Indigenous banking system refers to the traditional financial system that existed in various cultures and societies before the arrival of modern banking institutions. It was a system that was based on trust, mutual understanding, and social networks, and was mostly prevalent in rural areas.

Features of the Indigenous Banking System:

1. Trust-based: The indigenous banking system was based on trust and personal relationships. There were no formal contracts or agreements, and transactions were conducted based on mutual trust and faith.

2. Informal: These systems were informal in nature and not regulated by any government agency.

3. Community-based: Indigenous banking systems were community-based, and people knew each other well. This made it easy to lend and borrow money based on the borrower's reputation within the community.

4. Non-monetary transactions: Indigenous banking systems relied heavily on non-monetary transactions, such as bartering and exchanging goods and services.

5. Limited scope: The indigenous banking system had a limited scope and was mostly confined to rural areas.

Advantages of the Indigenous Banking System:

1. Easy accessibility: The indigenous banking system was easily accessible to people in rural areas who did not have access to modern banking institutions.

2. Low transaction costs: The absence of formal contracts and agreements meant that transaction costs were low.

3. Flexibility: The indigenous banking system was flexible and could adjust to the needs of the community.

4. Customized services: The indigenous banking system provided customized services tailored to the specific needs of the community.

Disadvantages of the Indigenous Banking System:

1. Lack of regulation: The absence of regulation meant that there was no guarantee of the safety of deposits.

2. Limited resources: The indigenous banking system had limited resources, which made it difficult to provide larger loans.

3. Lack of innovation: The indigenous banking system lacked innovation and was slow to adapt to changing circumstances.

Conclusion:

In conclusion, the indigenous banking system was an important part of many cultures and societies before the arrival of modern banking institutions. While it had its advantages, it also had its limitations, and the arrival of modern banking institutions has largely replaced it. However, some communities still rely on indigenous banking systems and continue to reap the benefits of this traditional financial system.