants to join once the demonstration effect is achieved. A project or program can do this by designing a pilot phase or by planning multiple waves of recruitment.

Third, by designing and providing guidelines and conducting regular training, project implementers can support the formalization process, which has been shown to address some of the underlying drivers of institutional mistrust (Xheneti et al., 2017). In the NFWP, formal mechanisms established a regularity and predictability in the WAG’s operation that helped establish expectations among the women participants. The NFWP also created a commonly shared and transparent reference point that group members could reliably turn to if somehow their expectations were not met. This reference point helped address underlying concerns about the lack of recourse for women who had negative past experiences with similar projects.

And lastly, by understanding the general context of trust or mistrust in government-affiliated institutions, project implementers can anticipate how much they might want to present government involvement in the formation phase. As reported above, the NFWP’s affiliation with the government was generally understood as a liability in some areas, whereas in others, it was considered an asset. With this context in mind, if project implementers in these latter areas partnered with recognizable local government actors to lend their legitimacy, credibility, and visibility to WAGs, it would have been reasonable to find a positive influence on group formation. On the other hand, perhaps less visibility of government partners may be warranted in areas that have a low level of trust toward government institutions.

Regardless of if the broader institutional context fuels trust or mistrust in a savings group project, our paper found that the NFWP itself was an opportunity to shape individual and community’s perceptions and levels of trust in the surrounding institutions. As aligned with existing literature showing that the quality of public service delivery and the involvement that the state takes in its citizens’ interests can significantly affect people’s views of the government (Kaasa & Andriani, 2022; Lavallée et al., 2008), we found that after the NFWP demonstrated its value to communities, community members came to view the project positively, and by extension, the government gained credibility through its affiliation with the project. Thus, we found that institutional trust not only shapes people’s participation in formal savings and loan groups, but participation in the formalized groups may also influence people’s institutional trust.