THE PROBLEMS OF BANKING HABITS OF THE RURAL COMMUNITIES IN NIGERIA.

CHAPTER ONE

1.1   INTRODUCTION

Since July 1997 which marked the official beginning of the rural banking programme for commercial banks, the economy of Nigeria has gone, through several changes each government continued policies it considered relevant banks have in recent times been confronted with challenges and they have called for introduction of one reform or directives so as to put it with our present economic realities.  This role is about what should be the proper function of banks in the transformation of Nigeria alien economy.  It is n this regard that the rural banking programe of commercial banks came as measure that will ensure effective grass root mobilization this resulted in settling up the Okigbo financial system review committee in 1976.  This most important recommendations of the committee excepted by government include:

1) That banks should actively facilitate the transformation of the rural environment by promoting the rapid expansion of banking habits by the rural communities or committees.  They will provide saving deposit facilities for their customers and there by help to mobilize rural funds outside the banking system.  This served as a revenue for creation of credit in rural areas which will be in the form of equity and loan for small scale farmers, co-operative societies and entrepreneurs.

2) That bank lending policy in the past been in favour of short term lending, that they should allow the medium and long tern lending so as to give the long time instrument enough time to mature.

3) That banks should identify with national objectives.  They maintained that decision making of banking should be localized.

4) That banks should be base a significant portion of their profit to improve the quality they offer.

The most striking of these recommendation was on the view that rural banking programme of commercial bank should be established and that banks should allocate specific loan port-folio to their rural bank customers. The rural banking programme of commercial bank was introduced with objectives and incentives.

1) The development of banking habits among rural dwellers.

2) To curb the excesses in crude banking practice such practice expose money to termites and render central bank monetary policy effective.

3)  To provide an institutional agency to mobilize rural fund.

4)  To improve agricultural production and the growth of allied industries by extending necessary credit to those sectors whose sources of credit to emanates from the local money lenders.

5)  Diversification of rural economy in particular and the National economy in general.

6) Others include the pegging the rural-urban migration with the hope of reducing urban unemployment.

1.2   INCENTIVE USE FOR THE PROGRAMME.

To ensure its smooth take off some incentive were outlined to innovated banks.  The incentives are:

a) Waving the requirement for feasibility report as a pure requisite for the establishment of a rural branch.

b) Allowing the banks the monopoly of providing banking services in their allocated centres for a period of two years starting from the day of opening.

c) Allowing banks to write-off the capital cost of erecting office banks and staff quarters with in a period of three years.

d) Exclusion of loans and advanced granted during the first two years to existence in the complication of:-

(i) Growth rates of loan and advances.

(ii) Ration of adjusted capital to loans and advances.

Infacts, as at 1989 monetary policy guideline the rural banks were recruited to grant a minimum of 45% deposited taken from rural centres as loan to such centres.  The first community was established in 1989 by Ibrahim Babangida.

1.3  THE STATEMENT OF PROBLEMS.

The essence of this study is to identify such key variable both endogenous and exogenous that affects that effective development of banking habit in Nigeria.  The basic problem is inadequacy of infrastructural facilities in the rural communities. Savings and investment moves in the same direction current investment is a function of accumulated savings rather, the death or our low level of economic activities have drastically reduced the propensity to save.  The poor rural farmer considers satisfaction of the basic biological (needs as important priority).  This low level of income has reduced the deposits available to the rural banks and subsequent liberation of credit to genuine small-scale farmers.

The competitive rule of the non-institutional credit scheme –

local money lenders have continued to attract many farmers.  The rural dwellers feel highly dissatisfied with the performance of the banks in terms of giving loans.  Thus, they resorted to patronizing these grasping money lender.  To challenge the activities of these local money lenders, banks have to develop appropriate strategies so to enhance the banking habits of the rural dwellers. Banking in rural communities is facing the problem of skilled and courageous personnel.  Infact, banking in Nigeria is vastly becoming dynamic and competitive.  The banking need to have a change of orientation towards their rural customers to survive highly sophistical financial environment, bank should aim at understanding like needs (buying habits) or their customers. Management should develop a philosophy of marketing concepts as to make its operation customer oriented.  The attitude of staff will pay a great role in enhancing the banking habits of the rural people only if they adopt a new approach in tackling the problem of the rural customers.

It is an obvious fact that rural communities illiteracy rate is considerably high. There is a lack of practical acknowledgment of modern in our banks.  The rural dwellers are not well enlightened as to the usefulness of banking as obtained in advanced perpetuation of the under developed state of the rural areas that make up Nigeria. Incessant quarreling amongst communities have increasingly contributed in polarizing the sitting of these banks.  The problem of location has caused many rich customers to be disenchanted and this decided to changed to other banks of their choice.  To ensure the realization of developing rural banking habits, location of any bank should give preference to economic variable like motivational convenience before political consideration.

1.4  OBJECTIVES OF THE STUDY

This stated the purpose of this is to

1. Identify the effect of level of income on the customers support of a bank by the rural communities.

2. Knowing the relationship between development of banking habits and the vocational conveniences of such a bank.

3. know the effect of the attitude of the banking staff on the banking habits of  the people.

4. Also, know the impact of the people banking habits towards the development of the rural communities in Nigeria

1.5  SIGNIFICANCE OF THE STUDY

To the government and the central bank the study will furnish their with useful recommendations on how best to improve on the community banking schemes, so as to effectively enhance the banking habits of the rural communities. Today’s environment is highly sophisticated and more conductive for efficient financial intermediation opinions however differs with regards to survival potentials of some of the new banks to cope with the relatively poor liquidity syndrome in our rural areas.  The study will be an invaluable too towards their survivals as recommendation will offered on the best strategies to adopt for the dynamic and competitive financial market of the Nigeria Economy visa-viz the rural economy.

1.6  DEFINITION OF TERMS;

In this section, the concepts which forms the cover of the study are exhaustively explained.  This will help in guiding the thoughts and appreciation of the world wide evidence of the relevance of developing an effective banking habits in the rural community has been defined as or by the United Nations as a place with a population of less than 100,000 person and characterized by a highly integrate social interpersonal relations  and work habits.  In Nigeria, the rural community is defined as consisting of all economic activities outside the urban economy with consisting of all economic activities outside the urban economy with Agricultures as the predominant activity.  In Nigeria, to guide commercial of the banks in the choice of rural communities for effective development of the rural bank programme to central bank of Nigeria arbitanly designed rural communities as:

1) Having local government headquarters and considerably level of economic activities.

2) Having a population of 5000 or above and established institution e.g schools.

COMMUNITIES BANKING:Financing institution mobilized savings from the surplus units to finance the investment proposals of the deficit units therefore, occupy a unique positions for facilitating and accelerating the pace of economic growth and development.  Their universally recognized function informed the rapidly with which banks are deliberately encouraged established and regulate to ensure stable and safe banking environment world-wide.  As a result different type of banks, therefore concentrated institution owned by a commodity for the purpose of providing credit deposit.

BANKING HABITS:One of the objectives of the programmed is the cultivation of banking habits amongst rural dwellers.  The banking habit refers to the practice of utilize banking effectively.  According to J. Orjih. Banking habits it is the extent of willingness of the people in a given economy to make use of the facilities and sense of banking.

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