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The main aim of this study is to analyze and access the contribution of rural banking in Economic development of Nigeria and further spotlight the problems militating against its rapid development and growth. This focus arose from the fact that banks are lopsided in their establishment of branches. They establish more branches in the urban centres, thereby leaving the funds in the rural areas untapped. The scheme which was introduced in 1977 attracted banks responses to the guidelines from 1978. The findings of this research conducted showed that the rural populace lacked banking knowledge and habits. It also showed that the interview, it revealed that over 75% of the rural populace had no bank accounts, though most of them had ideas of banking services. Inspite of the odds, the findings further revealed that the scheme succeeded in the rural area despite the fact that the deadlines set out by the monetary authorities were not met. The scheme made banking services easier and more efficient due to the bank abilities to diversity the rural-urban migration of the populace. Hence the cultivation of the banking habits amongst the populace enabled the banks to mobilize rural savings from which credits were available for the entrepreneurs who engage in small-scale ventures. Conclusively, the scheme is whole heartedly welcomed by all Nigerians because of its roles in a growing economy like ours.

Title Page                                                                                 i
Declaration                                                                              ii
Certification                                                                             iii
Dedication                                                                               iv
Acknowledgment                                                                     v
Abstract                                                                                   vi
Table of Contents                                                                     vii
1.1   Introduction                                                                     1
1.2   Statement of problem                                                      9
1.3   Objectives of the study                                                     10
1.4   Statement of hypothesis                                                  11
1.5   Scope and limitation of the study                                    16
1.6   Definition of terms                                                           17
1.7   Significance of the study                                                  17
2.1   Literature review                                                              19
2.2   Growth of banks in Nigeria                                              27
2.3   Role of federal government in respect to growth of rural banking scheme                                                                30
2.4   Role of state and local government towards growth of rural banking scheme                                                            31
2.5   The significance of rural banking and economic development
3.0   Rural banking and community development in rivers state 39
3.1   Questionnaire development and administration                      39
3.2   Study sample                                                                   39
3.3   Hypotheses                                                                      45
3.4   Hypothesis 1                                                                    46
3.5   Testing of hypothesis                                                       48
3.6   Testing of hypothesis                                                       53
3.7   Summary of the results of the hypotheses testing           54
3.8   Response to the scheme by the bankers                          55
3.9   Response of the rural communities to the rural banking scheme                                                                            57
3.10 Impact of rural banking scheme     
4.1   General summary                                                            60
4.2   Summary of major findings                                             61
4.3   Conclusion                                                                      62
4.4   Recommendations                                                           63
Bibliography                                                                            66
Appendix                                                                                 67
Questionnaire to bank customers                                            68

This project objectively aims at the problems and prospects of rural banking and economic development of Nigeria banks, since their inception in Nigeria concentrated their branches in the urban entries the country.
After the Nigeria civil war in 1970, there was need to enhance economic activities that will help in the reconstruction of the war devastated areas and Nigeria at large, consequently the government saw the need to open up more bank branches in the areas to improve the banking habits and bring banking services nearer to the rural populace. Accordingly the rural banking scheme was introduced in 1977 by the federal government of Nigeria through the Central Bank of Nigeria (CBN).
Before giving a detailed analysis of rural banking in Nigeria, let us state by tracing the origin of banking in Nigeria and how eventually rural banking followed up. The development of rural banking dates back to the colonial period when the activities of the extract territorial merchants in the former west African colonial period when the establishment of settled territorial government created the need for locally based financial institutions. For many years cash payment has been replacing the old barter system and British sliver currency was increasingly used in trading transaction. Thus the need arose for the establishment of financial institution that would cater for the importation of the currency, its distributions and absorption of any surplus of it when it was decided that a banking office was need in Lagos in 1890 by a British shipping magnet and its agents. The territory along the west coast of Africa had already turned into a commercial area of intense competition among several European traders. The decision was taken in the headquarters of Elder Dempster shipping company in Liver pool. For such a decision to be taken there must have been a vision of tremendous economic and money in more form, universally accepted, at least, among the trading people and communities that live along the coast area of West Africa whose Lagos seaport had become on important trading centre.
Following this, the African banking corporation opened its first branch in Lagos in 1892 Messrs. Elder Dempster and company, a shipping firm based in liver pool was instrumental to its formation. Because of the teething difficulties of the banking it eventually decided to transfer its interest to Elder Dempster and co. in 1983.
This led to the formation of a new bank known as the British bank of west African (BBWA) in the same 1893 (the bank is now first bank of Nigeria PLC) with ten thousand pounds capital which has later increased to one hundred thousand pounds during the same year. In March 1894 it was registered on London as a limited liability company and the first Lagos branch was opened in the same year. Accra fraction and Bathurst were major cities of West Africa in which some of the branches of the bank were established. The second Nigeria branch office of the bank was opened in old Calabar in 1900.
In 1899, the Royal Niger Company (now UAC) established another bank called Anglo-African Bank in old calabar to compete with the BBWA-their branches were established in Burutu, Jebba and Lokoja after its name had been changed to Bank of Nigeria the bank was, however, sold to BBWA in 1912 in the face of force competition and the monopoly for the importation of silver from the royal milk enjoyed by BBWA. Barclays bank D.C.O (Domino colonia overseas) opened its first branch in Lagos in 1917 (now union bank PLC). The Nigeria banking industry was donated by these two banks B.B. WA and Barclays Bank D.C.O. between 1894 and 1933. The British and French bank (now limited bank for Africa PLC) was established in 1947, making the third expatriate bank to dominate the early Nigerian banking industry.
The foreign banks came to offer services principally in connection with international trade. They were mostly related to the expatriate trading companies and with the government and did not pay attention to the development of local Africa entrepreneurship. These expatriate banks controlled about 90% at the aggregate bank deposits.
Between 1914 and 1930s many unsuccessful attempts to establish locally owned and managed banks to break the monopolistic barrier held sway by the expatriate banks. Industrial and commercial banks were set up in 1929 by a committed few Nigeria. Its day light went off in 1930 due to insufficient capital, maladministration and aggressive competition with the expatriate banks. Another group of Nigeria in 1931 established the Nigeria merchantile bank which like its predecessor was liquidated in 1936.
The National Bank of Nigeria was the first indigenous bank to survive after it was launched on 1933 by the same group of pioneers with greater determination and better planning. By 1945 Chief Okupe founded Agbonmabe Bank limited which was next in survived indigenous banks. This bank was later taken over by the Western State Government in 1969 and the name was charged to Wema Bank. The next successful established indigenous bank was African continental bank by Dr. Nnamdi Azikiwe in 1947. The Nigeria Penny Bank in 1941, Nigeria farmers and commercial bank of 1947 and the Merchant bank opened for business in 1952, all failed and collapsed under the weight of mismanagement and went into abyss in 1946, 1953 and 1960 respectively.
According to a survey conducted by the central bank of Nigeria (CBN), the period was a free for all banking that between 1994 and 1952 a total of twenty-two (22) tanks were registered in Nigeria. Quoted from government records and confirmed by the financial secretary as the actual member registered as banking companies between 1947 and 1952 were registered in 1974 and forty (40) in 1952. Many of them were registered but did not actually commerce operations. There became an apparent need to protect depositors. The colonial government had to set up a commission of inquiry called the Paton commission of inquiry consequent upon which the first banking registration was passed in 1952.
The enactment of the banking ordinance notwithstanding, banks still indulged in some obnoxious practices. The effective control of these malpractices the act could not contented with. This gave rise to the need to establishing a central bank to supervise and control all the bank activities. Thus the central bank of Nigeria was established in 1959.
Since the primary objectives of the expatriate banks were to finance import trade and other locally based expatriate enterprises, their activities were centered in the big cities and commercial centres. The indigenous merchants realized discrimination of these foreign owned banks which would not give them the financial assistance they required to promote their trade.
Because the expatriate banks that dominated the banking industry were centered on the cities, the survived indigenous banks followed suit to struggle for their share of the profits in the cities. They did not see themselves as instruments at transformation and development at the rural sectors. In the bid to survive the competition the indigenous banks lost sight at the fact that their main objective was to service the need of the rural population. Rather than that they settled in the big cities and directed their energies towards competing with the expatriate banks which were out to promote the interest of their metropolitan headquarters.
That was the background of the state of affairs of the banking system for about quarter of a century in Nigeria (from 1893 to 1977) when the federal government conceived the idea of rural banking. Before 1977 there existed about 470 banks branches do serve population of over 90million people and a territory of about 920,000 square kilometers. That was very low when compared with other countries of similar level of development with Nigeria. Besides, the geographical distribution of the 470 branches was lopsided, Olashore (1981), as Lagos alone capture more than to hundred (100) branches, state like, Niger, state like, Niger, former Benue and Rivers to motion but a few had less than twenty (20) each. The few branches within a state were located in urban centres. Whereas statistics showed that over 75% Nigeria population live in the rural areas of the country and derived banking facilities.
In adding, social and recreational facilities which are essential agents of economic development were lack. In rural areas thus the stock of money in the hands of the rural populate was kept outside the banking system. As a result the income level in this sector was low which in turn limited the valuable natural resources and left them also unexpected.
It is clear from the foregoing that the policy mistakes that gave rise to social and economic frustrations in our society today were as result of inadequate attention to rural development. Lack of rural development has not been in the overall interest of our nation. No wonder the former chairman of Director of food, road and rural infrastructure, air commodore L.D Koinyan in expanding the moral social, cultural, economic and either reasons for developing rural areas told the nation in his paper “organizing for effective Grass Root Development” at the National Assembly complex, Tafawa Balewa square Lagos that: 
1.     Virtually all the natural resources are in rural areas and so there is no justification for neglecting the proverbial goose that lays the golden egg.
2.     As a result of the neglect of the rural areas, rural-urban immigration continues to create problems for both the rural and urban areas. Because the rural areas devoid the able bodies men and women development and economic activities have suffered in the rural in the rural areas, whose over stretching of resources, creation and encouragement of antisocial behaviours dominated the urban centres.
3.     That the most compelling reason for rural development is economic through agriculture, handicraft, cottage and small scale industries. That we attack our problem of economy, inflation, unemployment, general low standard of living and equality of at the majority of our people by developing rural areas.
To avert the obvious disadvantages in this direction the federal government started booking for effective instrument and strategies to be used. This rural banking scheme was introduced in April, 1977 by the Central Bank of Nigeria (CNB) following Chief Okigob’s. The people and community bank of 1989 and 1993 respectively were environment by promoting the rapid extension and expansion of banking habit in rural communities. The resultant effect is the mobilization of local savings and the provision of investment funds to aid the much desired rural transformation this development with lead to opening up the rural areas and contribute towards the achievement of a more balanced development of national economic through the provision of small scale loans to small scale farmers and entrepreneur.
Through rural banking has come to stay in Nigeria since 1977 but many backs did not realize its main objectives, especially in commercial banking sector which dominated the banking industry. The main objective has been to bring the network of bank branches to the rural areas thereby drawing banking services meaner to the rural populace. Some economists say that structural arrangement and man agreement of banking services to the rural areas. They also hold that manpower constraint, poor infrastructure facilities and accommodation problems militate against the rural banking programme.
The banks do not adhere strictly to the monetary authorities directives; hence their performance is short of expectations. For instance many banks realize huge profits which are not ploughed bank for the establishment of more branches and development of rural areas as contained in the directives. Rather they, especially the expatriate ones, repatriate these profits to their home countries.
Questions are now being asked whether the rural banking/policy has promoted banking habit among the rural populate. This study will provide information to whether rural banking has succeeded in the development of rural areas.

The main objectives of this study are as follows:
1.3.1        To determine the impact of rural banking scheme on the rural populate on mobilizing savings habit.
1.3.2 To determine that success of the scheme has promoted economic activities.
1.3.3. To identify the problem militating against the implementation of rural banking programme.
1.3.4 To examine the prospects of rural banking in economic development in Rivers State.
The study is expected to validate or invalidate the hypothesis.
H01: That rural banking has encouraged the rural dwellers to inculcate savings habit in Rivers State.
H02: That rural banking has not encouraged the rural dwellers to inculcated savings habit on Rivers State.
H03: That rural banking has promoted economic activities in Rivers State.
H04: That rural banking has not promoted economic activities in Rivers State.
The population of this study will consist of all banks in Ikwerrre Local Government Area of Rivers State.
The sampling of the study will comprise all banks in Isiokpo and Elele, all in Ikwerre Local Government Area of Rivers State. The sampling that will be adopted will be a combination of random and cluster sampling. The putting together of both will be necessary to reflect the importance of all elements to be educated in the study. The sample size to be selected for the study will be 200 respondents.

There will be two sources of data do be used in this project work. These are primary and secondary data.
The primary data are the data coordinated by the researcher directly through methods to be employed. The method will include questionnaire and interviews with personnel of the various banks, customers and the rural dwellers.
The freshness and unadulterated nature of those data are some of the advantages of this source of data collection. Besides, they will be more realistic in that they will reflect the practical and current situation of the subject matter of this research work. The source also has its disadvantages of time consuming, expensive, and tedious and demand skill to effectively analyze the data collected.
There will be two different questionnaires that will be prepared for this study. While one will be for bank officials the other will be for the existing and potential customers of the banks. The samples will be attached as appendix 1 and 11. The questions will be designed to reflect the operational procedures problems of the scheme and the effect on the economy. Unique set of questions will be asked in different ways. They will be drafted in drafted in clear and simple language that can be easily understood by the lag man they will be structured to include both close and ended type (come with a set of options) and open ended type i.e. the one that gives the respondent chance to express his ideas and experience in his own way.
Another primary data collection tool that will be used will be oral interview method. This will prove more effective than the questionnaires, especially with the bank officials whose time constraint and work load make it difficult for them to complete the questionnaire on time. The oral interview will aim at appraising the real impact of rural banking scheme on the rural populates, at least from the point of view of the people themselves.
To avoid bias which could come up as a result of socio-economic backgrounds of the respondents, all classes of people will be represented in the survey. They will include literature, illiterate, proletariat, peasants and bourgeoisies.
The advantage at this method will be an immediate and on the spot response to the question raised and also provides other important issues that will form the bases of subsequent questions. On the other hand its disadvantage will be that the responses and briefings may be interrupted by visitors and other workers seeking for one thing or the other. The respondents may not be able to give straight forward answer also this may result in the researcher putting the bids together to form a whole.
These are the sources of information that have been previously written by other writers and available. These sources include journals, magazines, newspaper and animal bank reports. The researcher will select the necessary materials, refine and moderate them to suit the realities of the present situation of the country’s rural banking. The materials are historical in natural and will be used mostly in the literature aspect of this study. This source of information involve to libraries and other establishments like central bank of Nigeria.
These are some advantages in using this source of data collection which include.
a.     Accessibly just needs to be located, studied and narrated significantly to the subject matter of the study.
b.     The researcher does not pay for the information gathered. One of the other hand disadvantages of this source is that the materials are not allowed to be taken outside libraries. This result in the researcher visiting the libraries several dimes for consultations.
The data collected will be analyzed. The statistical tool the chi-square test (X2).
Basically, this test has been known as the contingency table test of association, between two variables. The two basic features of the chi-square test are:
i.      The level of significance (): This is a statistical standard or decision rule which is specified for accepting or rejecting the null hypothesis. It expresses probability of erroneously rejecting a true null hypothesis. (i.e. probability of an alpha-error or type are error). For example, a 1% level of significance implies that change of making the above error is 1 out of 100 (or probability of 0.10) square test.
ii.     The Degree of Freedom: This shows the extent to which we can assign an arbitrary number at observations to a specific set of group categories.
This study will focus attention on rural banking on the available banks that are functional in Ikwerre Local Government Area of Rivers State. The study will be conducted on only two banks which are within the local government.
In the process of getting the necessary data and information’s thee may be numerous problems of inadequate documented data. Many people to be interview are illiterate and it is difficult to put their answers together. These are a major problem of money. The researcher may not have enough money to procure materials and transportation required for this research work. Another limitation is time which the researcher will use to administer and retrieve all the questionnaire given out. Many officials may be reluctant to give out documents and facts which will be of great help do the researcher.
Rural-urban migration: this is the movement of people from on ara termed rural (underdeveloped) do urban (developed) in search employment or recreational facilities.
Rural Areas: it is an area of a state not designated as urban area by the government.
Development: it is a sided phenomenon. It means increased skill and capacity, greater freedom. Creativity, self-discipline, responsibility and material well-being of an individual. To the society, it is the ability to increase jointly the capacity for dealing with the environment. With the aid of science.
Rural development it is transformation of rural areas for the purpose of economic growth by providing industrial base and infrastructural facilities.
Urban Area: it is an area of a state that is not designated as rural (underdeveloped) by the government.
The importance at this study is to find out if the rural populaces have become aware of branch banking in their communities. It is also do find out whether the rural banking has achieved its objectives of promoting and instilling banking habits mobilizing rural savings, providing credit facilities for the small business and creating employment opportunities in the rural communities.
Another aim of the study is to show how banks have complied with the monetary authorities guidelines on rural banking programme.

The research will of immense help not only do not the operators in banking industry but also to the regulatory authorities and the general public alike. It will further enhance the basis for subsequent researchers who may want to develop and update on this work.




  1. Good article with excellent idea! I appreciate your post.RegardsSarkari Result

  2. Excellent post, I will like to get full material of this project... How can I get it pls


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