THE ROLE OF THE COMMUNITY BANKS IN THE DEVELOPMENT OF RURAL ECONOMYAGEMENT EFFICIENCY IN BANKING INDUSTRY
PROPOSAL
This work examined the role of community Banks in the Rural Development.
This research topic is of five chapters. The chapter one is telling us the main body which contains the historical development of the community bank in rural development and the problems of the study, the objective of the study, significant, delimitation and limitation of the over all study of the roles of the community banks in the rural development.
The Role of Community Bank in Rural Development in Nigeria
The second chapter is talking about the review of the related study i.e the role of the community banks in the rural development
The 3rd chapter is telling us the ways that the information of the methodology also the research designs. Therefore, it talks on how the result is been known by the researcher.
The chapter four is all about the project both the summary and finding.
Chapter five basically on the project topic ie talking about the project topics and chapters in it. Therefore, it can call recommendation and conclusion.
Finally Bibliography that is the list of reference that have been written on the chapter one to chapter four.
1.1 INTRODUCTION AND BACKGROUND OF THE STUDY ON COMMUNITY BANKING
Development and continuous development in a goal which every nation espies to achieve and when it is achieved every one shares in the glory.
Most nation development tends to concentrate in the urban arrears but a nation is related highly when its development extends to the rural areas.
In Nigeria, life in rural areas is synonymous people are predominantly peasant farmers who produced the highest percentage of nations food, fire and yet there is no significant development of the rural areas.
There are no good roads, electricity, and good water supply among things.
The banking industries help in no small measure in brining development in any country therefore in a bid to an extend this development to the rural areas.
The community banking system was introduced in Nigeria in 1990.
The proper masses in the rural areas who are majority involved with agricultural production need finance and social amenities which are supposed to make their work and life easier, therefore, there is need for more emphasis to be laid on establishment of community bank to see if those problems encountered in the rural areas could be solved and rural exodus brought to a stand still.
Adekanye (1984) his book “Element of banking” stated that the idea of development bank was established to increase agricultural output and productivity. The improve efficiency in the use of scarce land and water resources to enhance more efficiency use of capital resources.
Equitable distribution of income all of which gear up to raise the standard of living of the rural population.
The objectives of the community banking in rural areas are in a null-shell to facilitate the economics development of rural areas, which is the need for this study. The role of community bank in rural development.
Some economic believe that the economic status of any nation depends to a large extend on how effective their banking industries are. It is in the view of this national reasoning that the then Babangida’s administration inaugurated the national Board. For community bank in 1991 which its sole function is to guide and assist communities in establishing their own bank in their areas.
This measure is geared towards the use of banking industries in realization and actualization of the development of much neglected rural areas in the country.
In rural areas most community banks find it difficult to survive due to lots of factors. Most people in the rural areas are illiterates and fail to appreciate or acknowledge the importance of community bank.
They fail to see the community bank as a solution to most of their problems that rather they place it in the category of other bank, it is in view of those in the rural areas that the community banks does a lot more than they think, hence to appreciate. The important for better economic situation in the rural areas.
Community banking services in the rural areas are dynamic rural support system needed for an increase in the productivity of both large and small-scale farmers local businessmen and social amenities needs for better economic situation in rural areas.
The possibility or an easy access to the services of community banks can be possible by any effective and well organized rural community banking policy.
Rural and urban shifting could be discourage by encouraging mechanized farming in the rural areas which will hopefully lead to development of agro-based industries in the rural areas.
This will further create employment opportunities to the unemployed people in the rural areas and also motivate more people to appreciate setting in the rural areas. This will further create employment opportunities to the unemployed people in the rural areas and also motivate more people to appreciate setting in the rural areas. Community banking services has a big role to pay in mobilizing and organizing rural dweller into efficient active co-operative group and is also capable of motivating the establishment of integrated rural communities by the active services.
1.2 STATEMENT OF PROBLEM:
As a fall out of the system distress during the banking and financing industry, the community banks are not immured to the virus their dependency on conventional banks before they could serve their customers have proved to be the most undoing factors inhibiting the operations of community banks.
(a) POOR INCOMPETENT AND AT TIMES FRAUDULENT MANAGEMENT:
The most serous single factor responsible for the collapse of community banks is poor management. In most cases, community banks managers are either poor in terms of skills and lack of experience or are fraudulent manager expelled by their further banks and now engaged by community and how engaged by community banks.
(b) POOR ASSETS MANAGEMENT:
Another by-product of poor and fraudulent management is poor asses quality credit booked are not properly assessed or appraised unnecessary risk is taken and produce in credit disbursement is often neglected for personal interest. A great number of community banks manifesting liquidity problems emanated from poor assets quality and unnecessary risk taking.
(c) LIQUIDITY PROBLEM:
A significant number of community bank failed because the refused to adhere to sound and safe banking practices as well as non- maintenance of the liquidity ratio. Stipulated by the financial regulators liquidator is the biggest virus in community banking system failure.
(d) UNDER CAPITALIZATION:
The capital of a community bank is so small that it could not even maintain staff cost for 6 months. The initial minimum capitalization of N 250,000.00 (and N3m) is not enough at present day to do any meaningful business low capital, high how loss provision on poor quality asset, high operating cost as well as fraudulent and irregular banking practices combined to erode the small capital base of many community banks.
(e) POOR INTERNAL CONTROL MEASURES:
Most community banks are many cases unable to attract good and comp lent management staff, as they could not complete with the conventional banks. They therefore, resort to recruiting dismissed bank staff or appoint.
1.3 THE OBJECTIVES OF THE COMMUNITY BANK:
The objectives of the community banking system amongst others include:
(a) Promotion of rural development by providing financing and banking services
(b) The rapid entrancement of the development of productive activities in both rural and urban areas.
The promotion of the emergence an effective and integrated national financial system that responds to the needs of the whole economic especially at the grass roots community levels.
(d) The inculcation of discipline banking habits among the masses of low-income workers in rural areas.
(e) The fostering of the spirit of community ownership and use of economic assets. Therefore, one way or the other they have achieved some aims, because of their well defined and focused areas of need, the fearing neglected but highly productive small income earners have been able to survive.
Example, a Port Harcourt based community bank has advanced a loan of N50, 000.00. to 10 (ten) self help groups. Each of the group had a loan of N50, 000.00.
Such loan, the first of its kind, which was given by the marine base community bank, is to be used in uplifting the social status of the groups mainly made up of women.
The self-help groups that benefit from the loan facilities are Nabi co-operative society. Combined Investment, Fishing and Frading Association, Aniete co-operative Enterprises, fresh meat Dealer Association, Menigibo organization and the grinding.
Association others are Association of women council Amabelemogbo, and Belemu Ogbo and so many others individuals that benefited.
1.4 SIGNIFICATION OF STUDY:
This study will provide an opportunity for any person who may read it to appreciate what the role of community bank in the rural development means. It is also help in the objectives of the federal government in setting up the community banking system. It also brings some disadvantage of the federal government in the country.
Their role also offers some possible solutions to their problem, the study, therefore. Provides a useful guide to future researchers ie those who might want to embark on a study like this. The establishment of thee National bank of Nigeria in 1933.
1.5 DELIMITATION & LIMITATION & SCOPE
Research on this area is not an easy task at all, since the research work is limited to commercial banks operating in Nigeria metropolis.
The consideration will be made in these aspect of the role that commercial bank plays in the Nigeria which concern the promotional activities, attitudes of their staff, branching and communication.
1.6 DEFINITION OF TERMS:
Community: Community is described as all the people who live in a particular area, country etc. There is so many branches of community (1) Local community (2) International community.
Community is a group of people who share the same religion, race, job etc.
Biological community is a group of animals or plants living or growing in the same place.
Banking: banking is the business activity of the banks. Banking is thinking about a career in bank.
Roles: Roles is a function or position that somebody has or is expected to have in an organization, in society or in a relationship: eg the role of the teacher in the classroom.
Rural: Rural area is an undeveloped area. Therefore, rural area is an area that does not well developed like to say that area lack something like social amenities, good road, pipe bone water, electricity etc.
Development: It is a gradual of something in order to becomes more advanced, stranger etc. a body’s development in the womb, the development of basic skills such as literacy and numeracy career development.
Development is also the new or more advances, a new or advanced product, the development in aviation technology.
REVIEW OF RELATED STUDY:
2.0 It become clear that there was an urgent need for financial institution capable of providing medium and long-term capital to fill a serious gap in the financial structure. It was initially thought that merchant banks could fill the gap and provide medium term and long-term finance to industries, but it was found that merchant banks are, by tradition, small although they deal with substantial sums of money but they depend almost solely or short terms funds.
In an attempts to guaranteeing development these two development banks were established, the Nigeria bank for commerce and industry (NBCI).
Both (NIDB) and (NBCI) are important instrument of achieving increased investment growth and development. Both provide soft loans through equity participation. NIDB caters for the medium and large-scale industries enterprises and some small-scale units with total investment and working capital up to N570, 000 under its scope of financing.
The nature of NBCI operations in the last several years essentially make if the apex institution for small and medium scale enterprises (SMES).
The moratorium for loans advanced by NIDB is usually 2 years, while the repayment period is usually five years in twenty (20) equal installment for most projects. NIDB also grant working capital loans as well as loan for capital-intensive projects over expending ten (ten) years.
In the period 1980-1988, NIDB assistance to SMES covered industrial sub-groups.
Aggregate disbursement during the years was N277.8 million.
The NIDB assistance to SMES was concentrated or consumer goods sector which recovered about 60 percent total disbursements during the period under reference (Central bank of Nigeria report 1998. Lagos).
Both NIDB and NBCI assistance to SNES increased over the years but it could not solve the development problems because of their concentration in the urban centres.
Other schemes that have been initiated like federal loans Board (FLB) was constituted to make all types of loans available to SMES with the first National Development plan (NDP) 1968. the position of the FLB was strengthened and nationalize with grater accent on its role in promoting small enterprises development. It was to offer financial assistance to small Nigeria Business in the field of industry, trade and construction.
FLB made appreciable impact in promoting small-scale industries, however it died with the first NDP.
The scheme failed because its scope of operations and resources base were so limited that the FIB would neither gives loan to set up new enterprise nor assist fast growing prosperous one on the grounds of inexperience a lack of business expertise on the one hand and availability of other normal sources of capital on other hand.
The second NDP (1970-1974) possessed the unique features of embodying the log list in deals in development of the Nigeria economy.
The government’s Nigeria enterprises promotion decree 1972 and amended 1977 decree, reserved exclusively for Nigeria certain small / medium and light technology enterprises that were to be 100 percent Nigeria owned.
Similar other schemes were adopted in the third and fourth National Development Plans all in an attempt to assist small and medium scale industries. In 1980 government shifted the burden of financing SMES to the NBCI. As earlier mentioned, the NBCI was set up purpose to provide finance for Nigerians in acquiring the affected alien enterprise (under the Nigeria enterprise promotion decree) and carryout development muti-purpose banking function which have recently shift) focus on small / medium enterprises development.
On the basis of the findings the following recommendation were made the use of collateral as PRE-conditions for loan facility should be minimized if not stopped entirely. The banks should rather use village sanctions.
Whenever there is default the community bank owned by the community and the borrowers are member of the village of community. If any of the borrowers default, the borrowers should be reported to the community Head so that village sanction should be used to force the default to pay.
2. Community bank should employ more well qualified and trained staff for inculcating banking habits on rural dwellers.
3. More banks should be approved for the preferred sectors of the economy and that given to less prefer sectors reduced to the barest minimum for better economic development.
4. The community bank should be involved some other activities to encourage banking habits to the dwellers by the provision of social amenities to the community.
5. Community bank should involved persuasive recovery machines and re-negotiate of defaulted loan with the borrowers, so that the borrowers will conduct their banking business with honesty.
Moreover, the banks should be doing proper appraised of borrowers business and the risk associated with the business especially on government policies to enable management better credit decision in this vain, the rate of default will be minimized.
5.1 CONCLUSION
Beside these economic policies of facilitate rural economic development the banking, habits of the rural populace did not improve appreciable.
The problem remain that community banks are nearly operation exactly the same way as loan to small-scale producers. The banks require collateral before credits are given which the rural dwellers or development association may not be able to afford. The banks are not as experienced as the foreign banks in the art of banking. The foreign banks have well laid down banking procedures. The bank also lacks adequate capital.
This makes it very difficult for them to grant loans to rural dwellers.
Apart from the problems of community banks the rural dwellers have the conception that banks are for the rich and the elites of the society given the fact that the community banks have not employed trained personal who could disseminate proper banking information to the rural populace.
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