International Journal of Business and Social Science Vol. 4 No. 15 [Special Issue – November 2013] 75 The Effects of Informal Financial Institutions on the Socio-Economic Development of Adikpo Town Sambe, Ngutor Department of sociology University of Mkar Mkar, Benue, Nigeria Korna, Johnmark M. Research Fellow Banking and Finance Department University of Nigeria Nsukka, Nigeria. Abanyam, Noah Lumun Department of sociology University of Mkar Mkar, Benue, Nigeria Abstract This study was designed to examine the effects of Informal financial Institutions on socio-economic development of Adikpo town. Specific objectives were: to determine the effect of informal financial institutions on poverty reduction; to ascertain if informal financial institutions facilitate more access to credit facilities; and to ascertain whether informal financial institutions have affected the level of investment. The study randomly sampled 200 respondents as questionnaires were used to collect data. Chi-square was employed in the test of hypotheses using SPSS version 16.0. Dependency theory was used in analysing the study. Findings showed that Informal Financial Institutions were more effective in reducing poverty among members than non-members. Furthermore, the institutions guaranteed more access to credit than non-members and lastly, Informal Financial Institutions were effective in promoting investment among members as compared to non-members. It was therefore concluded that Informal Financial Institutions have been effective in promoting socio-economic development of the town. The study recommended for inclusion of the institutions in poverty reduction programmes of government, utilisation of the institutions in accessibility of credit by the masses and initiation of programmes that will enhance the multiplication and growth of Informal financial Institutions. Key words: Informal financial Institutions, dependency theory, development, poverty reduction, investment 1. Introduction The economies of third world countries such as Nigeria operate with dual financial institutions. On one hand are group which function through direct governmental control known as Formal Financial Institutions such as Commercial Banks, Insurance Companies and Mortgage Banks. And on the other hand are those financial institutions which are not directly controlled by government, called Informal Financial Institutions such as money lenders, cooperative societies, thrift and loan societies, local bankers, cooperatives etc. It should however be noted that statutory dominance of formal financial sector since independence is hinged on the thinking that the sector would stimulate the growth of the economy and ensure the upliftment of the socio-economic lives of the people. It has been contended that the Formal financial sector will promote savings and investment, improve opportunities for credit, and engender reduce poverty. But it has been observed that Formal financial institutions have seriously come short of the expectations as they have made things harder for Nigerians through stringent conditionalities for credit, poor customer services and high interest rates. The introduction of the informal financial institutions by individuals and groups is to cushion the effects of the Formal financial institutions on the socio-economic wellbeing of the people.