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THE ROLE OF COMMUNITY BANKS IN RURAL DEVELOPMENT

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

This chapter is mainly concerned with the efforts at expanding the economic base of the rural area which are always backwards because of scarcity of and restrictive access to loanable funds.  In solving the problem, previous government in their economic policies have lied on development banking and rural branch banking of orthodox banks.  The word Community Banking is defined as a self sustaining financial institution owned by a community or a group of communities.  Unlike commercial banks, community banks were established mainly to promote productive activities in the rural area.  Specially, they are meant to facilities the programmes of directorate of food, roads and rural infrastructural producers. Community bank has no other branch because it is established to operate within a community alone.  It is well known that 75 percent of the country’s resource and ownment are in the rural areas.  So our development project and programme can not achieve any appreciable improvement until this is focus on those rural areas.

The federal government of Nigeria 1990 budget speech decided to establish community bank in order to strengthen its programmes of grassroots economic development.  The fundamental concept of a community banks is of a self-sustaining financial institution, owned and managed by a community for the purpose of providing credit deposit, banking and the service to its members.  It is designed to ensure that a community may establish a community bank for the purpose for promoting rural development throughout the provision of finance and banking service improving the economic status of small scale producers both in the rural and urban areas, enhancing the rapid development of production activities especially in the rural economic growth in Nigeria.  A bank licensed under the community bank decree shall accept from persons various types of deposit including savings and time savings. Receive or collect money on behalf of its customers, operate equipment leasing facilities which is designed to ensure access of its customer to farm input.  Community bank in Nigeria banking system dates back to 1990 when the budget speech was delivered by the president commander in Chief of the Armed Forces, General Ibrahim Babangida.

Development and continuous development in a goal which every nation espies to achieve and when it is achieved every one shares in the glory. Most nation development tends to concentrate in the urban arrears but a nation is related highly when its development extends to the rural areas. In Nigeria, life in rural areas is synonymous people are predominantly peasant farmers who produced the highest percentage of nations food, fire and yet there is no significant development of the rural areas. There are no good roads, electricity, and good water supply among things. The banking industries help in no small measure in brining development in any country therefore in a bid to an extend this development to the rural areas. The community banking system was introduced in Nigeria in 1990.

The proper masses in the rural areas who are majority involved with agricultural production need finance and social amenities which are supposed to make their work and life easier, therefore, there is need for more emphasis to be laid on establishment of community bank to see if those problems encountered in the rural areas could be solved and rural exodus brought to a stand still. Adekanye (2014) his book “Element of banking” stated that the idea of development bank was established to increase agricultural output and productivity. The improve efficiency in the use of scarce land and water resources to enhance more efficiency use of capital resources.

Equitable distribution of income all of which gear up to raise the standard of living of the rural population. The objectives of the community banking in rural areas are in a null-shell to facilitate the economics development of rural areas, which is the need for this study. The role of community bank in rural development. Some economic believe that the economic status of any nation depends to a large extend on how effective their banking industries are. It is in the view of this national reasoning that the then Babangida’s administration inaugurated the national Board. For community bank in 1991 which its sole function is to guide and assist communities in establishing their own bank in their areas.

This measure is geared towards the use of banking industries in realization and actualization of the development of much neglected rural areas in the country. In rural areas most community banks find it difficult to survive due to lots of factors. Most people in the rural areas are illiterates and fail to appreciate or acknowledge the importance of community bank. They fail to see the community bank as a solution to most of their problems that rather they place it in the category of other bank, it is in view of those in the rural areas that the community banks does a lot more than they think, hence to appreciate. The important for better economic situation in the rural areas.

Community banking services in the rural areas are dynamic rural support system needed for an increase in the productivity of both large and small-scale farmers local businessmen and social amenities needs for better economic situation in rural areas. The possibility or an easy access to the services of community banks can be possible by any effective and well organized rural community banking policy. Rural and urban shifting could be discourage by encouraging mechanized farming in the rural areas which will hopefully lead to development of agro-based industries in the rural areas.

This will further create employment opportunities to the unemployed people in the rural areas and also motivate more people to appreciate setting in the rural areas. This will further create employment opportunities to the unemployed people in the rural areas and also motivate more people to appreciate setting in the rural areas. Community banking services has a big role to pay in mobilizing and organizing rural dweller into efficient active co-operative group and is also capable of motivating the establishment of integrated rural communities by the active services.

1.2     STATEMENT OF PROBLEM

As a fall out of the system distress during the banking and financing industry, the community banks are not immured to the virus their dependency on conventional banks before they could serve their customers have proved to be the most undoing factors inhibiting the operations of community banks.

The statement of the problems include the following: -

1. How can loanable funds made accessible to rural borrowers to enhance their economic activities?

2. How can the loan be secured other than asking for tangible security like collateral?

3. How rural banking habit can be improved to assist I rural development?

1.4    OBJECTIVES OF THE STUDY

The studies conducted by the researcher on the role of community banks in rural development reveals that the objective of the study includes the following: -

1. To determine how rural dwellers had responded to the services of community banks.

2.  To identify the type of customer that patronize community banks.

3.  To determine the type of services that are rendered to the public by the community banks.

4.  To ascertain the extent to which granting of loan to rural dwellers has any effect on unemployment level.

5. To determine any ther non-banking services that are rendered to the public by the community banks.

6. To examine if the availability of the loan has reduced the level of rural urban migration.

1.5    SIGNIFICANCE OF THE STUDY

This research work will be of immense help to the

government especially the rural development authority, as it will give them the opportunity to assess their performance in rural development.  It will also be a great value to the community banks to assess their performance. Hence, it will be beneficial to the generality of the public.  It will also be of a great importance to people carryout research in related topic.  The study is as much as it attempt to achieve the purpose of promoting the rural development by providing financial and banking services, credit and deposit services as well as other facilities.  It is also to achieve the festering of the spirit of community ownership and of economic assets and its maintenance on a suitable basis.  To the economy at large, this study is of a great value since rural development involves providing those social amenities in the urban area to the rural area.  This to some extent restrict the usual movement.  Restriction will lead to the promotion of rural financial and banking services and integrated national financial system that responds to the need of the whole economy.

1.6  DEFINITION OF TERMS

For the purpose of this research work, the definition of

terms used with the UN Standard Industrial classification of economic activities.

1. Economic:  Is the study of how a society organizes its money, in order to encourage its nation.

2. Rural Areas:  In a little communities that is not as larging like the city

3. Community: Is all the people living in a particular area.

4. Community Bank: Is a self sustaining financial institution owned by a community or a group of community.

5. Loanable: This is the money that can organization such as a bank lend out money.

6. Funds: Is the amount of money that has been saved or that has been made available for a particular purpose.

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