Community Banking System In Nigeria And The Promotion Of Rural Development

Community Banking System In Nigeria And The Promotion Of Rural Development

This work has a basis on the identification of the roles of community banking system in promotion of rural development in Nigeria.

The community banking system was launched with the opening of Alheri community bank Kaduna by then president on 31st December 1990 within three years, about 1991 community banks had commended operation nation wide. Today there are over 1000 Community banks in operation throughout the country. The government assistance in this regard, apart from helping to incorporate and license the banks and train their staff consists largely provided them with matching loans to aid them through the initial teething period.

Community bank is the latest arrival in the banking sector. The decision to come up with a community bank was promulgated in the 1990 budget speech by then president Ibrahim Babangida. However, the program actually took in December 1990 when the first licensed community bank stated operation in Alhen, Local government area of Kaduna state to speed up the scheme, a president committee called “Community banks implementation committee” was set up. This was later replaced by the National Board for community bank, which is under the presidency.

The board is legally backed by the community bank decree of 1992 and its charged with the responsibility of supervision and regulated or community Banks.

Consequently the effectiveness effort of the board, community banks were shaped to become very deposit banking and financial services to its grass root level.

Problem of inculcating banking habit to the rural dwellers. For example palm wine tapers who don’t ever know anything about banking after making a lot of money from daily states of their product either keep the proceeds at home or among the raffia’s where they tap and it turns to be a problem and the federal government decided to establish community banks to source these collie funds in the rural community.

Loan recovery: It has turn to be a problem because of lack of collateral securities high of delinquency arising from deliberate refused of pay back loan for the fact that community bank is a grass root banking system aimed at inculcating banking habits in rural folks. The community bank do not emphasis collateralize for loan execution.
To find out the various financial services offered by the community banks and their role in rural development.

To find out how effective they are in pursuance of the objective of the community banks to provide through the recommendation the operational development of the rural populace.
The significance of the research work lies on the fact that the establishment of community banks is a step in the right direction towards economic growth and increased standard of living both the urban and rural communities.

Moreover, the project will make it easy for government, community bank managers and their customers to address their minds to the best way of operating or managing community banks in the country.

Besides the implementation of the finding and recommendation of the project will in no small measure enhance the development activities of the community banks towards rural dwellers and also increase the level of public confidence reposed in them.
The research envisaged some matches and includes the following.
(a) Finance:

The research would have produced an accurate and more comprehensive work due to fact that the cost of transportation and accommodation with various states of federation is enormous.
(b) Non – availability of relevant data

The obtaining of relevant data from the bank posed a big problem and most bank officials refused to release some of the confidential material, which would help the researcher’s work.

JOHN ORJI (1996)  Element of banking, Rook communication Nigeria Publishers.
JOHN ORJI (1996) Banking Operation in Nigeria.


According to the chairman of the national board for community bank (NBCB) at the annual workshop held in Benin City in Edo State in 1994, he said that community bank has two missions, the first like a commercial bank is to provide banking services to the community. The second and more important is to promote the development of the Local economy. The further emphasized that community banks are unit banks and that unless that make the local economy grow, they themselves will not grow too.

Also, Dr Mrs Patric in her paper 1995 states in actual fact the role of the rural banking system in Nigeria today as exemplified by community bank is a giant stride in the nations banking industry.

Moreover, the chairman of the national board for community banks manpower development is of the opinion that community bank would be expected to draw career paths for their staff as the skills and knowledge about banking improved. He further said that individuals who wishers to purse a career in community banking thus have a wonderful opportunity available.
Different authors had defined community banking in different ways. For instance in 1996 / 1998, community banking was defined by Ben Chukwuemeka Anibueze as a financial institution set up to mobilize the supposed Idle cash in the community and provide for the financial and other banking needs of members of that community.

By Dr John Orjih in 1996, he defined it as a self sustaining financial institution owned and managed by a community or group of community for the purpose of providing credit, banking services and other financial services to it’s members.

Available literature reveals that much has not been written in the past about community banking system and promotion of rural development


ADEKANYA (1983) The element of banking, 2nd Edition cram ham Burns BED from shier publisher.
JOHN ORJI (1996) Element of banking, Rook Communication Nigeria Publisher.

Banking practice volume Two by Glanic ventures press.


This part of research report explicitly deal with how the research would be executed, types of data to be collected should be specified. It is called the procedure phase and it is the crux of research report. It is the background against which the reader evaluates the findings and conclusion.
In research design and methodology data can be collected from the following sources:

Primary Data
Secondary Data
But I am writing only on secondary data collected. This research was carried out through the collection of information using secondary source of data only, as primary data is not required at this level of research.

Secondary Data

Secondary sources of information are those, which contain accounts of event of phenomena by other people who did not participate or witness the event. The specific sources of information used for this project works falls under this category.

Dictionary of economics and commerce and other research thesis.
Unpublished works.

Secondary data used for this project work are located in the following places.
Libraries, which includes

(i) IMT Library

(ii) National Library

(iii) Banks
The research is an investigation study, the study is an academic research on the community banking system in Nigeria and the promotion of rural development. On the basis of the above the following research method were used in the collection of data.


The library is a store house of knowledge and wisdom, which have accumulated since the beginning to time. In general sense, whatever is worth knowing probably, record in one of the volume in the library. The reason for using this literature related community banks in Nigeria financial institution is:


More so, the method of information investigation used for this project work includes information obtained from existing literatures which has been renewed and information collected data center visited.


WILLY NNAMANI   Research appreciation,

I M T Enugu.
OJO. O     Bank research methodology by metcsn

Publicity Company p. 28.

Based on this research so many things have been discovered in this write- up. Firstly it was discovered that the board of Directors takes policy decisions of the Bank.

I also discovered that the sources of fund of community bank are share, commission on turnover (C.O. T), and deposit from customers and borrow. The finding based on research shows that the priority areas of community bank in promoting of rural development are loan advancement, Agriculture, Electrification and Education.

The researcher also found out that loan advancement help a lot of the small scale manufacturers, retailers, wholesalers, artisans and professional and others have benefited from the loan schemes allowed by community banks.

It was also discovered that there are some problems militating against their promotional activities. The community bank promotional activities towards rural development are universal and not particular to any bank.

Based on the findings, the existence of community banks has led to more community members putting their money in the bank. About 10 million rural dwellers started depositing money in the bank because of the existence of community banks, its nearness and confidence as community property.

One of the greatest achievements of the community banks is the reduction of the amount of money under our pillows and reduction of the high incidence of stealing in the communities.

Community banking has helped in creating employment opportunities.

It was also realized that there is a fear of being distress.


JOHN ORJI (1996)  Comparative banking in Nigeria.
LIBRARY  IMT Library Enugu and National Library Enugu.



For the commercial banks to control the stated problems, the following recommendations are hereby made:-

The banks should be financed both by the government and the community reducing the fear of bank distress. The government should participate to increase their increased, the bank scope will also be increased.

Efforts should be geared towards protecting and strengthening its operations.

Based on the above statement, the national board for community banks and the central bank of Nigeria (CBN) prudential guideline should be made favorably to the infant community banks. Since they are still tender in the sector still struggling for survival therefore, community bank should have some exceptional clauses in the operational guideline.

The manpower development scheme of community bank should be made efficient so that qualified and will trained manpower will be available for the bank.

This academic research has shown that the community banking system in promoting rural development has grown over this fears of its existence. This work touched the functions, objective of community banks in the country. It also detected some of the priority areas of promotional activities of community banking to be Agriculture, Education, Loan advancement, electrification and advisory etc.

The promotional activities of their banks are universal and not particular to any bank in the country.

Moreover, the community banks role of promoting rural development in the country has been greatly achieved.

Bank research methodology by metesn Publicity Company.

Banking practice Volume Two

By Glanic Ventures Press.
Community banks news Letters

JOHN ORJI (1996) Element of banking Rock communication Nigerian Publishers.

Financial institution by splah media organization

Nigeria community banks Annuals (1994)

WILLY NNAMANI  Research appreciation IMT Enugu.

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