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The short answer
A cooperative loan is lent from members' pooled savings, usually up to a multiple of your own savings, with fellow members as guarantors. The Nigerian Co-operative Societies Act requires each society's bye-laws to state the interest rate, maximum loan, repayment period and default rules, so ask for them in writing and convert any flat rate to a reducing-balance figure before comparing.
The short version: a loan backed by your own savings and your colleagues
A cooperative loan is credit a registered cooperative society gives to its own members out of the pool that members have saved. It is not a bank loan, and the society is not allowed to lend to outsiders: the Nigerian Co-operative Societies Act says a registered society may not make a loan to anyone who is not a member, except as the Act itself allows (section 30). Three things decide what you can borrow and what it costs: how much you have saved with the society, who will stand as your guarantors, and the interest rule written in the bye-laws.
That last point matters more than most members realise. The Act requires a society's bye-laws on member loans to set out the interest rate, the maximum amount that may be lent, the maximum repayment period and what happens on default (section 11(3)). So the rules are not supposed to be made up at each meeting. If your society cannot show you those four things in writing, that is the first problem to fix.
How the savings multiple works
Most societies tie your loan ceiling to your savings balance. The bye-laws say something like "a member may borrow up to a stated multiple of their savings", and the committee applies it. The multiple is set by each society, so there is no national figure; you have to read your own bye-laws.
The logic is simple. Your savings are the society's first security. If you stop repaying, the committee can usually set your savings against what you owe, and the bye-laws normally say so. Borrowing a multiple of savings means the rest of the loan is covered by other members' money, which is why guarantors come in.
| Your savings with the society | Multiple in the bye-laws (example) | Maximum loan (example) |
|---|---|---|
| ₦200,000 | 2 times | ₦400,000 |
| ₦400,000 | 2 times | ₦800,000 |
| ₦400,000 | 3 times | ₦1,200,000 |
Guarantors: what you are asking of them
A guarantor is a fellow member who promises to cover your loan if you do not. In practice, many societies freeze part of each guarantor's savings until you repay, or deduct from those savings if you default. Before you ask a colleague to sign, and before you sign for anyone, check what the bye-laws say about:
- how many guarantors are needed, and whether their combined savings must cover the part of the loan above your own savings;
- whether a guarantor's savings are locked while the loan runs, and whether they can leave the society during that time;
- what notice a guarantor gets when the borrower misses a repayment;
- whether a guarantor can recover what they paid from the borrower, and how the committee helps.
The Act also limits how long a former member stays liable for the society's debts: generally two years after they leave (section 29). That is about debts of the society, not about personal guarantees inside it, so read your own form carefully.
Interest: flat rate versus reducing balance
Societies often quote a flat monthly rate, charged on the original loan for the whole term. A bank or a regulated lender is more likely to quote an annual rate on the reducing balance. The two are not the same, and a flat rate always costs more than the same number quoted on a reducing balance.
Worked example (illustrative figures)
Say you borrow ₦800,000 for 12 months at a flat 1% a month, repaid in equal monthly instalments:
- Interest: ₦800,000 × 1% × 12 = ₦96,000.
- Total to repay: ₦800,000 + ₦96,000 = ₦896,000.
- Monthly deduction: ₦896,000 ÷ 12 = ₦74,666.67.
Because you are paying the loan down every month but paying interest as though you still owed the full ₦800,000, the effective cost is higher than 12% a year. On these figures it works out at roughly 21.5% a year on a reducing-balance basis (about 1.79% a month). That may still be cheaper than many alternatives, but it is the figure to compare when you shop around.
Some societies also charge a form fee, an insurance contribution or a one-off "processing" deduction taken from the loan before it is paid out. Add those to the total cost. If ₦8,000 is taken upfront in the example above, you receive ₦792,000 but still repay ₦896,000.
What to check before you apply
- Ask for the current bye-laws and the loan policy. Members are entitled to inspect the bye-laws and the list of members free of charge at the society's registered address (section 13).
- Confirm the society is registered with the state cooperative department. An unregistered group calling itself a cooperative has none of the Act's protections.
- Get the cost in writing: rate, whether flat or reducing, all fees, total repayable and the monthly deduction.
- Check how repayment is collected. Staff societies often deduct at source from salary; ask what happens if you change jobs.
- Ask when the last audit was done. The Act requires accounts to be audited every financial year (section 36). A society that cannot show recent audited accounts is a risk to your savings, not just your loan.
- Work out whether the deduction fits your budget after rent, transport and food. Our guide to budgeting on a Nigerian salary has a simple method.
If something goes wrong
Disputes about a society's business, including loans, go first to the state Director of Co-operatives, who may settle them or refer them to an arbitrator; a decision can be appealed within 30 days (section 49). If a large group of members is worried about how the society is run, a simple majority of the committee or at least one-third of members can apply for a formal inquiry (section 37). This is information about the law, not legal advice; a lawyer or your state cooperative office can tell you how it applies to your case.
Where Pryme fits
Pryme does not run cooperative loans. If you are saving towards a society contribution or building a buffer so you borrow less, Savings Boxes let you keep that money in its own Naira pot. For everyday spending with merchants in Spaces, Loans on Spaces are lent by Solid Allianze MFB: a limit may be offered, and you see the full agreement before you accept. Compare its cost in the app with your society's figure before deciding.
Questions people ask
How much can I borrow from my cooperative?
It depends on your society's bye-laws. Most set a maximum as a multiple of your savings, plus a minimum membership period. The Act requires the bye-laws to state the maximum loan, the interest rate and the repayment period.
Can a cooperative take my savings if I default?
Many bye-laws allow the society to set your savings against an unpaid loan, and some also deduct from guarantors' savings. Read your loan form and the bye-laws before you borrow or guarantee.
Is cooperative loan interest flat or reducing balance?
Many societies quote a flat rate on the original amount. A flat 1% a month over 12 months costs about 21.5% a year on a reducing-balance basis, so convert before you compare.
Can a cooperative lend to non-members?
No. Section 30 of the Nigerian Co-operative Societies Act says a registered society may not lend to a non-member, except as the Act allows, such as lending to another registered society with members' consent.
Sources
- Nigerian Co-operative Societies Act (PLAC Laws of Nigeria) · accessed Oct 2026
- Mondaq (Pavestones Legal): Registering a cooperative society in Lagos State, 12 May 2023 · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.