The Impact Of Community Banks In Economic Growth And Development Of Nigeria (A Case Study Of Ndi-Afia Community Bank In Enugu-Urban)

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The Impact Of Community Banks In Economic Growth And Development Of Nigeria (A Case Study Of Ndi-Afia Community Bank In Enugu-Urban)


Not, every Nigerian knew exactly the paramount impact of Community Banks to our dear nation and to economic growth and development of our father land Nigeria. Most of the time, it sounds aloof and appears trivial to the ignorant and the unconcerned. We just hear about this bank without really care how to set it up or even support it.
However, Community Banks established in Nigeria to help remedy the problem of lack of development that has been facing Nigeria since after World war II in some areas of the country.

The fundamental concepts of a Community bank is of self-sustaining financial institution owned and managed by community or a group of communities for the purpose of providing credit deposit, banking and other financial services to its members, largely on the basis of their self-recognition and credit worthiness.

This research, work has five chapters. The first chapter of this document contains a general discussion ie introduction of the topic of scrutinizes Community Banking. It want further to state the background of the study, statement of problems, objectives of the study, statement of hypothesis, scope and limitations of the study, finally the definition of terms.

A number of past related literature were vividly reviewed in chapter two for the purpose of effective and comprehensive study in other words, highlighted the objectives and functions of Community Banks vice-versa.

Chapter three deals with the research design and methodology, method of research design, sources of data, selection of population, sample and sampling techniques. It also deals with method of data presentation and analysis.

The data got from research survey were analyzed and interpreted in chapter four.

Finally, the fifth chapter made by the researcher saw to the summary of findings, recommendation and conclusion.

The major findings of the study is that Ndiafia Community Banks been the case study of this research work could be rited as fair and good as regards its roles in her services and this is obviously manifested by their performance since the bank was open.

Chapter One


1.1 Background of the Study

In Nigeria and in other developing countries alike the problem of credit extension to the rural dwellers (who usually dominate the population) and cannot afford the much sough collateral being demanded by conventional financial institutions has been such a persistent Nigeria case, that government after government have been making persistent efforts to remedy the situation. The financial needs of these rural dwellers pose a double problem in that part from the risk inherent in such credit in extension, it is not case effective because of the large number of accounts involved with little amounts. Also the inability of those group to have access to credits compounds the vicious circle of poverty in the economic system (Ugwuoke K. 2000 p.21).

However, the development of these rural areas where majority of the population dwell happens to be bed rock of the economy. The establishment of Community Bank was done in order to strengthen its programmes of grassroots economic development (YOKUBU M.O. 2000 p. 36)

The fundamental, concept in the establishment and operation of Community banking system is that of a self sustaining financial institutions, owed and managed by a community or a group of communities for the purposes of providing credit, deposit, banking and other financial services within the area to its members largely on the basis of their self recognition and credit worthiness. It is in contradiction to the near total reliance as the basis for giving credit, it was designed to ensure that bank Community or group of communities may establish bank for the purposes of promoting rural development improving the economic status of small-scale producers both in the rural and urban area enhancing the rapid development of productive activities especially in the rural areas to support desirable and sustainable rural economic growth in the Nigeria Banks that are licensed under persons various types of deposits including savings, time and target deposit issue for the purpose of raising funds, redeemable debentures to interested parties.

In the same vein the Community banking took off in 1990. when president on power ( C in C General Ibrahim Babangidi) in his annual budget speech announced that the Community Banking system would be introduced into the Nigerian Financial system. The Community bank implementation committee (CBIC) which established for general supervisions, promotion, monitoring and development of the Community Bank act under the control of (NBCB) National Board for Community Banks and (CBN) Central Bank of Nigeria (Ukamenam C. O. 2001 p. 9).

1.2 Statement of the Problem

  1. The major problems which Community banks faces is how harness those abundant resources for the development of the rural areas, bearing in mind that those resources are minutely held by the vast population of the rural dwellers.
  2. The banking sector as the prime mover of the nations economic life is seen as the most viable sector to make this dream a this dream a reality, but then given the Nigerian situated especially (Enugu Urban) with vast area of land and how income base, the task before community banks are quite enormous with the problem of ignorance and illiteracy of the majority of people whom the bank are dealing with and also the problem of infrastructure facilities.
  3. Another most delicate problem is that the depositors in community banks do not have their deposits as is obtainable in Commercial and Merchant Banks.
  4. In addition, the current distress syndrome have eaten deep into the confidence response on banks; the common saying “you are working in a bank” in rural areas about higher spenders is no longer in vogue. This is because villagers that regarded bank as a “cidatel of money store” has discovered to chagrin that you can go to the store for your money and come back empty handed and this confidence will take time and effort to restore and community banks not equipped and in a position to restore this confidence not now and also some of those distressed commercial banks.
  5. Finally, lack of banking habit among the rural dwellers who still use old tradition ways of savings mobilization like the daily savings method or issued or the social meetings. How can the bank make rural dwellers less apprehensive of the bank and use the services provided by them to enhance their welfare.

1.3 Purpose / Objective Of The Study

  1. The objectives of this study is to determine and analyse the promotion of rural development by providing financial banking services (credit and deposit services) as well as other facilities to communities adequately supplied with such facilities.
  2. To determine and analyze its effects in the natural economic development and asses how these developments created by the Community Banks have gone in alleviating the rural economic development problems.
  3. The inculcation of disciplined banking habits in the masses of low workers in Nigeria especially those in the rural areas, it is believed that at the end of this study, rural economic development would be identified and possible solution given.
  4. The rapid enhancement of the development productive activities in both rural and urban areas, and hence the improvement of the economic status of small producers in the informal sectors of the national economy.
  5. Fostering of the spirit of community ownership, and use of economic assets and maintenance of such facilities, and organizations on a sustainable basis.
  6. Promotion of the emergence of an effective and integrated national financial system that responds to the need of the whole economy especially at the grassroots community level.

1.4 Research Questions

The study is to find out the problems associated with community banks investing activities and their impact on the economy in rural area. As stated above, some banks in Nigeria is the scope of this research. Kindly respond objectively to the questionnaire as all responses will be treated with strict confidence. It will be highly appreciated if you could respond objectively to this statement without prejudice.

Thanks for your co-operation.

  1. Do you think that your bank can encourage rural dwellers to engage in investing with bank that is closer to them?
  2. Can you bank alleviate rural economic development in terms of infrastures in the rural areas?
  3. Does your liable of enormous problem of ignorance and illiteracy among the dwellers.
  4. Does your community bank grant and encourage insurance/security to investors at a normal level?
  5. What does your bank normally require collateral before granting loans to investors?
  6. Does your bank provides expert financial advice to the management of funds by beneficiaries?

1.5 Research Hypothesis

The following hypothesis have been designed for analysis:

  1. Ho – That there is no significant relationship between the establishment of Community Banks and growth of small scale industries.
    H1 – That there is significant relationship between the establishment of Community banks and growth of small scale industries
  2. Ho – That the establishment of Community banks in Nigeria especially in Enugu urban has not led to increase awareness and uses of banking services by the people.
    H1 – That the establishment of Community banks in Nigeria especially in Enugu urban has led to increase awareness and uses of banking services by the people.
  3. Ho – That the level and amount of services providing by these banks in Enugu urban have not justified the objectives of Community banking.
    H1 – That the level and amount of services providing by these banks in Enugu urban have justified the objectives of Community banking.

1.6 Significance of the Study

This research work will be a great help to the government especially the rural development authority as it will give them the opportunity to access their performance in rural economic development.

It will also be of immense value of the community banks to access their performance and improve in the area of poor performance.

Hence it will be beneficial to the generality of the public and also of great important to people carrying out research in related topic.

To the economy at large, this study is of great value since the economic development involves providing those amenities in the urban areas to the rural areas. This will go some extent restrict the usual movement of the rural dwellers to urban areas.

The movement restriction will lead to massive agricultural and industrial productions the promotion of emergence of an effective and integrated national financial system that responds to the needs of the who economy.

1.7 Scope and Limitations of the Study

This research work was chosen with the intention to analyze the role of community banks in the economic growth and development of Nigeria.

In conducting this research work, the researched, some problem so first was that the researcher had to operate within the each of limited available financial resources in the face of high cost of stationeries and transportation.

There is also a problem of secretly in the nature of financial institutions in the country’s this secretive act has resulted into unavailability of limited date on this issue. The work has to be done within one academic year in addition to the lectures which will be taken including our examinations.

These limitation not with standing, the researcher still comes out with a well articulated study which will add to the stock of solutions to the rural economic development and national economy in general.

1.8 Definitions of Terms

Community Banks:

A Community bank is a financial institution established to carter for the savings and credit needs of small-scale producers throughout the country.

Chapter Five

5.0 Summary of Findings, Recommendation and Conclusion

5.1 Summary of Findings

Community banking as a form of unit banking was introduced to strengthen the credit system and ultimately lead to growth and development in the economic. These was an ideas when conceived and placed very well seems to be rosy but when it comes to practical implementation, a lot of hitches and problems arise. The scheme is very bit laudable till date, the system has been experimented with for nearly eight years and but now may have shown some apparent strengths and operational management or implantation deficiencies.

Firstly, discovered that the major objective of community banking which is saving mobilization and providing credit extension during off-seasons as a mean of breaking the dependency on, and the hold by local money leaders of vast majority of rural dwellers is much a far what the government intends to achieve.

Secondly, I found out that the number of community banks established in Enugu urban are far from being adequate and they are not evenly distributed for instance, most of these community banks are located either near a school nor a market place which are some how more developed than other areas, and so cannot conveniently said to be pursuing the objectives of community banking system.

Thirdly, the researcher observed that despite the constraint of establishment of few community banks in Enugu Urban, the customer which the banks have, do not actually embrace the ideals of banking, imagine a bank having not less than one thousand customers to a very tangible population. It was also discovered that not many customers seek the banks financial assistance and so the aim of channeling the fund mobilized into the rural areas become very difficult.

Furthermore, the banks do not do anything practical to encourage or attract more customers and most of ht bank staff are not qualified staff and lack manners. And in this case, there is no real relationship that exist between the bank officials and the customers.

5.2 Recommendations

The community banking idea is novel and when strengthened will and growth development in the nation. On the basis of our study of the activities of community banks in Enugu Urban, the following recommendations, if implemented like help make the system effective.

  1. Increased minimum share capital base: Since minimum authorized share capital (N250,000) is too inadequate for community banks an increase was made (N3m). But government should insist on recapitalizaiton through appropriate cash injection rather than through physical asset donation by owners. That will enable them meet the requirements.
  2. Timely supervision: The NBCB should always use the off-site and on-site inspection instruments to check the state and activities of community banks. It should be timely because time has a lot of bearing on the banking business.
  3.  Insurance for depositors funds: community banks should insures its deposits, liabilities to restore confidence in the sector. It will also attract the watched eye of C.B.N and NDIC and help maintain standard and sanity.
  4. Community banks should also try to adopt system of giving incentives to their staff in from all allowances and promotions to boost their morals.
  5. To curb the problems of illiteracy and ignorance, government should through the ministry of education and the education department of the local government increase the tempo of its adult education program to raise literacy level of the people and also that mass mobilization unit (MAMSER) should help to enlighten the masses on the benefits of modern banking services. This will probably lead to the promotion of banking habit among the people as well as increasing awareness of the people to benefits of using banks.
  6. Government should also look into creating clearing house for community banks to ease the many problems they pass through in the hands of correspondent banks, a clearing house for community banks is very needful because it will help them grow the more.
  7. Community banks deliberately under-staff the banks and this cause less actively advances. For one reason providing efficient and prompt services in the community banks depends on adequate staffing and satisfactorily services of the banks will increase the volume of works number of customers which in long run will turn to increase income and profitability of the bank.

5.3 Conclusion

In the overall, both the government and the community banks operators has a major role to play in order to set a required and genuine standard and also sanity in the operation of its services to the populace.

  1. Firstly, its true that poor capital base is on of the community banks handicaps for its limited success as far as its operations is concerned but in view of this capital hitched, the bank can still improve on its service proper management of the already available funds. Because it clear that many well funded community banks has failed due to poor management of available resources.
  2. Secondly, proper orientation should be given to the staff at the or set and at subsequent periods, for them to understand the set goal and why they are being employed to work for the banks. They should also understand that customers should be recognized and at the bank.
  3. Finally, based on expectation of the government on the role of community banking system. It should as well assist the community banks by providing them with initial infrastructure facilities to enable them take off well and also extend communication facilities where necessary.

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