CHAPTER ONE
INTRODUCTION
The introduction of community banking in Nigeria was an innovation, which was greatly influenced the financial sector of our economy. It w as provided basic and ready solutions to some problems that for many years seemed insurmountable. For instance, the country has continued to experience balance of payments difficulties, increasing debt, service burden, and gross depreciation in the exchange value of the Naira, persistence industrial unrest and low productivity. All these are clear manifestation of economic depression. Then, the fundamental concepts of a community bank is to establish a self sustaining financial institution owned and managed by members of a community for the purpose of providing credit, banking and other financial service to its members. Largely by their self recognition and credit worthiness.
First, community banks enhance the economic activities in the rural areas, encouraging development and promoting community ownership.
Secondly, it transformed the tradition rotational credit system in formal banking. The rural dwellers imbedded a banking culture which provided easy loans and better security and management at personal funds. It would therefore not be an over statement to say that community banks succeeded where commercial and merchant banks failed. This is true because the marginalisation of rural people by the other banks had compelled the central bank of Nigeria, some year ago, to issue a directive that specified the number of branches of commercial banks be opened in rural areas, though over 750 of such rural bank sprang up, the problem still persisted. Consequently, the search continued until December 1990 when the first community bank in Nigeria was born in Tudun Wada, Kaduna State. It was established by decree number 46 of 1992 and amended by decree number 97 of 1993, Community Banks soon spread across the hinter land, receiving wide ovation and support from the rural dwellers.
The reason was simple because the difference was clear. A community bank has simple ownership structure. In this set up a Community Development Association (CDA) is the primary promoter of the bank with at least 30% of shares indigenes are also encouraged individually to buy shares not exceeding 5%. The received loans easily without collaterals and become owners of banks located in their environment. In effect a community bank can be said to be the people, the people and for the people. No wonder; today there are about 1,982 community banks in the 36 states of the country and Abuja and provided employment to over 1,5000 people.
According to the executive secretary of the National Board for Community Banks, Alhaji Zakan Isa Chawai, the total assets of these bank stand at over N4 billions while the total deposit so far mobilized is over N3 billions, the country banks also have share holders funds of almost N800 millions while loans and advances of over N1 billion have been given to their customers.
A friend in need, it is said ‘is a friend indeed’. And community banks have proved to be friends in need. Not only because their doors are open for longer hours providing banking services even at weekends and public holidays, but because they have given succor to their customers especially whenever the other banks went on strike. This is another reason why many traders, farmers, manufacturers, and other Nigeria have changed to community banks. But for years after their operation, many of the community banks have not been issued a final license by the central bank of Nigeria. Source of them still operating with provision license even when some have strong equity bases of between N5 millions and N10 millions as against the minimum take off equity of two hundred and fifty thousand naira (N250,000.00).
Perhaps a lot more is expected of the community banks especially in these days of Nigerians distressed economy.
The National Board for Community Banks (NBCB), which was inaugurated on Tuesday, July 16 1991 to take control of all the community banks in the country. Still has a lot of work to do if the community banking system must grow rapidly to save the development need of the grass root throughout the country. The NBCB is grateful to government for the opportunity given to it to:
- Evolve a modern banking scheme adapted to the Nigeria indigenous culture.
- Devise a credit scheme that makes loan accessibility at the grass root a thing at joy.
- Awaka the innovativeness and creativeness of Nigeria producer who can now earn the elusive foreign exchange through embarking on productive venture.
- Provide a sound basis for grass roots development