COMMUNITY BANKING SYSTEM IN NIGERIA AND THE PROMOTION OF RURAL DEVELOPMENT

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

This project work has a basis on the identification of the roles of community banking system in promotion of rural development in Nigeria. The community banking system was launched with the opening of Alheri community bank Kaduna by then president on 31st December 1990 within three years, about 1991 community banks had commended operation nation wide. Today there are over 1000 Community banks in operation throughout the country. The government assistance in this regard, apart from helping to incorporate and license the banks and train their staff consists largely provided them with matching loans to aid them through the initial teething period.

Community bank is the latest arrival in the banking sector. The decision to come up with a community bank was promulgated in the 1990 budget speech by then president Ibrahim Babangida. However, the program actually took in December 1990 when the first licensed community bank stated operation in Alhen, Local government area of Kaduna state to speed up the scheme, a president committee called “Community banks implementation committee” was set up. This was later replaced by the National Board for community bank, which is under the presidency. The board is legally backed by the community bank decree of 1992 and its charged with the responsibility of supervision and regulated or community Banks. Consequently the effectiveness effort of the board, community banks were shaped to become very deposit banking and financial services to its grass root level.

1.2   STATEMENT OF THE PROBLEM

Problem of inculcating banking habit to the rural dwellers. For example palm wine tapers who don’t ever know anything about banking after making a lot of money from daily states of their product either keep the proceeds at home or among the raffia’s where they tap and it turns to be a problem and the federal government decided to establish community banks to source these collie funds in the rural community.

Loan recovery: It has turn to be a problem because of lack of collateral securities high of delinquency arising from deliberate refused of pay back loan for the fact that community bank is a grass root banking system aimed at inculcating banking habits in rural folks. The community bank do not emphasis collateralize for loan execution.

1.3    PURPOSE / OBJECTIVE OF THE STUDY

To find out the various financial services offered by the community banks and their role in rural development. To find out how effective they are in pursuance of the objective of the community banks to provide through the recommendation the operational development of the rural populace.

1.4   SIGNIFICANCE OF THE STUDY

The significance of the research work lies on the fact that the establishment of community banks is a step in the right direction towards economic growth and increased standard of living both the urban and rural communities. Moreover, the project will make it easy for government, community bank managers and their customers to address their minds to the best way of operating or managing community banks in the country. Besides the implementation of the finding and recommendation of the project will in no small measure enhance the development activities of the community banks towards rural dwellers and also increase the level of public confidence reposed in them.