CHAPTER ONE
1.0
INTRODUCTION
Banking service when
introduced in our rural areas will bring development or specifically economic
development to the doorstep of every citizen in this country since between 70 –
80 percent of Nigerians lives in the rural area.
Every Nigeria want to go
to the urban area because of availability of infrastructural amenities like
electricity, good roads, pipe borne water, civilized market operation, job
opportunities and so on. If these social
amenities continue to exist in urban areas, life in rural areas will still
remain underdeveloped. Money they say is
the blood that nourishes or gives life to any prosperous economy of a
nation. For money to accomplish its aims
in an economy, it needs to be properly managed and controlled in the banking
sector.
Agriculture is the
second major sources that generate revenue to the Nigeria government after oil
industry. The sector of the economy
right from time has been neglected. The
rural areas have not felt any positive impact on the development plan but only
recorded a decline in agricultural productivity, which shows that the rural
areas have been neglected at the expense of the urban areas.
The banking industries
one of every nations sectors that has a controlling impact on the economy
particularly in terms of monetary policy, this is why federal government has
continuously encouraged banks to expend their services and facilities not only
to the urban cities but also rural areas.
1.1 AIMS AND OBJECTIVES
This research work is
aimed at investigating the impact the rural banking services, commercial banks
have on the productivity of small and medium agricultural farmers and the
entire economic activities of the rural areas.
This project work also aimed at acquainting ourselves with the benefit
of rural banking services in terms of mobilizing and organizing present farmers
into efficient and active co-operative groups, small and medium scale farmers
and integrated rural communities.
The objective of this
research is to evaluate how effective credit allocation among productive
activities the rural areas have been realized.
Finally, the aim of the
project work is to suggest policy measures to government in improving rural
banking so as to have the desired development impact on the rural areas in
Nigeria.
1.2
STATEMENT OF RESEARCH PROBLEMS:
The commercial bank is a
profit making organization. There is a
great fear in establishing in rural areas where it cannot maximize profit. Rural banking has been seen as indispensable
if the nation is to develop its rural areas.
The development of one rural area may not be a reality if services of
commercial banks are not at the reach of our rural dwellers.
The problem therefore is
how to resolve the profit motive of the rural commercial banks and the
essential services being rendered to the rural dwellers. This project work is designed to measure to
what extent the rural commercial banks have been able to involve the rural
dwellers in the economic activities in terms of awareness and
1.3
SIGNIFICANCE OF STUDY:
Nigeria is a developing
country with more than 70 percent of her population living in the rural
areas. These rural dwellers are faced
with lot of hardship in terms of basic infrastructures. The rural dwellers are mostly farmers,
definitely require loans, to reduce the hardship involved in acquiring input as
well as cultivating their farms, therefore, the services of banking becomes
very essential.
This study is
essentially significant in that it is directed towards evaluating the effect
the growth of rural banking activities has on the rural inhabitants which is a
criteria aimed by measuring economic standard.
It is also significant in the sense that it shows to what extend the
rural banking programme in Nigeria has been successful.
Conventional economics
and experience suggest that by supplying food, labour and invisible surplus,
the rural areas help to generate urban income and employment. They also help to stabilize if not reduce
production cost for industries and cost of existences of commercial banks in
the rural areas will speed up investment.
1.4
SCOPE OF STUDY:
This study is limited to
Enugu State, a state comprising of eighteen (18) local government area each
having one or more rural bank(s). For
ease of information we would restrict to Awgu, Nkanu East dwellers. This project work is designed to measure to
what extent the rural commercial banks have been able to involve the rural
dwellers in the economic activities in terms of awareness and influence on
their style of living through banking activities and how successful the banks
are measuring up with their major aim of existence. The government has accepted banking
persuasive rather than forcing banks to establish branches in the rural areas.
Most villages are
without electricity and pipe borne water and the banks spend much more that
customers deposit to provide these amenities for workers.
A major problem is that
the rural dwellers don’t patronize the bank industries. Most of the rural dwellers are farmers. They go to the farm before the bank starts
its business and return only after they have closed to customers. Hence the bank finds it difficult to make
profit.
The rural banks
encounter lot of problems cultivating banking habit in the rural dwellers. Rural dwellers live in mutual suspicion with
strangers, for that rural branches workers are affected.
The rural banks also
encounter problems of granting loans to rural dwellers and small scale
businessmen in the rural areas. Because
they are not too aware about why bank lend them loan, they use this loan for
marrying wives, thus means of repayment becomes a problem.
Although United Bank for
Africa (UBA) has been chosen as a case study, other banks like Union Bank of
Nigeria (UBN), first Bank of Nigeria, All States Trust Bank, Citizens Bank etc,
can find this study beneficial to hem since they are all operating the same
economic environment.
The study focuses
attention to the impact of rural banking in the development of rural areas.
1.5
LIMITATION OF SCOPE:
In the process of
carrying out the research focuses on the development of rural banking in
Nigeria with United Bank for Africa (Rural Branches) as case study concrete
efforts were been made to arrive at a logical conclusion. However, the work was subject to certain
limitations.
Financial constraint is
another limitation to this works which is as a result of high cost of
transportation fare to the various bank branches together data, cost of
material to carry this work to conclusive standard was equally important.
Respondents turned out
to be co-operating by completing the questionnaires, which took lot of time and
energy to convince them.
1.6
STATEMENT OF RESEARCH HYPOTHESIS:
The following hypothesis
has been formulated to which the study will attempt providing answers.
Ho: The United Bank
of Africa UBA makes use of techniques/methods in determination of its return in
rural banking.
H1: Apart
from the rural farmers, the United Bank of Africa does not source fund from
other activities of the rural banking.
Ho2: The
United Bank of Africa make adequate benefit from the accumulated investments of
urban banking.
Ho3: The
United Bank of Africa does not derive any benefit from the accumulated
investments of rural banking.
1.7
DEFINITION OF TERMS:
BANK:
According to the
Nigerian Banking Act, 1969 (as amended Bank amendment act 1979), a bank is
described as the business of receiving money from outside source as deposits
irrespective of the payment of interest and the granting of money, loan and
acceptance of credited or the purchase of bills and cheques or the purchase and
sale of securities for account of those or the incurring of the obligation to
acquirer claims irrespective of loan prior to their maturity or the assumption
of guarantees and other warranties for others or the commissioner may on the
recommendation of the central bank by order publish the federal gazette
designed as banking business.
RURAL
AREA:
According to Webster’s
New Word Dictionary, it refers to that not being characterized with citizen or
urban life. That is usually associated
with farming and agriculture. The rural
area has the features of low level of literacy, poor health facilities, and
inadequate family planning, low technology and inadequate infrastructures. In addition, a prominent phenomenon in rural
areas is that the people who live there have as integrated culture and social
system as their way of life. Development
is carried out as group efforts in a community.
In Nigeria, majority of people who live in rural areas earn their main
income from agriculture.
RURAL
BANK:
A rural bank can be
described as a brand of existing bank established in the rural area to provide
banking services for rural population.
These services could be in the form of motivation, rural saving, credit
allocation among productive activities of the rural population and linkage of
money market in the rural areas with the capital market in the urban centers,
in other words, the adequate efficient and equitable allocation of resources
amongst different sectors of the rural economy.
The scope of the
activities and operations of a rural bank is similar to that of commercial bank
establishing it but limited due to a verity of reasons. The primary role expected of a rural bank
should be the finance of identified rural development projects of short and medium
terms duration. But given constraints in
finding and the need to have it becomes obvious that it will be desirable and
viable that projects of the following categories should be financed by any
rural banks.
RURAL
BANKING PROGRAMME:
This is a programme
embarked upon by the Nigeria government in 1977 with the aim of extending
banking habit to the rural area by mobilizing rural savings, assisting
government in implementing monetary and other development policies. The programme is also aimed at making productive
an activity receive adequate attention by way of allocating credits. The implementation of the programme is the
moments in 1977-1980; 1980-1983 (later extended to 1985) and 1985-1989).
DEVELOPMENT:
Development should be
perceived as a multidimensional process involving the re-organisation and
orientation of entire economic and social system. In addition, to improve income and output, it
typically involves radical changes in population, attitude customer and belief.
Finally, although
development is usually defined in the national context its wide spread
realization, modification of the international, economic and social order.
ECONOMIC
DEVELOPMENT:
This term has generated
a lot of controversies over the years.
Some economics see it as political and structural change while others
are of the opinion that it relates the progress in the basic human needs over
time. Another school of thought defines
it as growth accomplished by changes i.e. change in structure of the economic
in the country’s social structure and its political structure.
Others have tended to
make basic human needs approach, an approach which defined economic development
in terms of progress toward reducing the incidence of poverty, unemployment and
income inequalities and for those whose living standards have not been rising. This approach also seeks ways and means of
improving their conditions,
MONETARY
POLICY:
The monetary policy of a
nation is a fact of its broad economic policies. It deals with the discretionary control of
money supply by monetary authorities in order to achieve desired economic
goals.
STANDARD
OF LIVING:
This could be linked
with the level of substance, as of a nation, society, class or person with
reference to the adequacy of necessities in daily life as a result of varying
per capita income; people equally vary in their standard of living. The per capita income in the United States of
America for example cannot be compared to that of developing countries like
Nigeria.
Consequently, the
standard of living differs, and perhaps, the nature of facilities and economic
activities present in urban areas make standard of living differ from the urban
area and the rural dwellers.
EMPLOYMENT:
In the simplest form,
employment refers to the engaging, hiring or making use of the services of a
person with the view of compensating him or her with wages. As a result of the economic recession in
Nigeria employment problem has not been adequately tackled.
MARKETING:
Whenever one engages in
doing anything to create satisfaction that the person has engaged in marketing,
be it production of goods or rendering services. The challenges that face marketing are that
of generating ideas and avenues of satisfying consumers needs and want at a
profit in a socially responsible manner.
Marketing involves any interpersonal, inter-organizational relationship
with the result of exchanging processes; it related the exchange of ideas,
goods and services.
LOAN:
This is the amount
granted to individual companies, banks or any organization by commercial banks
or any other financial institution for a specific period when the money may be
paid back with interest.
PRODUCT
UNITY;
Engaging in the ration
of economic value and quality involving manufacturing of goods and services.