Critical Review Of The Role Of Community Banking In Rural Development
Community banking plays a crucial role in fostering rural development by serving as a financial cornerstone for local economies. These banks, deeply rooted in the communities they serve, understand the unique needs and challenges faced by rural residents and businesses. By providing accessible financial services such as loans, savings accounts, and investment opportunities, community banks contribute to the economic growth of rural areas. They facilitate entrepreneurship, support local agriculture, and enable small businesses to thrive, thereby creating employment opportunities. Additionally, community banks often engage in community development initiatives, collaborating with local organizations and government agencies to address broader issues like infrastructure development and educational programs. Through their personalized approach and commitment to local well-being, community banks play a pivotal role in building and sustaining vibrant rural communities.
This research work scrutinized the roles of community banks in rural development is very essential to complete with other parts of the world.
Particularly those from industrial countries who are already in the rural development and have easy access to various type of community bank in rural development.
To be able to complete effectively with such rural development, Nigeria community banks must be willing to offer attracter terms.
The federal government has and is still working hard to encourage the development of community banking in rural areas. A good step towards this is the promulation of roles of community bank in rural development incentives and miscall on loans provision decree 46, which came up with numerous incentive to community bank in rural development.
More also is the inauguration of community bank in rural development. In a nutshell its pertinent to note that roles of community ban k in rural development is a great important towards economics development in rural areas.
Therefore all hands must be on desk to salvage our community from the hindrance or obstacles of community banks, so as to put our economy in to a better position.
i Title page
ii Approval page
iii Dedication
ivAcknowledgment
CHAPTER ONE
1.1 Statement of problem 1
1.2 Rationale of study 2
1.3 Significance of study 3
1.4 Definition of terms 4
CHAPTER TWO
2.1 Literature review 6
CHAPTER THREE
3.1 Statement of hypothesis and methodology of study 13
3.2 Method of study 14
3.3 Method of data collection 14
3.4 Sources of data 16
CHAPTER FOUR
4.1 Presentation of data 18
4.2 Analysis of data 21
CHAPTER FIVE
5.1 Summary 25
5.2 Conclusion 26
5.3 Suggestion 27
Bibliography30
1 STATEMENT OF PROBLEM
The bank is structure to accommodate every community member including indulging, organization and non-indigenes.
A community bank is a self sustaining financial institution owned and managed by the community or group of people (age grades) in that community for credit worthiness.
I want to investigate how for the community banks have played the roles expected of them in rural development these roles include to:-
a) Provide financial and banking services to rural dwellers.
b) To serve as security to the rural dwellers operate equipment leasing facilities, supervises credit schemes for groups
c) Assist clients in marketing agricultural rural industries and other products.
I also want to investigate some of the problems facing these community banks in the performance of the roles:-
a. Reckless lending / spending inability to market banking service
b. Poor capital base has stagnated the progress of many community banks.
c. Staffing
d. Political
1.2 RATIONALE OF STUDY
A student of the nature must be purposive otherwise it will mean that the researcher has labour in vain.
The study, therefore are
1) The rapid development of production activities in the rural areas and hence the development of the economic status of both the rural people and the rural areas.
2) The promotion of rural development by providing financial and banking services to communities madunately supplied with such services.
3) The fostering of community ownership and use of economic asset. Etc.
4) The inculcation of discipline banking habits among the masses of low income workers in Nigeria, especially thodre in the rural areas.
5) The emergence of an effective and integrated national financial system that responds to the needs of the whole economy, especially at grassroots community levels.
1.3 SIGNIFICANCE OF THE STUDY
This study will provide an opportunity for any person who may read it to appreciate what role community banks mean. There is no gain saying that it will proffer an immense assistance to potential role community bank through an expected problem, that may seem a hindrance. And those that are managing the roles of community, offer possible solutions to some of the problem they encounter while performing their duties.
The study therefore provide useful guide to future researchers who may want to embark on the study.
1.4 DEFINITION OF TERMS
COMMUNITY: This means group of people living together in a geographical area, or united by shared interest, religion, nationality, language and culture.
BANKING: This is the act of acquiring form account holders, valuables for sate keeping payment of cash according to the mandate of the customers and provision of credit facilities to desire and qualified customers and other financial services, by financial institution called bank.
RURAL: This is the country side of country. It is the opposite of the urban centers.
DEVELOPMENT: Development is a continuous process of positive change in the quantity and span of life of a person group of person and a community. In this respect other forms of development are taken as contributory factor economic, social political, technology and cultural development are inter-related and inter dependent.
SELF-HELP: This means that people should produce whatever they need them selves without depending on outside help.
SMALL SCALE ENTERPRISE: central banks circular number 28 on monetary policy in 1994 section 12 designed small scale enterprises as an enterprise whose total cost excluding cost of fund but including working capital is above one million naira (N1m) but does not exceed ten million (N10m).
LOAN: This means a customer in the bank withdrawing more than the amount deposited on a bank. The bank customer is of respectable character.
The Role Of Community Banking In Rural Development:
The role of community banking in rural development has been a subject of significant interest and debate over the years. While community banks can have a positive impact on rural areas, there are also several challenges and limitations that need to be considered. Here, I will provide a critical review of the role of community banking in rural development.
Positive Aspects:
- Access to Financial Services: Community banks can improve access to financial services in rural areas, where traditional banks may be less inclined to operate due to lower population densities. This access can help individuals and small businesses secure loans, save money, and invest in their local communities.
- Local Decision-Making: Community banks are often better positioned to understand the unique needs of rural communities. Their local decision-making can lead to more customized financial products and services that cater to the specific requirements of rural residents and businesses.
- Economic Development: By providing loans to local businesses and supporting entrepreneurs, community banks can stimulate economic growth in rural areas. This can lead to job creation, increased incomes, and an overall improvement in the standard of living.
Critical Aspects:
- Limited Resources: Community banks in rural areas often struggle with limited resources, both in terms of capital and talent. This can restrict their ability to offer competitive interest rates, expand their services, and invest in advanced technology, which can hinder their effectiveness in rural development.
- Risk Management: Rural economies can be more volatile due to their dependence on agriculture or natural resource-based industries. Community banks may struggle with managing the higher risk associated with these sectors, potentially leading to financial instability.
- Competitive Pressure: Larger financial institutions and online banks have a competitive advantage in terms of resources, technology, and marketing. This can make it challenging for community banks to compete effectively, which may limit their ability to serve rural communities comprehensively.
- Financial Inclusion: While community banks can enhance access to financial services, they may not reach all segments of the rural population. Certain marginalized groups or individuals with low creditworthiness might still face barriers to accessing banking services.
- Regulatory Challenges: Community banks, like any financial institution, must adhere to regulatory requirements. Compliance with these regulations can be particularly burdensome for smaller banks, potentially diverting resources away from development efforts.
- Dependence on Local Economy: The health of community banks in rural areas is closely tied to the local economy. If the local economy falters, it can have a cascading effect on these banks, potentially leading to closures or mergers.
Conclusion:
Community banking undoubtedly plays a vital role in rural development by providing financial services, promoting economic growth, and supporting local decision-making. However, several challenges, including limited resources, competition, and regulatory constraints, can hinder their effectiveness. To maximize their impact, community banks should consider strategic partnerships, technological investments, and innovative approaches to address the unique challenges of rural development. Additionally, policymakers should provide support and incentives to strengthen the role of community banks in rural areas, recognizing their potential to contribute significantly to economic and social development.