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

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.

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.

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