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Paper short abstract

Rural dwellers often have limited access to formal finance. This study examines factors influencing participation and intensity in community-defined financial systems. Results show that education, social trust, farm size, and extension contact significantly increase participation and engagement.

Paper long abstract

Rural farmers in Nigeria often have limited access to formal financial services, which makes it harder for them to manage risks, save money, and maintain their livelihoods. This study looks at what determines participation and how actively individuals engage in community-defined financial systems among rural dwellers in Ogun State, Nigeria. Data were collected from 160 rural dwellers. Probit model was used to examined the factors influencing individuals’ decisions to participate in community-based financial arrangements, and a Tobit model to examine the determinants of participation intensity, measured by the level of financial contributions. The Probit results show that social trust and education strongly increase the likelihood of participation at the 1% significance level, while farm size and distance to formal financial institutions positively affect participation at the 5% significance level. Access to formal credit had a negative but statistically insignificant effect. Tobit results indicate that education, trust, and frequency of extension contact positively and significantly influence the level of participation at the 5% and 10% significance levels. This study suggests that participation in community-defined financial systems depends not only on economic factors but also on social and institutional influences. The study concludes that community-defined financial systems complement or substitute formal finance by improving rural livelihoods and risk management. It recommends policies that support and strengthen these systems through technical assistance, capacity building, and integration with formal services.