ABSTRACT: This project work is a study of the impart of Community Banks in Rural Development: case study Uli Community Bank Ltd, Uli. In carrying out the research, questionnaires were used, which the researcher made available to the manager, staff and customers of Uli Community Bank. Information for this research was collected from primary, secondary and oral interviews. The data were analyzed using tables and evaluation of data using percentages. The study reveals Uli Community Bank has a lot of impact in the development of its local area (Uli,Ihiala LGA, Anambra State), and these include: inculcating banking habits on the rutal dwellers, and to generate employment in the areas where it is located; and as well, granting loans to the rural dwellers; a ready medium for quick cash transfers for people whose relations are abroad and within. The researcher also found out that Uli Community Bank does not only provide financial services to the rural dwellers, but also guarantees employment to the masses in their local and granting loans to the rural dwellers without adhering strictly to the collateral requirements Uli Community Bank even goes the extent of limiting the use of collateral to only making use of a third party qyarabtir. The researcher also noticed that the main problem facing Uli Community Bank is that it has a lot to do in the growth of economic activities in the rural areas. The recommendations were made the banks should be adequately funded by the federal government to beef up their capital base. Since it was established to promote productive activities in her rural area, this will go a long way in helping the bank to meet her enormous demands in development of the rural areas.Government should also allow the community bank to be involved in foreign exchange transactions and also to process her cheques directly with the central bank and not through correspondent commercial banks. This could be possible only if community bank are allowed to have branches and are accepted no clearing house. Finally, Uli Community Bank should be allowed to establish other branches in her rural areas and beyond. If all these recommendations are implemented, it will go a very long way to developing the rural community which is among the objectives for establishing community banks.
Introduction 1
2.1 Historical developments of community banks 11
of community banks 23
References 55
Appendix A 57
CHAPTER ONE
The establishment of community banking in Nigeria was consequent to 1990 budget speech by the president.
Owing to this, the first community bank was established at Alheri Local Government Area of Kaduna State in December, 1990.
A community bank from definition standpoint is a bank for the community purely set up for the development of the rural community. To this extent, the bank is a rural development bank. It is also a self-sustaining financial institution owned and managed by a community or group of communities to provide financial services to that community.
To establish a community bank, a minimum equity share capital of N250, 000 = is required by the community banks implementation committee to process applications for its establishments.
Community banks were established mainly to promote productive activities in rural areas specifically.
They are meant to facilitate the programmes of the Directorate of Foods, Roads and Rural infrastructure by providing easy access to credit of rural producers. Consequently, the Directors of community banks will be expected to take very special interest in knowing about and understanding the details of these programmes and encouraging their customers to enhance their productive capacity through participating in these programmes.
Part of our experience in rural development has clearly shown that efforts are expanding the economic base of the rural area is always backward because of scarcity and restrictive access to loan able funds. In solving this problem, previous government in their economic policies had relied on development banking and rural branch banking of the orthodox banks.
It was however, observed that the sophisticated mode of operation of conventional banks, their legalistic insistence on collaterals and their very limited/geographical coverage rendered them inadequate or incapable of dealing with the unsophisticated rural dwellers and less privileged in our society.
It was the unsatisfactory outcome of the banking systems that prompted Babangida administration to conceive other more appropriate systems of credit delivery, hence, the introduction of community banking in 1990.
The law establishing community banks made it a unit banking institution. This means that it is prohibited from haring branches. Community banks render all banking scheme services except foreign exchange transactions restricted by the law establishing it.
It is also restricted to other lower financial institutions.
Indeed rotating savings and credit association `Isusu` dominated the informal credit system of poor, rural and urban inhabitants and provided a viable structure upon which community banks were built.
The `Isusu`, though it has potentials for providing a viable basis for the evolution of a rural banking system was so tedious and crude. As much, community banks were meant to replace this, and inculcate disciplined banking habits in the rural population.
It was not only that the banking habit of the populace is underdeveloped and naïve, the community banks were reluctant to establish branches in the rural areas, perhaps due to lack of essential amenities. It was this c
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