CHAPTER ONE

1.     
INTRODUCTION

Banking service when introduced in our rural areas
will bring development or specifically economic development to the doorstep of
every citizen in this country since between 70 – 80 percent of Nigerians lives
in the rural area.

Every Nigeria want to go to the
urban area because of availability of infrastructural amenities like
electricity, good roads, pipe borne water, civilized market operation, job
opportunities and so on.  If these social
amenities continue to exist in urban areas, life in rural areas will still
remain underdeveloped.  Money they say is
the blood that nourishes or gives life to any prosperous economy of a
nation.  For money to accomplish its aims
in an economy, it needs to be properly managed and controlled in the banking
sector.

Agriculture is the second major
sources that generate revenue to the Nigeria government after oil
industry.  The sector of the economy
right from time has been neglected.  The
rural areas have not felt any positive impact on the development plan but only
recorded a decline in agricultural productivity, which shows that the rural
areas have been neglected at the expense of the urban areas.

The banking industries one of
every nations sectors that has a controlling impact on the economy particularly
in terms of monetary policy, this is why federal government has continuously
encouraged banks to expend their services and facilities not only to the urban
cities but also rural areas.

1.1       AIMS AND OBJECTIVES

This research work is aimed at investigating the
impact the rural banking services, commercial banks have on the productivity of
small and medium agricultural farmers and the entire economic activities of the
rural areas.  This project work also
aimed at acquainting ourselves with the benefit of rural banking services in
terms of mobilizing and organizing present farmers into efficient and active
co-operative groups, small and medium scale farmers and integrated rural
communities.

The objective of this research is
to evaluate how effective credit allocation among productive activities the
rural areas have been realized.

Finally, the aim of the project
work is to suggest policy measures to government in improving rural banking so
as to have the desired development impact on the rural areas in Nigeria.

1.     
STATEMENT OF RESEARCH
PROBLEMS:

The commercial bank is a profit making
organization.  There is a great fear in
establishing in rural areas where it cannot maximize profit.  Rural banking has been seen as indispensable
if the nation is to develop its rural areas. 
The development of one rural area may not be a reality if services of
commercial banks are not at the reach of our rural dwellers.

The problem therefore is how to
resolve the profit motive of the rural commercial banks and the essential
services being rendered to the rural dwellers. 
This project work is designed to measure to what extent the rural
commercial banks have been able to involve the rural dwellers in the economic
activities in terms of awareness and

1.     
SIGNIFICANCE OF STUDY:

Nigeria is a developing country with more than 70
percent of her population living in the rural areas.  These rural dwellers are faced with lot of
hardship in terms of basic infrastructures. 
The rural dwellers are mostly farmers, definitely require loans, to
reduce the hardship involved in acquiring input as well as cultivating their
farms, therefore, the services of banking becomes very essential.

This study is essentially
significant in that it is directed towards evaluating the effect the growth of
rural banking activities has on the rural inhabitants which is a criteria aimed
by measuring economic standard.  It is
also significant in the sense that it shows to what extend the rural banking
programme in Nigeria has been successful.

Conventional economics and
experience suggest that by supplying food, labour and invisible surplus, the
rural areas help to generate urban income and employment.  They also help to stabilize if not reduce
production cost for industries and cost of existences of commercial banks in
the rural areas will speed up investment.

1.     
SCOPE OF STUDY:

This study is limited to Enugu State, a state
comprising of eighteen (18) local government area each having one or more rural
bank(s).  For ease of information we
would restrict to Awgu, Nkanu East dwellers. 
This project work is designed to measure to what extent the rural
commercial banks have been able to involve the rural dwellers in the economic
activities in terms of awareness and influence on their style of living through
banking activities and how successful the banks are measuring up with their
major aim of existence.  The government
has accepted banking persuasive rather than forcing banks to establish branches
in the rural areas.

Most villages are without
electricity and pipe borne water and the banks spend much more that customers
deposit to provide these amenities for workers.

A major problem is that the rural
dwellers don’t patronize the bank industries. 
Most of the rural dwellers are farmers. 
They go to the farm before the bank starts its business and return only
after they have closed to customers. 
Hence the bank finds it difficult to make profit.

The rural banks encounter lot of
problems cultivating banking habit in the rural dwellers.  Rural dwellers live in mutual suspicion with
strangers, for that rural branches workers are affected.

The rural banks also encounter
problems of granting loans to rural dwellers and small scale businessmen in the
rural areas.  Because they are not too
aware about why bank lend them loan, they use this loan for marrying wives,
thus means of repayment becomes a problem.

Although United Bank for Africa
(UBA) has been chosen as a case study, other banks like Union Bank of Nigeria
(UBN), first Bank of Nigeria, All States Trust Bank, Citizens Bank etc, can
find this study beneficial to hem since they are all operating the same
economic environment.

The study focuses attention to
the impact of rural banking in the development of rural areas.

1.     
LIMITATION OF SCOPE:

In the process of carrying out the research focuses
on the development of rural banking in Nigeria with United Bank for Africa
(Rural Branches) as case study concrete efforts were been made to arrive at a
logical conclusion.  However, the work
was subject to certain limitations.

Financial constraint is another
limitation to this works which is as a result of high cost of transportation
fare to the various bank branches together data, cost of material to carry this
work to conclusive standard was equally important.

Respondents turned out to be
co-operating by completing the questionnaires, which took lot of time and
energy to convince them.

1.     
STATEMENT OF RESEARCH
HYPOTHESIS:

The following hypothesis has been formulated to
which the study will attempt providing answers.

Ho:      The United Bank of Africa UBA makes use of techniques/methods
in determination of its return in rural banking.

H1:         Apart
from the rural farmers, the United Bank of Africa does not source fund from
other activities of the rural banking.

Ho2:      The
United Bank of Africa make adequate benefit from the accumulated investments of
urban banking.

Ho3:      The
United Bank of Africa does not derive any benefit from the accumulated
investments of rural banking.

1.     
DEFINITION OF TERMS:

BANK:

According to the Nigerian Banking
Act, 1969 (as amended Bank amendment act 1979), a bank is described as the
business of receiving money from outside source as deposits irrespective 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
irrespective of loan prior to their maturity or the assumption of guarantees
and other warranties for others or the commissioner may on the recommendation
of the central bank by order publish the federal gazette designed as banking
business.

RURAL AREA:

According to Webster’s New Word
Dictionary, it refers to that not being characterized with citizen or urban
life.  That is usually associated with
farming and agriculture.  The rural area
has the features of low level of literacy, poor health facilities, and
inadequate family planning, low technology and inadequate infrastructures.  In addition, a prominent phenomenon in rural
areas is that the people who live there have as integrated culture and social
system as their way of life.  Development
is carried out as group efforts in a community. 
In Nigeria, majority of people who live in rural areas earn their main
income from agriculture.

RURAL BANK:

A rural bank can be described as
a brand of existing bank established in the rural area to provide banking
services for rural population.  These
services could be in the form of motivation, rural saving, credit allocation
among productive activities of the rural population and linkage of money market
in the rural areas with the capital market in the urban centers, in other
words, the adequate efficient and equitable allocation of resources amongst
different sectors of the rural economy.

The scope of the activities and
operations of a rural bank is similar to that of commercial bank establishing
it but limited due to a verity of reasons. 
The primary role expected of a rural bank should be the finance of identified
rural development projects of short and medium terms duration.  But given constraints in finding and the need
to have it becomes obvious that it will be desirable and viable that projects
of the following categories should be financed by any rural banks.

RURAL BANKING PROGRAMME:

This is a programme embarked upon
by the Nigeria government in 1977 with the aim of extending banking habit to
the rural area by mobilizing rural savings, assisting government in
implementing monetary and other development policies.  The programme is also aimed at making
productive an activity receive adequate attention by way of allocating
credits.  The implementation of the
programme is the moments in 1977-1980; 1980-1983 (later extended to 1985) and
1985-1989).

DEVELOPMENT:

Development should be perceived
as a multidimensional process involving the re-organisation and orientation of
entire economic and social system.  In
addition, to improve income and output, it typically involves radical changes
in population, attitude customer and belief.

Finally, although development is
usually defined in the national context its wide spread realization,
modification of the international, economic and social order.

ECONOMIC DEVELOPMENT:

This term has generated a lot of
controversies over the years.  Some
economics see it as political and structural change while others are of the
opinion that it relates the progress in the basic human needs over time.  Another school of thought defines it as
growth accomplished by changes i.e. change in structure of the economic in the
country’s social structure and its political structure.

Others have tended to make basic
human needs approach, an approach which defined economic development in terms
of progress toward reducing the incidence of poverty, unemployment and income
inequalities and for those whose living standards have not been rising.  This approach also seeks ways and means of
improving their conditions,

MONETARY POLICY:

The monetary policy of a nation
is a fact of its broad economic policies. 
It deals with the discretionary control of money supply by monetary
authorities in order to achieve desired economic goals.

STANDARD OF LIVING:

This could be linked with the
level of substance, as of a nation, society, class or person with reference to
the adequacy of necessities in daily life as a result of varying per capita
income; people equally vary in their standard of living.  The per capita income in the United States of
America for example cannot be compared to that of developing countries like
Nigeria.

Consequently, the standard of
living differs, and perhaps, the nature of facilities and economic activities
present in urban areas make standard of living differ from the urban area and
the rural dwellers.

EMPLOYMENT:

In the simplest form, employment
refers to the engaging, hiring or making use of the services of a person with the
view of compensating him or her with wages. 
As a result of the economic recession in Nigeria employment problem has
not been adequately tackled.

MARKETING:

Whenever one engages in doing
anything to create satisfaction that the person has engaged in marketing, be it
production of goods or rendering services. 
The challenges that face marketing are that of generating ideas and
avenues of satisfying consumers needs and want at a profit in a socially
responsible manner.  Marketing involves
any interpersonal, inter-organizational relationship with the result of
exchanging processes; it related the exchange of ideas, goods and services.

LOAN:

This is the amount granted to
individual companies, banks or any organization by commercial banks or any
other financial institution for a specific period when the money may be paid
back with interest.

PRODUCT UNITY;

Engaging in the ration of
economic value and quality involving manufacturing of goods and services.

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