DEVELOPMENTAL EFFECT OF RURAL BANKING IN NIGERIA
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DEVELOPMENTAL EFFECT OF RURAL BANKING IN NIGERIA
1.0 INTRODUCTION TO CHAPTER ONE OF THE DEVELOPMENTAL IMPACT OF RURAL BANKING IN NIGERIA
Banking services in our rural areas will bring development, notably economic growth, to the doorsteps of every citizen in this country, as 70-80% of Nigerians reside in rural areas.
Every Nigerian want to live in a city because of the availability of infrastructure facilities such as power, nice roads, piped water, civilised market functioning, work prospects, and so on. If these social facilities remain in urban regions,
rural life will continue to be underdeveloped. Money, they say, is the blood that nourishes or gives life to a nation’s flourishing economy. Money must be properly handled and controlled in the banking sector for it to achieve its goals in an economy.
Agriculture, after the oil industry, is the second most important source of revenue for the Nigerian government. From the beginning, this sector of the economy has been neglected.
The rural areas have had no positive impact on the development plan, but have seen a drop in agricultural productivity, indicating that the rural areas have been abandoned in favour of the metropolitan districts.
The banking industry is one of every country’s sectors that has a controlling impact on the economy, particularly in terms of monetary policy, which is why the federal government has consistently pushed banks to expand their services and facilities not only to metropolitan areas, but also to rural areas.
1.1 MAIN GOALS AND OBJECTIVES
This study aims to investigate the impact of rural banking services and commercial banks on the productivity of small and medium agricultural farmers as well as the overall economic activities of rural areas.
This project also sought to familiarise us with the benefits of rural banking services in terms of mobilising and organising existing farmers into efficient and active co-operative groups, small and medium-scale farmers, and integrated rural communities.
The goal of this study is to assess how effective credit allocation among productive activities has been realised in rural areas.
Finally, the project’s goal is to recommend to the government policy steps to improve rural banking in order to achieve the intended development impact in Nigeria’s rural areas.
1.2 STATEMENT OF RESEARCH PROBLEM:
The commercial bank is a for-profit enterprise. There is a great deal of apprehension about operating in rural locations where profits cannot be maximised. Rural banking has been viewed as essential if the country wants to develop its rural areas. The development of a single rural area may not be a reality if commercial bank services are not available to our rural residents.
The issue is thus how to reconcile the profit incentive of rural commercial banks with the important services provided to rural residents. This project effort is intended to assess the extent to which rural commercial banks have been able to involve rural inhabitants in economic activities in terms of awareness and participation.
1.3 SIGNIFICANCE OF THE STUDY:
Nigeria is a developing country where more than 70% of the population lives in rural areas. These rural residents face numerous challenges in terms of basic infrastructure.
Rural people, who are largely farmers, would undoubtedly demand loans to alleviate the hardships associated with procuring input and developing their farms; hence, banking services become extremely important.
This study is fundamentally noteworthy in that it is aimed at evaluating the impact of the increase of rural banking activities on rural residents, which is a criterion for measuring economic standard. It is also notable in that it demonstrates the extent to which Nigeria’s rural banking plan has been successful.
According to conventional economics and experience, rural areas contribute to urban income and employment by providing food, labour, and an invisible surplus. They also serve to stabilise, if not lower, industrial production costs, and the establishment of commercial banks in rural regions will accelerate investment.
1.4 SCOPE OF THE STUDY:
This study is limited to Enugu State, which has eighteen (18) local government areas, each with one or more rural banks. We would limit this information to residents of Awgu and Nkanu East.
This project work is intended to assess the extent to which rural commercial banks have been able to involve rural dwellers in economic activities in terms of awareness and influence on their way of life through banking activities,
as well as how successful the banks are in meeting their primary goal of existence. Rather than requiring banks to open branches in remote areas, the government has embraced banking persuasive.
Most towns lack electricity and piped water, and banks spend far more than clients deposit to supply these necessities for workers.
One big issue is that rural residents do not patronise the banking industry. The majority of rural residents are farmers. They go to the farm before the bank opens and return only after the bank has closed to customers. As a result, the bank is having difficulty turning a profit.
Rural banks face numerous challenges in fostering banking habits among rural residents. Rural residents have a mutual distrust of newcomers, which affects rural branch workers.
Rural banks also face difficulties in extending loans to rural residents and small-scale company owners. Because they are unaware of the reasons why banks lend them money, they use it to marry women, making repayment difficult.
Although United Bank for Africa (UBA) was chosen as a case study, other banks such as Union Bank of Nigeria (UBN), First Bank of Nigeria, All States Trust Bank, Citizens Bank, and others may benefit from this study because they all operate in the same economic context.
The research focuses on the role of rural banking in the development of rural communities.
1.5 LIMITATIONS:
Concrete attempts were made to arrive at a logical conclusion while carrying out the research focusing on the growth of rural banking in Nigeria with United Bank for Africa (Rural Branches) as a case study. However, there were several constraints to the work.
Financial constraints are another obstacle to this effort, which is due to the high cost of transportation fare to the various bank branches together data, as well as the expense of material to carry this work to a conclusive standard.
Respondents proved to be cooperative by completing the questionnaires, despite the fact that convincing them took a significant amount of time and effort.
1.6 RESEARCH HYPOTHESIS STATEMENT:
The following hypothesis has been developed, and the study will aim to provide answers to it.
Ho: The United Bank of Africa UBA employs techniques/methods in calculating its return in rural banking.
H1: Apart from rural farmers, the United Bank of Africa does not obtain funds from other rural banking activities.
Ho2: The United Bank of Africa reaps a sufficient return on its urban banking investments.
Ho3: The United Bank of Africa derives no advantage from the cumulative rural banking investments.
1.7 DEFINITION OF TERMS:
BANK:
According to the Nigerian Banking Act, 1969 (as amended by the Bank Amendment Act 1979), a bank is defined as “the business of receiving money from outside sources as deposits regardless 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 regardless of loan prior to their maturity or the assuaging of claims prior to their maturity or the assuaging of claims
AREA RURAL:
According to Webster’s New World Dictionary, it refers to something that is not associated with citizen or urban life. That is frequently associated with agriculture and farming. The rural area has low literacy, poor health facilities, insufficient family planning, limited technology, and inadequate infrastructure.
Furthermore, a notable characteristic in rural areas is that the people who live there have an integrated culture and social structure as part of their way of life. In a community, development is carried out through collaborative efforts. Agriculture is the primary source of income for the majority of Nigerians who reside in rural areas.
THE RURAL BANK:
A rural bank is a brand of an existing bank that has been formed in a rural location to provide banking services to the rural community. These services could take the form of motivation, rural saving,
credit allocation among productive activities of the rural population, and the linkage of the rural money market with the capital market in urban centres, or the adequate efficient and equitable allocation of resources among different sectors of the rural economy.
A rural bank’s activities and operations are comparable to those of a commercial bank, although they are constrained for a variety of reasons. A rural bank’s principal duty should be to finance recognised rural development projects with short and medium-term durations. However, given the limits in finding and the necessity to have, it is evident that projects of the following types should be sponsored by any rural bank.
PROGRAMME RURAL BANKING:
The Nigerian government launched this scheme in 1977 with the goal of expanding banking habits to rural areas by mobilising rural deposits and aiding the government in implementing monetary and other development goals.
The initiative also aims to ensure that productive activities receive appropriate attention by allocating credits. The programme was implemented over the years 1977-1980, 1980-1983 (later extended to 1985), and 1985-1989.
DEVELOPMENT:
Development should be viewed as a multifaceted process that involves the reorganisation and orientation of the entire economic and social system. Furthermore, improving revenue and output often necessitates drastic changes in population, customer attitude, and belief.
Finally, while development is typically characterised in a national context, it is widely realised through the transformation of the international, economic, and social order.
DEVELOPMENT OF THE ECONOMY:
This word has sparked numerous debates over the years. Some economists perceive it as a political and structural shift, while others believe it pertains to the progression of basic human needs across time.
Another school of thinking describes it as growth achieved by changes, such as changes in the economic structure, the social structure, and the political structure of the country.
Others have tended to take a fundamental human needs perspective, which characterised economic development in terms of progress towards eliminating poverty, unemployment, and income inequities, as well as for those whose living standards have not been rising. This strategy also looks for ways and means to improve their situation.
ECONOMIC POLICY:
A country’s monetary policy is a reflection of its overall economic policies. It is concerned with monetary authorities’ discretionary regulation of the money supply in order to achieve desired economic goals.
LEVEL OF LIVING:
This could be related to the degree of substance, as of a nation, community, class, or person, in terms of the sufficiency of essentials in everyday life as a result of varying per capita income; people’s standard of living varies as well. For example, the per capita income in the United States of America cannot be compared to that of developing countries such as Nigeria.
As a result, the standard of living varies, and probably the nature of amenities and economic activity prevalent in urban regions causes the standard of living to differ between urban and rural people.
EMPLOYMENT:
In its most basic form, employment is the engagement, hiring, or use of a person’s services in order to compensate him or her with compensation. The employment crisis in Nigeria has not been satisfactorily addressed as a result of the economic recession.
MARKETING:
When a person does anything to create satisfaction, that person is marketing, whether it be the manufacturing of goods or the giving of services. Marketing has the difficulty of providing ideas and channels for satisfying consumers’ needs and desires at a profit while remaining socially responsible. Marketing is any interpersonal or inter-organizational interaction that results from the interchange of processes; it is associated with the exchange of ideas, goods, and services.
LOAN:
This is the sum granted by commercial banks or other financial institutions to individual companies, banks, or organisations for a particular length of time, with the money repayable with interest.
PRODUCT INTEGRATION;
Engaging in the rationing of economic value and quality in the production of goods and services.
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