Community Banking Problems and Prospects

Community Banking Problems and Prospects

Community banking is relatively a new banking concept in the banking industry in Nigeria which cam into existence after the 1990 budget speech of the then president of the federal republic of Nigeria General Ibrahin Babangida on Monday 31 December 1990 at the tummdu Wada Kaduna state.

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The community banking system in Nigeria, an introduction (1992)

Community has been established to cater for the credit and savings of the small-scale rural producers throughout the country. According to Amagada Eric (1998) in his text “personal banking, a strategic marketing tool” (unpublished) said that about 63% of the total population o approximately 63 million of Nigeria currently reside in the rural areas. He further said that developing country are characterized by poverty, high unemployment and inequality, low productivity and low standard of living, subsistence farming, migration with high population growth and dependency burdens. This is more so far in rural areas with more than 50% of the population below the poverty line. One wonder if the goal outline of many national development can ever be archive without the participation of this colubrine majority. It is also important to note that the same communities are blessed with land, which includes the national resources and human resources, which include labour and entrepreneurship in he, basic production, the availability of capitol is the basic problem to rural productive capacity.

Therefore the community banking system was conceptualized to address this resource gap by providing a financial service including the financial capital f the acquisition of the real capital such as machinery and equipment of the rural community. All this concept of the community bank is in step in the right direction and should be supported by every body. Every few book or contribution has been written or made about the community banking in Nigeria as a result of this newness. In this chapter effort were made to find out the rational behind this establishment of the community bank. The concept of community bank, the need for the community banking, phase of rural banking, problem of community banking and its achievements

CONCEPT OF COMMUNITY BANKING

Although the actual commission of the first community bank in Nigeria took place in |December 1990. The idea of establishing such a bank dated back to 1970 when it was observed that the existing financial institution could not actually meet the need of the of the economy for the rapid development especially in the rural areas and having find out this by the federal government it is not possible to start building a house from the roof top in the same sustainable economic development in Nigeria context cannot take off without effective grass root participation. It was because of this that the federal government in bid to address the death of financial service in the rural areas promulgated a decree in 1969 aimed at forcing the commercial bank to extent their branches to rural areas. At this time most of the Nigerian particularly the rural economy was normal and underground, theses was the need to moneytized the rural economy. This was logical because the monetary policies that direct the economy towards the full employment and non-inflationary level of output ncome and price must permit the most spectrums to archive its desired objectives. However, the rural banking scheme did not give a lasting solution to the problem of rural development. This analysis could be supported by the failure of the scheme because the commercial banks, which are profit oriented, found the scheme unprofitable due to such factor like poor infrastructure in the rural areas, resultant high operational cost and poor patronage.

Therefore the community banking system was introduced to address and archive the aim of he federal government towards the rural banking scheme which the commercial bank has fail to archive.

NEED OF COMMUNITY BANKING

The central bank of Nigeria introduced the rural banking scheme in 1977 with a three-phase calendar of 1977 – 1980 – 1985 and 1985 – 1989. at the end of 1963, 756 branches stipulated that at least 50% of deposit in the rural area should be advance as credit to the rural borrowers. Vogel and Burket (mobilizing small   sale saving) repot that by 1977, there were 1,127 communities without the banking facilities. As one can recall in some ten twenty, eighty years ago, communities offered free land and buildings to attract bank to their areas, which of this without success for some even the local office post office building in the community effort. Not much will change until our rural dweller takes much on changes. The reluctant of the big bank to set up shop in the rural areas is partly understood. Profit in the button line for decision-making and very little rural community has the appetite for big bank in their legend. Then came the community in joint over five yeas. The national board of the community bank has successfully incubated about 1361 unit banks. This is a commendable fact. Thank to the community leaders who refused to give up on the comments. The good new is that more of the total number of the community bank are successfully Co-operating self-contenting financial institution owned and managed by the community. This system has also created many job and also has expose many citizen at board and management level to more sorphiscated ideas in many cases new to the local environment. The most recent report sheet by the national board of the community bank (NBCB) is impressive. As of June 1995, there were about 1361 already commissioned. They are assist owned of 5 billion and grose earning of 10 million. The combined (multiplied) effete of this figure will make impact any day, anywhere in Nigeria.

I must caution at this point not to celebrate for our rural populace for this is not yet. However I am persuaded that the best is yet to come, that with proper planning and prudent management and supervision, community bank are born to be the bank of the future.

Community bank holds much hope as catalyst of the rural development process. Through the collaboration with the local government authorities, community development association, co-operation and non-governmental association, community bank can assist the rural and the urban poor to be more productive, increase the income and the small scale and rural producers and transform the subsistence economic activity into the commercial ones.

COMMUNITY BANKING IN NIGERIA

The community banking is relatively a new concept in the banking industry in Nigeria, which came into existence after the 1990 budget speech of then president of Nigeria, General Ibrahim Babangida.

The community banking is a financial institution established to cater for the credit and saving need of the small-scale producers throughout the country. General Ibrahim Babangida commissioned the first community bank in Nigeria on 31st December, 1990 at tudum Wada state. The failures of the rural baking schemem in Nigeria do nit stop the federal government in its effort of in provision of credit and rural economic emancipation. In 1989, for instance, the government established the people bank which its chietles the wasses in our rural areas. as rightly observed by general Ibrahim Babangida, the de – facto exclusion of out rural population from the credit has contributed to the depression of the economic condition in the rural areas and this has translated into low level economic development in the nation as a whole. The president general Ibrahim Babangida while commenting on the rational behind the establishment of the community bank in Nigeria observed that the sorphiscated mode of operation of the commercial bank, their legalistic insistence on collaterals and the very limited geographical coverage rendered then inadequate or incapable of dealing with the unsophiscated rural dwellers and the less privilege in the lower strata of society. According to him still, he said that it was unsatisfactory outcome of this administration that conceived other more appropriate system of credit delivery.

This system of the babagida administrative idea was he people bank of Nigeria. At the inception, the Nigeria society received the peoples bank with great ovation, but today the people bank of Nigeria has the same inbuilt shortcomings. For instance the bank initially provided maximum loan of 2000.00 t a single individual. This amount was later raise to 3,000.00. it was still too small foe a large number of rural dweller who required a higher amount of credit than what the people bank can provide. Moreover, the people bank has very few limited office which where also sited mostly in the urban areas. The effectiveness of the bank therefore highly depended on the efficiency of mobile system of banking adopted by the bank since wasted toe, rural dweller may not have to travel a far distance to the urban areas purposely to bank with the peoples bank.

The after mentioned shortcomings of the peoples bank greatly affected the much-desired objective of archiving the private sector investment and rural economic emancipation. This is much felt no that there is external drop in the financing resulting in the general investment reduction. This decline in more noticeable in developing countries like Nigeria, if continued will affect the sustainability of the adjustment effort and any viable innovation such as the establishment of community bank should be highly welcomed.

According the general during the first commissioning of community bank said that the community bank will be substantially owned by the community development association (CDA), as well as the local co-operative society, farmers, union, large group, individual resident in the community as well sons and daughters of the community resident outside the country.

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This article was extracted from a Project Research Work Topic

COMMUNITY BANKING PROBLEMS AND PROSPECTS

(A CASE STUDY OF EKULU COMMUNITY BANK IN ENUGU STATE)

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Community Banking Problems and Prospects

 

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BANK NAME: FIRST BANK PLC

ACCOUNT NAME: CHIBUZOR TOCHI ONYEMENAM

ACCOUNT NUMBER: 3066880122

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