THE IMPROVEMENT OF BANKING HABIT OF RURAL DWELLERS BY COMMUNITY BANK

By

OZOCHI MARCEL AMAECHI

Presented To

Department of Accountancy

TABLE OF CONTENT

TITLE PAGE II

APPROVAL PAGE III

TABLE OF CONTENT VI

CHAPTER ONE

1.1 INTRODUCTION 1

1.2 BACKGROUND OF THE STUDY 3

1.3 STATEMENT OF THE PROBLEM 4

1.4 OBJECTIVES OF THE STUDY 6

1.5 SIGNIFICANCE OF THE STUDY 7

1.6 SCOPE AND LIMITATION OF THE STUDY 8

1.7 DEFINITION OF THE TERM 8

CHAPTER TWO

2.1 AN OVERVIEW OF BANKING HABITS 10

2.2 INTRODUCTION 10

2.3 THE MEANING OF BANKING 12

2.4 THE IMPROVEMENT OF BANKING HABITS 15

2.5 THE IMPORTANCE OF BANKING BY

RURAL DWELLER 15

CHAPTER THREE

3.1 SUMMARY 24

3.2 CONCLUSION 28

BIBLIOGRAPHY 33

CHAPTER ONE

INTRODUCTION

The establishment of the community banking system in December 1990 is an attempt to resolve the perennial problem of unavailability of credit facilities to the rural producers. In the past eight years, the 1014, community bank that are operational in the country show that the economy has a special place for them, the community are unique because of their community ownership and special clients. The community banking system has been tested and it has shown resilience as a result of its unique community ownership which does not allow them to die easily even when they are experiencing spill - over effect of a distressed economy.

The rural small scale producers and other information economic operations are very critical for the growth of Nigeria economy. Effort at integrating these groups of people into the management of the national economic have been divers but with little positives effects. Programmes ranging from direct interactions in production such as in agriculture, creation of employment and micro credit for the poor have been embarked upon at different times.

The low - level education and outright illiteracy of the rural people have made participation difficult. The rural people have preferred using their old but functional local credit mobilization system which through informal, serve their purpose. In many part of Nigeria, the system is known as "aju" or "isusu" or "bam" and adashe" the main characteristics of these local system are voluntary contributions from members on daily, weekly or monthly basis. Such monies collected are given out as loans top needly members according to the rules, nominal interest are charged on the loan. Where any member defaults, appropriate and mutually accepted sanctions are imposed.

In spite or rapit modernization of the banking system with many attractive products, the influence of these local credit institutions is still very high among the grassroots people. The conventional bank continue to regard them as high risk fund borrowers and users.

The cost of administering such credit to the poor is not profitable for them, they claim.

Sustainable development at the grassroot level of difficult to achieve because of the lack of proper economic structures and policies. This then is the vacuum that the community banking system came to fill.

BACKGROUND OF THE STUDY

Following the incessant abuse of money by those in the rural areas unnecessary embarrassment from hoodlums and the like of them, then their arose this great need to establish community banks in the rural areas in order to safe guard the wealth acquired by the rural dwellers.

Sequel to the establishment of community bank in the early 90ths, a lot of achievement haven been recorded. The poor banking habit of the rural dwellers have to a great extent been reduced. The people no longer carry money about as it was the case before the incessant harassment from hoodlums have been reduced tremendously and the people have learnt to keep money in the bank either for transitive, precautionary or speculative motive this enhancing the well being of man and its environs.

STATEMENT OF THE PROBLEM

Predatory acts by the commercial bank recapitalization to be N3 million for urban CBS and NI.5 million for rural CBS; poor staffing as a result of low capital unauthorized and unsecured loan, poor internal control and auditing, high overhead cost, non - issuance of final license and share capital certificates and limited making loan to very few CBs.

Cause of problem of community bank are fraudulent misrepresentation: at the preliminary stage of setting up a community bank some communities (or interest groups) deliberately misguided our appraisal officers in matters that relate to our initial requirement like the CDA, Authorised share capital, broad composition, list of share holders.

In competent board & management staff the appointment of some individuals to the board of directors of some of the community banks are not done on the basis of honest representation of community interest, but on the basis of kingship and family ties.

The same is also the case for appointment into management position in the bank. Poor staffing (manpower constraint) some community bank could have all the structures properly established but could still have problems, and inexperienced staff, who are not well trained in the practice of banking.

Insider dealing: this incise in most cases when the chairman resorts the behaviour that portray him as the executive chairman. He acts and direct the bank unilaterally and interest of the relations and final. He takes loan without passing through the credit committee. In most cases such loans are of very large nature, and he finally fails to either pay back the loan or service it. Such chairman do a lot of interfering with the day running of the banks. And are often to have private office inside the bank premises.

Low capitalization, inadequate regulation and supervision arising from legal construction week internal control and poor accounting system and poor lending policy.

OBJECTIVE OF THE STUDY

The objective of the community banking system amongst others, shall include.

The promotion of rural development by providing financial and banking services (credit and deposit services) as well as other facilities to communities inadequately supplied with such facilities.

The rapid enhancement of the development of productive activities in both rural and urban areas and hence the improvement of economic status of national economy.

The inculcation of disciplined banking habits, among the means of low income workers in Nigeria especially those in the rural areas.

The promotion of the emergence of an effective and integrated national financial system that responds to the grassroots community bank.

SIGNIFICANCE OF THE STUDY

The importance of this study is to highlight some of the improvement recorded so far as regards the banking habits of the rural dwellers which was as a result of sitting of community bank in the rural areas statistical analysis carried out show s that the banking habits of these in the rural areas has charged tremendously following the sensitization and ostentation programmers organized by the banking sector of the economy which its cause - effect of some product community banks in such areas.

The study of their topic has a way of government solutions preferred for solving the problems associated with poor banking habits shall be worthwhile for the government and the banking sector to consider. With such recommendation, an increase improvement shall be recorded as regards the banking habit of people in the rural areas.

SCOPE AND LIMITATION OF THE STUDY

The scope of this study would be confined to discussing the emergency of community banks in the rural areas, the improvement of banking habits of rural dwellers and problems associated with the establishment of such banks in the rural area.

Limitation of the study to the facts, figures, information, relevant journal and books available to the writer. In addition, visit may be made to some community banks in the rural areas in Enugu state like: Nsukka community bank.

DEFINITION OF THE TERM COMMUNITY BANK BY RURAL DWELLERS

The fundamental concept of a community bank is of a self sustaining financial institution, owned by and managed by a community or group of communities, for the purpose of providing credit deposited, banking and other financial services, to its members, largely on the basis of their self recognition and credit worthiness. This is the in contradiction to the near - total reliance by the orthodox bank on viable ands negotiable collaterals as the basis for giving credit.