The failure of the conventional banks to urge rural economic development over
the years led the federal government of Nigeria to introduce the community
banking system in 1990. the community banks were to be used to accelerate rural
economic development through the advancement of credit to rural economic masses
and small scale producers. The unpleasant condition of our rural economy is due
to insufficient fund and the high hope placed on this scheme. Community banks
as an answer or cure to this situation triggered my interest to carry out this
study. This study is designed to investigate community bank contribution
towards rural economic development. To carry out the study, 6 hypothesis will
be formed. It will be collected from literature review. There will be two form
of structured questionnaire (1 for manager and the other for customer) which
will be used to collect relevant primary data from sample of 100 customers and
6 managers randomly selected from population. The chi-square will be employed
to test the null hypothesis at the 0.05 level of significance. I will survey
the current practice of the bank to know their lending techniques and its
effect on the progress of rural economic development.
Recommendation will be made based on my finding in the study.
statement of the
1.4.1 Limitation of the
Review of Related Literature
2.1 Definition of rural economic
2.2 Community bank and rural
2.3 Awka community bank
contribution to economic
Development in the
Research Procedures and
3.1 The design of
3.2 Population of the
3.3 Sample of
3.4 Data collection instrument
3.5 Data collection
3.6 Method of data
Presentation and Analysis of
4.1 Presentation of
4.2 Testing of
Summary of Finding and
5.1 Summary of
1.1 BACKGROUND TO THE STUDY
The past approach to development focused attention on the
development of urban centuries at the gross expenses of rural areas. Nigeria
being a developing country with at least seventy five percent of her resources
endowment abounding in the rural areas can achieve no meaningful self
sustaining development without the rural masses being effectively mobilized
genuinely, motivated and properly organized for productive activity.
Olulade (1987:6) noted that most expert on rural development are
of the opinion that the failure to develop the productive potential of the
rural masses was responsible for the failure of past rural development
programmes in Nigeria.
This realization has been the brain behind the strong effort of
the federal government of different regime to search for ways to monetize the
rural economy and thereby promoting productive activities in the rural areas.
This cannot be achieved without adequate provision of loan to the rural
Awka community bank was founded in the year 1991. the
ex-president, General Ibrahim Babangida (1992:10) in his address at the
commissioning of the first community bank in Nigeria, observed that effort at
expanding the economic base of the rural areas always flounder because of
scarcity pf loanable fund and mobiliser and dispenser of fund, banks are best
suited for this role of providing fund for economic activities.
To solve this problem of inadequate provision of fund for
development of economic activities in Awka community and other rural areas, the
federal government economic measures or rural banking programme, selective
credit guideline, establishment of co-operatives and finally, the establishment
of people’s bank. These measure were applied with the aim of ensuring that
credit and funds reach a lot of people at their desired sectors.
Despite all the effort made, the initial complaint resurfaced.
They were as follows: conventional banks were people able to service the credit
need of the rural people and the small-scale business. Ogubanjo (1985:78)
stated that “the cry of most indigenous businessmen especially small-scale
business), is the inadequacy of bank to finance and grant credit”.
Actually, this problem was beginning to paralyze the programme of
the Directorate of Food, Road, and Rural Infrastructure (DFRRI)which was
constrained towards the end of 1989 to address a memorandum to the then
president of Nigeria, General Ibrahim Babangida, proposing the critical needs
to establish a nove financial institution to be known as community banks
(Mabogunje:1991). It was against this that Awka community bank was established
and also other community banking system. It was established by section 37;
decree no: 46 for the purpose of:
a. Promoting rural development through the
provision of finance and banking service.
b. Enhancing the rapid development of productive
activities especially in the rural and urban areas.
c. Improving the economic status of small-scale
producer both in the rural and urban areas (community bank decree:1992).
Finally, it is generally expected that with the inauguration of
community banking system, that the problem of inadequate provision of loanable
fund to Awka community and other rural areas as well as the small-scale
business will be a thing of the past. Presently, there are about 1014 community
banks already in operation (2000), inclusive of Awka community bank (1991)
This study is therefore aimed at appraising the contribution of
community bank, towards rural economic development using Awka community bank as
1.2 THE STATEMENT OF THE PROBLEM
The problem inadequate provision of capital for economic activities
in the rural areas has been a coq in the wheel of real development in the
nation. Awka community bank due to their limited geographical coverage,
legalistic insistence on collateral securities and other stringent loan
conditions have failed to meet this need, despite the mandatory rural branching
policy (Babangida : 1990). Ogubanjo (1985) referred to the loan condition as
In the light of the current failure of banks and financial
institutions, the objective of setting up community banking scheme, the rate at
which people are embracing the idea of community banking, the rate at which
they are also setting up their own banks, their high expectation from the
scheme, the fact that most community banks already commissioned are urban based,
the recurrent allegations of shady deals and distress in some community banks,
a number of questions readily come to mind. Have Awka community bank been able
to meet peoples’ and government expectation? Do people still have confidence to
them as a mean of rural economic development? Are they maintaining the rural
focus of the scheme?
Based on the foregoing, therefore, the study was designed to
evaluate the contribution of Awka community bank toward rural economic
development and also highlight some problems encountered by the bank in their
effort to extend loan to the rural masses.
1.3 PURPOSE OF THE STUDY
The main aim of this study was to find out the extent to which
Awka community bank has been able to meet up with the expectation from them as
a strong tool for promoting productive activities in the rural areas.
Specially, the study was aimed at finding out the following:
1. The extent to which Awka community banks are
providing for the credit needs of the rural masses and small-scale businesses.
2. How they are helping rural economic development
efforts through their lending scheme or policy.
3. Appraisal of the methods of determining credit
worthiness of their customer.
4. The step which they are taking to assist their
customer to become more credit worthy.
5. Whether they are maintaining the main rural
focus of the scheme.
6. The advantages of Awka community bank managers
believe that community banks have over other community banks in terms of
reaching the rural people with banking services.
7. The issues and problems that militate against
community bank’s lending and make suggestions and recommendation where
necessary to alleviate the problems so identified.
1.4 SCOPE OF THE STUDY
This is a survey study on Awka community bank with specific
regards to their lending functions. To facilitate the study I have limited
myself to Awka community bank already in existence (1991). My criterion for
differentiating between rural and urban areas being as the National Board of Community
Banks (NBCB) has differentiated between rural and urban.
1.5 SIGNIFICANCE OF THE STUDY
The following interest groups are expected to benefit from the
finding of this study: First is the manager of Awka community bank is from
Anambra state. The National Board for Community Banks (NBCB) who though may
have the figures on community banks lending yet may not have all the pieces of
information elicited in the primary data and so may use that for improvement to
ensure that the aims of the scheme is achieved.
Also, the federal and state government, the community leaders, and
the entire masses of people who have reposed such confidence and expectation on
the scheme as a panacea to all financial problems of the rural masses may want
to know the extent to which their expectation is being met.
Finally, it is expected that the finding of this study will be a
useful tool for further studies in this field and will also act as a warning,
encouragement and guide to any potential community bank in Nigeria, including
Awka community bank.
There are 5 hypothesis tested in the study they are:
1. Receiving loan from Awka community bank is
independent of one’s level of education.
2. A customer’s credit worthiness in Awka community
bank is independent of his major occupation.
3. Receiving loan from Awka community bank is
independent of the length of time one has been their customer.
4. Awka community bank lends according to the
specified average to the preferred stocks (here I tested two
sectors-agriculture and production).
5. The lending philosophy of Awka community bank’s
is helping rural economic development.
TERMS AND CONDITIONS APPLY
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