COMMUNITY BANK AS A CATALYST FOR RURAL DEVELOPMENT IN ENUGU STATE [A CASE STUDY OF OGUI URBAN COMMUNITY BANK, ENUGU]
Development is a goal whichever nation aspires to achieve and when it is achieved every one shares I the glory. In most nations, development tends to concentrate in the urban areas but a nation is rated highly when its development extend to the rural areas.
To enhance access to institution credits is a very important element in the transformation of the economic base of the rural population it will enable the formal to acquire more productive assets, employ more labour and expand the scale of his production. In particular, credit facilitates the adoption of those modern output-enhancing technologies and imputes which enable the farmer to increase his output and income. Furthermore, good institutional credit enables the farmer to break out of the stronghold of the moneylender, the exploitative produce buyer and the shylock merchant all of whom have survived and continue to prosper. On saviour credit extended to the farmer on highly unfavourable terms. It is against this background that intensive campaigns were mounted for the establishment of community banks. Upon inception, mabogunje stressed that “ indeed, the central bank had been advocating the need for rural banking system of this type as far back as 1970s”. Jega and Naem highlighted that “where credit is targeted to teach the bottom strata of rural society, it can become a potent instrument for income distribution as active catalyst for the mobilization of resources and abilities of the poor for rural increase development.
The introduction of community banking system can be seen as a revolutionary step in Nigeria efforts to turn the rural economy. The banks are designed to bring banking facilities to the door step of the rural masse thereby inculcating in them, those banking habits and economic aptitudes which will enable them survive and prosper in a dynamic and changing modern economy.
For one to understand this project topic and relate to the case study, it will be important to known what a rural community is, its characteristics and it development objectives.
RURAL SETTLEMENT DEFINED
The United Nations defined a rural settlement as any settlement of less than 24,000 in population.
CHARACTERISTICS OF RURAL SETTLEMENT
- Lack of or near absence of major infrastructural development such as good road network, electricity health facilities etc.
- Low educational facilities and low overall educational level.
- conservatives in behaviour.
Relating the above parameters to rural community, one will find out that only very few state capitals are not rural communities. Hence, the major characteristics of a rural community is on its level of poverty. Professor M.D. Ijere described the rural people as “victims of collective poverty, lacking purchasing power enough to maintain a minimum standard of living”. A United Nation survey in 1995, revealed that 81.9% of Nigerians live in the rural area. Therefore, the task before everybody is to transform the rural communities which is divided into several catchments areas of about 20,000 persons each, into vibrant and prosperous communities.
Consequently, efforts at developing the rural areas must have the following objectives:
- Sustained improvement of the quality of life and standard of living of majority of the rural populace. These will include the provision of regular portable water supply, electricity supply, and good roads network for the evacuation of farm produce.
- Raising the quality, value and nutritional balances of their food in take at affordable price.
- Improving their housing needs, general living standard and easy procurement of farm inputs.
- Enhancing their health condition through accessible and reliable health services.
- Creating great human resources development and employment opportunity, more importantly, self employment which in future would lead to improved, productive capacity and income levels within the communities.
The provision of the above amendments world improve their quality of life as well as the wealth of the rural community. It will further arrest the rural urban drift of the rural dwellers.
Rural development is defined by Jega M.U. and S.A. Nkom as “the real foundation upon which any meaningful and sustainable national development can be built in any nation” they went further to stress that despite the widely acknowledged significance which oil has come to assume during the past two decades, the fact still remains that the economic liability and progress of Nigeria still depend largely on the mobilization and enhancement of the productivity and output of the rural majority.
The establishment of community banks was among the major efforts by the government to mobilize and bring loan-able funds to the reach of rural areas.
The establishment of community banks was among the major efforts by the government to mobilize and bring loan-able funds to the reach of rural areas.
- THE CONCEPT OF COMMUNITY BANK
The community banking is a new innovation in the banking industry in Nigeria. James Ajale in one of his articles “challenges before community, banks” in “Business Time of November, 1992 said that community banks are set up to alleviate the sufferings of the masses form poverty, hunger and disease through a new system of credit extension and a close banking relationship with a particular group of community or communities. He pointed out that “it is a unit system of banking where branch system is not practiced like it is the case with the orthodox system in this country.
According to Lan Kanji Joshua in his article “challenge of urban community banking” in the National Concord, the bank is a novel banking system set up to boost and democratize the grassroots economy and to add to the community pride and prestige, which is entirely a community affair.
In Nigeria financial system by G.O. Nwonkwon, it was stressed that “it is as a result to better the lives of the generality of the populace that led to the establishment of these financial institution in the country”.
The first generality commercial bank to be established in Nigeria was called the African Banking Corporation and was established in 1892. This ear as pointed out by Nwankwo continued until other banks like Barclays Bank DCO (Dominion Colonial Oversea) came into effect in 1925.
The first indigenous bank (National) by Nigeria came into existence in 1933. Nwankwo further stressed that the above periods were characterized with uncontrollable system of establishment of banks; mass failure of banks and swindling got people’s funds. These shortfall led to the setting up of paton commission of inquiry in 1948. The authority further categorized the evaluation of commercial banks into five major periods as follows, up to 1952 was the period of free banking system in Nigeria. From 1952 to 1959 was the pre central bank era. The period between 1959 to 1977 was the indigestion era while 1977 was Okigbo era. Nwankwo pointed out that the paton commission was set up to stop the free banking business that was characterized with tack of control and supervision by any organized body, hence the ass failure of mushroom banks in the country.
As a result of this, Femi Adekanye noted that “there was need for legislation for the control of banks in Nigeria which later came into effect in 1952”.
However, Nwankwo noted that in spite of this, malpractice in banking industry did not stop. This brought about the setting up of a body that would control and supervise these banks. This further led to the setting up of the lowness commission that recommended the establishment of the central bank of Nigeria in 1959. in this regards, government interest in banking business was dated back in banking business was dated back to 1954.
According to G.O. Nwankwo, without government participation in banking business, these world not have been indigenous banks so that they would be able to give credit facilities to our people to better their lives.
- THE ORIGIN OF COMMUNITY BANKING IN NIGERIA
Professor Akin L. Maabogunje, Chairman, National Board for Community banks defined community bank as “a financial institution established to cater for the saving and credit needs of small producers through out the country”.
According to him the institution represents the coals cence and modernization of two traditional institutions with which these producers (Nigerians) are very familiar with. The first is the rotating credit institution known as esusu, susu, bam, adeshi as is called in different parts of the country. Others included town union or community development association.
He maintained that the necessity to bring these two institutions together in a modernizing contex became imperative when it was clear that inspite of the fact that government policy such as the Agricultural commercial banks and even development banking institutions face serious constrain in attending to the credit need of millions of small producers most of whom have no collateral to put down as security, more than this enormous paper work involved in ministry to credit needs of so many small borrowers constituted real disincentive.
One commercial banking executive said that “you spend as much energy giving a loan of N5000 as that of 5 million Naira”. The difficulty of getting the commercial banks to serve the credit needs of the small scale farmers was a paralyzing problem in the programmes of DDRI which was established by decree 4 of 1987. this degree assigned to DFRRI, primary function of identifying, involving and supporting viable local community organisation in effective mobilization of the rural development activities. This is with a view to promoting greater community participation and economic self-reliance of the rural community.
For over a period of three years, the directorate held discussion with commercial banks. Barious useful suggestions as to what could be done were offered. But it was clear that the issue of collateral security would always constitute a real hurdle to effect credit provision to rural producers.
Professor A.L. Mabogunje Stressed, “it was as a result of exhausting the possibility of credit provision through the commercial banks that DFRRE was constituted towards the end of 1989 to address a memorandum to the president and commander – in – chief of the Armed forces proposing the entice need to establish a novel financial institution to be known as community Bank”. In subsequent hearing, the president advisory Committee, through the central Bank of Nigeria came out strongly in support of the proposal. It may still be important to highlight again that the central bank had been advocating the need for rural banking system of the type of far back as in 1970s. it was therefore against the above background that the approval of the proposal by the Mr. President of the country became evident in the budget speech of the January1, 1990.
- COMMUNITY BANK AS A CATALYST FOR RURAL DEVELOPMENT
It is not possible to over state the fact that community banks were set up primarily to promote productive activities in the rural areas. Specifically, they are meant to facilitate the programmes of DFRRI by providing easy access to credit for rural producers. They are to sustain and improve the quality of lives and the standard of living of majority of the rural populace. In this sense, they provide regular water supply, electricity supply, god road network, and employment opportunities among others.
This research work clearly reviewed that community banks have helped in raising the quality; value and nutritional balance of food in take of the rural areas. These have been greater human resources development and employment. This has inturn led to improved productive capacity and income levels with the communities in the rural areas.
Community banks have inculcated banking habit among the low-income segment of the rural areas. They generate credit from within the communities for the enhancement of productive and purposeful economic status of the rural dwellers.
Generally, there have been rapid promotion of rural activities in agriculture, tourism, manufacturing, real estate management, commerce, transport and communication among others.
Through the loan facilities and advances provided by community banks, the rural areas have now made a better rural economic environment. Apart form accelerating business and commercial activities, the rural dwellers have been encouraged to despoiled and save this idle money thereby helping them to accumulate money for investment in promising project.
THE ROLE OF OGUI URBAN COMMUNITY BANK IN RURAL DEVELOPMENT
The ogui Urban community bank has upon inception played very vital roles in the development of its catchments areas. The bank has apart form mobilizing rural funds to provide credit facilities for terming, tourism, manufacturing, commerce etc. has extended other services towards improving the lives of the rural dwellers. These include;
- MASS TRANSIT SERVICES :- Ogui urban community placed four serviceable buses on the need to assist the inhabitants it he locality move from place to place as well as convey their farm produce to areas where they are mostly needed. This will not only improve the savings potentials of the rural dwellers but also encourage more investments like expansion of the farms.
- REAL ESTATE MANAGEMENT
The bank also provides real estate management service in its area of operation. This gesture does not only encourage property owners in the areas to borrow from the bank but also help them make wise decisions sought from the bank investing their money so procured in the estate management. This estate management exercise also restores confidence in the rural owners in the cause of any mishap. The implication here is that the bank relies on the document made available to them when the contract was entered into.
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