Developmental Impact Of Rural Banking In Nigeria

Developmental Impact Of Rural Banking In Nigeria: (A Case Study Of United Bank For Africa (U.B.A) Plc)

Developmental Impact Of Rural Banking In Nigeria: (A Case Study Of United Bank For Africa (U.B.A) Plc)
According to Osuntogun and Adewuimi (1983). The commercial bank is a profit making organization and as such there is geat fear by operators of commercial banks in establishing in the rural areas, this is because like every profit making organization they would not want to lose their business. But it has been that rural banking is in dispensable if the Nation is to develop its rural area will development of one’s rural area may not be realized it the serious of commercial banks are not at the reach of our rural dwellers.

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This project work is designed to measure what extent the rural commercial bank have been able to involve the rural dwellers in economic activities in terms of awareness and the influence on their style of living through banking activities and how successful the banks are measuring up with their major aim of existence.

This research work is aimed at bringing into light the development impact of rural banking in Nigeria rural areas and how it affect the economy in general. It is also aimed at investigating the impact of the rural banking services.


The reason for the study is aimed at finding out the development impact rural banking in Nigeria has on rural areas/rural dweller.

The study is important now because rural banking in Nigeria increases the productivity of small and medium agricultural farmers and the entire economic activities of the rural areas.

The study is necessary now in the sees use that it leads to infrastructural development of the rural areas that is provision of basic amenities like electricity, good roads and pipe bore water etc.

Finally study is important because it leads the rural dweller to cultivate banking habits of depositing their money in the banks and stop their old way of burying money the ground with clay pots.


The study is significant in many aspects. Firstly would enable our rural farmers and industrialists to obtain loans from the banks to reduce the hardship involves in banks acquiring farm inputs as well as cultivating their farms and building of firm and industries.

Secondly, individuals and rural dweller will through this study cultivate banking habits and be enlighten on the activities and the benefits of banking industries.

Thirdly, the findings will serve as a guide to other bank that has no branches in the rural areas to know that impact of rural banking in our rural areas.

Finally, the study will also be useful for academic purposes, it will serve as a data base for students will carryout related studies in the future.


The United Bank for Africa (UBA) PLC is one of Nigeria top three commercial banks. it was established in 1961 by a consorting of five international banks to take over the banking business carried on in Nigeria since 1949 by the British and French Bank limited with assets of over N54.4 billion and 205 branches spread all over Nigeria the bank has recorded an impressive growth rare.

UBA is active in all aspects of commercial banking and provided international banking, transship share registration, corporate finance and computer service through specialized division and subsidiaries.

An aggressive business promotion strategy coupes with willingness to in vote has earned banks an available position in the banking industry. UBA PLC is strongly committed to its social responsibilities, and identifies with the communities in which it is represented Nigeria’s interest constitutes 60 percent of the shareholding of the bank.

Four of the founding international banks namely bouquet National de Paris, bankers international corporations of New York, Banker National dellavovo and montedei peaschi de Sieva, who all together Owu 40 percent of the shareholders are represented by the Board Directors as they continue to customers of the bank and the Nigerian economy in general.

UBA PLC has branches in New York and Grand Cayllian Island. It also Nigerians correspondent relationship with many banks in Africa and in major countries of the World.

In pursuant of it vision to be the undisputed reading and dominant full service bank in Nigeria, it recently under went a total process of re-engineering and introduced modern technology in its operations. This resulted in clear structure in terms of staff.

The bank’s (UBA)PLC professional mission is “to provide first class service to its customers, delivered by will trained and highly motivated people aided by the best technology generating supervisor returns to shareholders while positively impacting the community served.

The mission of the bank is not without due consideration for the bank management of credit through which it can successful impact the community with service of great importance to commercial banks who grant credits to their customers all over the world with sound management of credit various role of these financial institutions in the boosting of the different segment of the country need not be ignored. Commercial banks in collaboration with other financial institutions provides facilities for the process of saving and investment in the economy. They ensure that there is enough funds to service the need and aspiration of the economy at large. One of the economic functions performed by these financial institutions transferring of funds from surplus units of the economy to the deficit units of the economy for investment purposes.

Developmental Policies: This programme is also arrived at making productive activities receive adequate attention by may of allocating credits. The implementation of the programme is at the moment three (3) phase 1, 1977 – 1980, 1980 – 1983 (later extended to 1985) and 1985 – 1980.

Development: Growth of a particular person, group or a Nation Physically, morally, economic and socially etc. in addition to improve in income outlay it typically involves radical changes in population, Attitudes, Customs and Belief, finally although development is usually defined in the National context, it’s wide spread realization may necessitate fundamental modification of the international economic and social order

Economic Development: This term has generated a lot of controversies over the years. Some economics see it as political and structural change while others are of the opinion that is relates to the progress in the basic human needs overtime. Another school of thought defined it as growth accomplished by changes i.e change in structure of the economy in country social structure and its political structure.

Another approach is focused on human need, this approach defined economic development in terms of progress towards reducing the incidence of poverty, unemployment, income inequalities and for those whose living standards have not risen. This approach also seek ways and means of improving their conditions.

Monetary Policy: The monetary policy are of a Nation is a face of its broad economic policies. It deals with the discretionary control of money supply by monetary authorities in order to achieve desired economic goals.

Standard of Living: This could be linked with the level of substance, as of a Nation Social Class or person with reference to the adequacy of necessities in daily life. As a result of varying per capital income, people equally very in their standard of living. The per capital income in the united state of America for example cannot be compared to that of a developing country like Nigeria.

Consequently, the standard of living differs quite significantly. And perhaps, the native of facilities, and economic activities present in urban areas make standard of living different from those of the rural dwellers. Although in practice, there may not be one definite factor to measure standard of living, it is worth mentioning that the general standard of living for the rural dwellers in Nigeria is quite low.


Bank: according to the Nigeria Banking Act, 1969 (as Bank Amendment Act) 1970). A Bank is described as the business of reliving monies from outside source as deposit irrespective of the payment of interest, and the granting of money, loan and acceptance of credit or the purchase of bills and cheques or the purchase and sale of securities for account owners or the incurring of the obligation to acquire claims irrespective of the loan prior to their making or the assumption of guarantees and other warranties for others or the commissioner may on the recommendation of the central bank by order published in the federal gazette designed as banking business.

Rural Area: According to websters be words dictionary it refers to that not being characterized with cities urban cite, they are usually associated with farming and agriculture. The rural area has the features of low level of literacy, poor health facilities and inadequate family planning, low technology and inadequate infrastructures in addition, a prominent phenomenon in rural areas is that the people who live there have an intergraded culture and social system as their way of life, development is carried our as group efforts in a community. Majority of people who live in rural areas earns their main income from agriculture. This include live stock fishing and forestry.

Rural Bank: A rural bank can be described as a branch of existing bank established in the rural areas to provide banking services for rural populace. These service could be in the form of mobilizing of rural savings, credit allocation among productive activities of the rural populace and linkage of money market in the rural areas with capital market in the urban concerns is other words, the adequate efficient and equitable allocation of resources among different sectors of the rural economy. The scope of the activities and operations of a bank is similar to that of the commercial bank establishing it, but limited due to a variety of reason. The primary role expected by a bank should be the finance of identified rural development project of and the need to have may project within any give rural community, it be becomes obvious that is will be desirable and viable that project of the following categories should be financed by any rural banks.

Small to medium size of the agricultural projects not exceeding N50,000 capital outlay.

Agro-industrial project of small sizes eg. Willing and food processing small scale industrial project for rural areas.

Rural Banking Programme: This is a programme embarked upon by the Nigeria Government in 1977 with the aim of extending banking habit to the rural area by mobilizing rural savings, assisting government in implementing monetary and other.

Government: In the simplest form, employment refers to the engaging living or making use of the services of a person with the view to compensating hi, in wages. As a result of the economic recession in Nigeria employment problem has not been adequately tacked.

Marketing: Whether one engages in doing any thing legally to create satisfaction, that person has engaged in making, be it the production of goods or rendering of services. The challenges that faces marketing is that of generating ideas and awareness of satisfying consumers need and want at a profit in a socially responsible manner. Marketing involves any inter-personal or inter-organizational relationship with the result of exchecking process, its related to the exchange of ideas, goods and service. The need for marketing arises and grows as the society move from one stage of self-sufficiency to an exchange economy.

Marketing management has taken the task of regulating the level, tilling and character of customers in a way that will help the organization achieve its objectives. Wherever marketing strategy is being adopted by bank for example, it must serve the ultimate aim of enlightening the population in terms of banking habits so as to improve the standard of living and economic well being in Nigeria.

Profit and Profitability: Profit is the difference between total revenue and total cost. Maximum profit occur where there is the greatest possible difference between total revenue and total cost profit could be negative i.e a loss. The generalized notionalble that profitability is a measure of business efficiency. It is not as important as knowing how these profit are measures e.g the problem of data competition technique of standard adopted etc.

Loan: This is the amount granted to individuals companies, business and organization by commercial banks another financial institution for a specific period when the money may be paid back with interest.

Productivity: The act of engaging in the create of economic value and quality involving manufacturing of goods and services.




(Olashora 1983), The Nigeria Banking System started as far back as the colonial period with the establishment of the African Banking Co-operation in 1982. Following the attempt initiated by the chairman of the elder Dumpster and Company, a shopping firm which operate between West Africa and Liverpool. The African Banking Co-operation was taken over by the Bank of British West Africa established in 1893.

A now competitor (the colonial bank) was established in 1916 and was taken over in 1975 by Barclays Bank together with the Aglogytian Bank and the National Bank of South Africa converted to the Bardate. The privacy aim of the European Banks that were established then was to facilitate trade. The expatriate Banks were more concerned with the finance of import and expert trade and other locally based expatriate enterprises their operation concentrate merely on the big cities and commercial centre.

The indigenous merchant realized quite early that the foreign banks would not give the financial assistance they need to provide their trade, so they sponsored individuals and groups and a total of 25 indigenous bank between 1925 and 1957 were established. This was in February 1933 first successful indigouns bank (the National Bank of Nigeria) was established between 1933 and 1947 a number of commercial banks rose and failed by 955,all the Mushroom Banks established since 1945 has collapsed except Africa continental bank8 Agbomable Bank. The Merchant Bank and the National Bank of Nigeria depositors suffered losses from the collapse of these banks which aroused much public indication and concern.

There are factors that were responsible for the failure of these banks among which was under capitalization, bank then had little or no paid of capital which was supposed to be used to off set losses incurred in the first year of operation. The two indigenous bank that survival at that time (National Bank of Nigeria and Africa Continental Bank) has paid up capital which was used to offset losses that incurred in the first year of operation.

The banking ordinance came into existence in 1958 which established the Central Bank of Nigeria and determined its power and responsibilities which include the raising of paid it capital of foreign banks from $100,000 to $200,000 while that of the indigenous bank remained in $125,00 as contained in the 1952 ordinance. The 1962 amendment raised the minimum paid up capital of indigous bank from $125,00 – $250,00 and requires the foreign banks to keep within Nigeria Assets of at least 250,00.

All bank were required to be locally incorporated under the 1969 degree, which replaced the earlier banking legislation in the economy. It also increased the minimum paid up capital requirement of indigenous banks to $300,00 and banks directly or indirectly received about $750,000 from abroad. The decree required banks to maintain a capital deposit ratio of between 10 and 30% raised the capital loan from 25% of the statutory transfer of profit to reserve.

Most of these provision were designed to promote a sound financial structure and improve the efficiency of the operations in the commercial banking system.

In 1972 the federal government acquired 0% equity interest in the three (3) biggest banks in the country i.e. Union Bank, first bank and UBA. It was increase to 60% by the bank decree of 1977, which gave a new list to banking in Nigeria.


(Adeseun etal 1992), Banking marketing has been defined as that part of management activities which seeks to direct the from of banking service profitability to selected customers.

Banking marketing primary concern itself with the problem of establishing itself as acceptable worth while function. Recently many bank are beginning to realize the great significant and impact of marketing is changing the banking business or the financial world. They now see marketing as the basis upon which their business depends. Marketing in banking is an important factor which

(a) Increase competition for customers.

(b) Increase sophistication of these customers.

(c) Increase technology

(d) Increase cost of making customers.

The effective practice of marketing in the banking environment is becoming recognized as a vital objective marketing for banks could be said to mean the creation and delivering of customers satisfying services at a profit to the bank.


(Otitit 1983), recently, the federal; government through its economic policies has been reposing more confidence on the banking sector. These policies have been designed to ensure that banks play a major role in the over all objective of attaining economic growth and self reliance for the Nation. These responsibilities imposed on the banks by government have frequently conflicted with the profits motive upon which banks were established.

Since the introduction of S.AP.P in 1988, the banking sectors has witnessed a major change in its role function bank are now actively involved in channeling the Nations foreign exchange to vital area of the economy.

They are now also free to fix their own interest rate considering Central Bank of Nigeria (CBN) minimum rediscounting rate and can now have been criticisms over the non-challant and uncooperative attitude of banks in promoting government policies aimed at achieving rapid industrialization of the economy, allegations of dishonesty and unpatrotism have been cited against some banks for selling their stipulated by CBN. Rate quoted by bank at the auction market are often too high and unrealistic but still some bank sell at autonomous rates. These practices have been cited as been responsible for the constant depreciation of the naira against other foreign currencies.

Some banks (commercial) fail to open up branches in rural areas as stipulated under the Central Banks rural banking programme under the third phase of the programmes (1989) only 146 or 48.6% of their projected 300 branches was not by commercial bank operators. This development was view with distaste by government since it places emphasis rural areas. The programme was seen as a social responsibility, which the banks must fulfill. Consequently, CBN threatened to introduce sanction against any bank which does not comply with the programme. Non-compliance statutorily allocation by banks has been a source of worry to the monetary authority. The performance of commercial bank in this areas is not satisfactory and as such the CBN instructed commercial bank to make loan available to their customers who wish to buy shares during the on-going privatization programme various segments of the society have accused the bank of refusing to grant loans ti respective share buyers. This action is regarded as sabotaging the privatization programme since the federal government wants these shares to be owned by a broad spectrum of the populance.

Wide disparity between banks lending rates and their deposited rates have come under critical. The aim to achieve high profit at all cost is held responsible for high interest rate changed on loan and relatively low interest rates paid on customers saving. Bank claim that they are not responsible for the depreciation of the naira but the inadequate finding to the foreign exchange market by CBN, where demand out ships supply.

Many commercial banks felt it is unfair for CBN to compel them to open rural branches, which will be operated at a loss. They refer to lack of infrastructural facilities and operating a cost as problems facing the opening up of rural bank. Since they are not in business for charitable purpose, they believe it would be unfair credit allocation is clear, banks can only put their money where they can earn quick and adequate returns. This is why the banks find it difficult to issue loan to prospective shareholders under the privatization programme.

With the deregulation of the economy the federal government placed social responsibilities on the banks. They have become tools of development by assisting government in implementing its monetary and fiscal policies for the over all economic growth of the Nation. Banks are expected to perform their services bearing in mind the social responsibilities, which the new role place on them. Banks should look beyond the intention of of making profit at all cost. They are to act as catalyst towards the Nation’s economy, as a financial institution, they can decide the faith of many citizen through granting of loans and credit facilities and providing investment service among others.


(Osubtogun 1983), the rural areas is mainly where agricultural production especially cash, forestry and food crops take place. development incentives are needed for these project to take place successfully, such incentives include, the rural banking scheme and agricultural credit guarantee scheme, various government at both federal and state level pursued series of meaningful rural development programme like farm settlements predominance in the old Western regions, agricultural development project etc. these scheme can not be successful without providing rural electricity, water supply and other social infrastructures. Despite these efforts, the desired goal of increase agricultural productivity and improve standard of living for rural dwellers have not been achieved. Agricultural occupation has been a predominantly self-employed or private business. It was conceived that a means of accelerated adequate credit moralization might go a long way in facilitating the tapping of the abundant resource that has been neglected due to limited financial resources of farmers.

Hence, the federal government directed all commercial banks to extend their banking services to the rural areas through the rural baking schemes. The successful operation of a development agricultural project in the rural area is dependent on the available of money which should be granted in form of loan to rural dwellers. Rural banking schemes was introduced to make possible savings in the rural areas. It also made banking in the rural area comfortable and also to enhance the rural interactive programme of the government.


(Otiti 1983), in the past, little or no attempt was made to change the under developed states of the rural dwellers of which 95% are peasant farmers. “Any National Development policy that fails to recognize the small scale farmers ass the centre piece of food production is bound to fail because they constitute the back bone of our agricultural product. Our rural dwellers lack basic intracture like fared roads, electricity and pipe born water, which are indispensable if any meaningful development is to be achieved in the rural area.

With the establishment of agency like derivate of food, road and rural in fractural (DFRRI) in early 1989, a meaningful impact has been made on the construction of assessable road, provision of water and electricity of meet the need of rural areas.

Rural banking has solved the problem of farmers in the rural areas who in the past make several trips to the cities and distant places to negotiate for loan. This had been able to help peasant farmers with sufficient capital at the time they need it and be advised on how to effectively use their capital if the full benefits of agricultural development is to be realize rural banking service had really gone a long way to mobilizing and organizing peasant farmers into efficient and active group bringing about integrated rural community.


(Osuntogun and ADEWUNMI 1983):

i. Employment opportunity: since a large populace resides in the rural areas, developing our rural economy rests on the fact that the rural dwellers contribute in no small way to the wealth of the Nation. The setting up of rural banks will stand in to be a means of employment to qualify rural dwellers, which will inversely reduce in no small way the movement of rural dwellers to urban cities to search for employment.

ii. Commercial/industrial activities: many industrialists consider financial institutions, mainly the banks as important among the social economic variables necessary for the location of industries. Most state government in their bid to attract interested investors of their state provide land other amenities as incentives, all this is aimed at improving the lives of the in liabitants through employment opportunities and booming the commercial sector particularly if the posed establishment are agricultural firms, manufacturing firm or financial institution which will be of great importance and advantages to the rural dwellers and the state in general. A local bank branch will conveniently serve this purpose. The category of customers are farmers, sole trader as, small-scale business, privately owned industrial companies as well as government institution.

iii. Banking habit: effective banking schedule enables the rural dwellers to cultivate the much desired banking habit which consequently provides the necessary incentives, economic opportunities and access to needed input. It is act surprising that most rural dwellers keep money in clay pot, aluminum containers, even under their beds. But this like warm attitude is fast changes for the better, it also contribute immensely to the 1984 currency – exchange exercise. Even since banking habits are being cultivate and proved upon particularly in the rural areas.



According to the governor of Central Bank of Nigeria Achaji Abdulkadir Ahummed in an intervient, “policy measures that would help restore our agricultural to its pre-oil boom era must first and foremost improve the productive of peasant farmer by guaranteeing a minimum good life” (welfare) for the rural work force, good roads, water electricity, Heaney are facilities etc. Guaranteeing the above requires the available of credit to the rural sectors and the credit requirement of the rural sector has increased substantially. Agricultural development among with the development of subsidiary occupation in annual husbandly, fisheries and development of forestry requires substantial capital.

With the appreciation of this financial needs in the rural sectors and realizing the role commercial banks can play in transforming of the economy and other socio-economic objective which requires a strong base of funding the government set up a financial review commission in 1976. The commission was headed by late Dr. P. Okigbo whose duty was to advice the federal government on how effective credit facilities should be channeled to the rural sector. Consequently, the commission recommended that banks should actively facilities the transformation of the rural environment by promoting the rapid expansion the rural and area by communities.

The rural banking scheme was finally and officially commenced in 1977, consequent upon the Okigbo report on the rural banking system. The det service in the rural areas of the country commenced effectively but not without some un-corporate attitude displaced by commercial bank operator who were reluctant in taking initiate and opening offices in these areas but not withstanding the aim of this scheme are:-

(a) Cultivating of banking habits among the rural dwellers.

(b) Mobilization of saving from the rural areas for the purpose of changing some to other profit able ventures.

(c) Creation of credit by way of equity and loan for small-scale inducting.

(d) Development of agricultural and Agro-allied industries in the rural areas with a view to achieving the National objective of self-sufficiency in food production and

(e) Reducing to a large extent, the drift of young men and women from the rural areas to the urban areas with the above objective in mind, the rural scheme came into operation. The whole exercise has distinct phases and for each phase a large target is set for the periods incorporated in the phase. It was formally conceived by the Central Bank of Nigeria to use the method that was adopted by Indian in her rural banking scheme, which was described as very successful. This method provided for the division of the country into three zones, it was suggested that allocation should be made to the six biggest banks in executing the scheme.

The decision was abounded no sooner than when it was set to commence, this was due to some loophes inherent in its execution, such as the four that those banks that were exampled from taking the leading role of bank would be non-chalet to the execution in which case the operation would be limited to profitability of bank that have strongly base in urban centre alone. Because of these and other loophole noticed by the CBN. It is decided to adopt the methods below as a criterion.

First phase

Out of about 1,126 where rural banking do not exist, zoo centers were allocated of phase out during this first phase among the existing 18 licensed banks than the first phase were expected to last from July 1977 to June 1980 as shown in table 1 below. The number of branches allocated to foreign banks were more then these of their indigenous counterparts this was because of the neglect of farmer as in the rural areas. The First Bank of Nigeria therefore the tipped the list by having 166 branches, while Kaduna co-operative bank and mercantile bank of Nigeria had the least number with 3 branches each allocated to them.

By the end of June 1980, a total of 188 Banks branches out of the allocated 200 were opened and an additional 6 were opened by the end of December 1980 balancing 6. These remaining 6 were carried formed to be opened along with these allocated in the second phase.

Second Phase

The second phase of the scheme covered a period of three years and five months i.e. from August 1980 through December 1983. It was necessary here, because of the numbers of branches involved to give the Bank a longer period. A total 266 centres were allocated in this phase. At the end of this phase, only about 67% of the allocated branches had been opened i.e as at 31st December 1983, a total of 181 branches had been opened as against the allocated 266. This poor performance was attributed to the problem that the Bank encountered in their operations however, this number rose to 00 as at June 30th 1984 leaving a balance of 66 branches unopened. Table II below revealed that like the first phase, allocation were based on the viability of the Banks, secondly it portrays that the poor performance was greater in indiglous than mixed banks. It is worthy to note were that in the second phase, a total of 20 commercial banks that were in existence participated the execution of the programme.

Third Phase

As a result of the benefits of the rural banking programme and its improvement of the banking service to customers, the necessity of further phase can not be over emphasized. It was on this basis that the third phase took off i.e. after the second phase of the rural banking programme, the rates was brought of the scheme in 1977 from 1:1170,00 as at the beginning of the scheme in 1977. Despite the tremendous reduction impact, the Nation is still serious under baked, when compared with other nations such as the USA with the ratio of bank to person of 1:6,00 and India with that of 1:52,00 despite its large population.

The third phase commenced in August 1989, this third phase was carried at achieving the establishing branch at each Government Headquarter and the second phase where banks were directed to make cognizance of the populace of a place as well as the industrial and commercial importance of that place before citing a branch, the bank led no such directive in the third phase. However, data, on the performance of the third phases is not available for reasons. Though the life Span is 1985-1989.

Incentive to Bank

According to Owualah…etal 992. To enable the achievement of the objective of extending banking services and habits to the rural population by opening all these allocated branches and for easy and quick execution of this land able scheme, some incentives were granted of this commercial banks to motivate them to pursue vigorously. The successful accomplishment of this programme. They include –

The exclusion of credit facilities granted by banks in the rural area from total bank credit. This is when working out the allowed growth in the banks loan and advance in determining the ratio of the banks adjusted capital to its total loan advance.

The relaxation of banks feasibility to support their application for establishment in the rural centers that is establishing rural branches. A bank if established in rural area will be allowed to enjoy monopolistic operation for a three years period in the area as compensation for the sacrifice the bank is expected to make for social and economic development of the area of location.

Also ass part of the incentive the federal government approved a proposal that some rate of capital allowance in respect of capital expenditure incurred by the banks on rural branches be set off as follows:

• Initial allowance – 15% annual allowance – 10%, investment allowance – 20%. This when summed up will cause a bank to write off 45% of its capital on establishment rural branch in the year of incurring such expenditure. This information and development stood to 1982. However a lot of charges have been effected. The most gearing one is that of investment allowance which has been increase to 30% from 20%.


According to Agba…etal 1992. In evaluating the rural banking scheme much anterior need to be paid to its performance criticism and suggestion of the Banking executives as well as alovibers of the public in addition, the central Bank of Nigeria Svavisvical record will go a long way to live a Vestavia judicious.

At the first pupas of the programm 24% success was achieved and this was give Commendable leaving look serious that this achievement has made the programme. To have a good start with every local government Headquarter having are least a bank. However, such success was not unconnected with the Economic boom and with profit performance of commercial Banks during the period. Encouraging enough, the programmed is being executed at a time the government is spreading education to the qrsass roots level more importantly among the Adults. The importance of this is that it would enhance Banking awareness.

The second phase with 266 allocation achieved 68% of success as 181 branches were established using the first phase as a focal point, the performance of the second of letter stages may not be very commendable, one major reason attributable to this, was the economic recession and general declining of Bank profit especially in 1983, other reasons include large number of branch allocation, lack of adjustment lack of patronage and inadequate infrastructure. This led to the extension of time to December 1984, where a total of 229 branch were timely established.

In July 1985, the third phase commenced with the aim of establishing 300 rural bank branches by the end of 1989. At the end of 987 the bank have Net with a little success but because of some inadequacies it was also impossible to tell how successful the third and final stage was.

The commercial banks performed well under the rural banking programme in the different phases. For example United Bank for Africa (UBA) introduced a small scale farmers loan scheme, whereby the small scale farmers will be given an amount of N5000 without collateral just to help them improve their capital base.

First Bank of Nigeria also launched it new N100 million community farming scheme. The scheme which is still in operation in primary to aid small-scale farmers either individuals or cooperative societies with a maximum facility of N5000 per individual within the group, without any form of collateral. Most Commercial Banks provide credit to farmers, which are mostly used for purchasing current inputs such as seeds, fertilizers and pesticides. These credit provided by the Commercial Banks can be attributed to the following reason.

(a) Commercial Bank extension of their branch net work to rural areas, thereby bringing banking services to the door step of rural dwellers.

(b) Agricultural sector guarantee scheme.

(c) The CBN monetary guideline issued to the commercial banks favour Agricultural sectors.

Finally, the activities of the Banks in rural areas will help as achieve self-sufficiency in agricultural and many aspects of rural industrialization, which will surge a like among different sector of the economy.

Commercial Bank are not finding it easy with the rural banking because of some problems they encounter, such problem include lack of infrastructure in rural areas, like good road, Housing, Electricity, Communication Network, other are poor profit ability in rural Bank because of the relatively low commercial activities in the rural areas and inadequate supervision of the programme by the authorities concerned.

The continuity of the programme is the question that emerged from two school of though. The first which consist of the commercial bank, Executive, who are against the continuity. They believed that the programme does not generate profit and commercial banks like most commercial enterprises in the country operate with the objective of making profit, commercial bank should be employed to open branches in the rural areas only if the feasibility study of that area show that profits can be generated, more so, the school of thought suggested that braches established in the first and second phase were enough for any rural development ought to be responsible for providing infrastructural facilities like electricity, good road, and telephone before asking banks to establish branches as this will reduce the cost element of the programme. For example Robert is reportedly increasing in the rural branches because of electronic devices to minimize these crime rates. Moreso, security from police posts, thereby spending much money in living the services of the police on daily basis.

The second school of thought with domination of CBN to believe that the programme is necessary and as such should continue. Although the school agreed that there are some problems facing the programme, but time, it will be a thing of the past.


According to Orjih J. 1996. The Banking Habit of Nigeria is considered low and there is the need to tae some positive steps towards improving it. The following measures are recommended:-

1. The Government through the Central Bank of Nigeria should encourage even spread or bank offices in the economy. The commercial banks should establish more branches in the rural areas. This will encourage rural dwellers to cultivate banking habit.

2. Nigerians should be educated and enlightened on the advantages of using credit instruments for setting transaction and indebtedness. if the credit habit of the people is improved upon, the banking habit will definitely improve.

3. The number of bank branches serving the population is not adequate, more branch offices should be established to boost the banking density end the banking habit of the people.

4. The banks should develop financial services and strategies that will enable them complete favourably with the informal financial market for business. These financial packages when deluged, should have the rural areas as their target.

5. As a measure of improving the banking habit of the people, the banks should introduce the mobile banking scheme. This scheme will take the banks to areas where they cannot establish branch offices. This mobile banking scheme be used to visit the rural areas on agreed schedules to carry out banking transactions.

6. Where the need arises, the commercial banks can charge lower interest rates for lending in the rural areas. This will have the effect of making the rural populace to become interested in banking services.

7. Adequate training and education should be given to bank staff on their relationship with customers. They should be made to under and that their customers are supreme and should be treated politely and not rudely.

8. As much as possible unnecessary Bureaucratic processes should be avoided. The protocols involved in obtaining financial facilities should be minimized especially in the rural areas.

9. The banks should contribute to the social development projects in the rural areas. This practice will cause the rural inhabitants to develop interest in the banks.

10. The government should Endeavour to establish industries and other productive venture in the rural areas. These facilities when available in the rural areas, will provide gainful employments for the people. This will in turn increase their income, savings and banking habits.



In this chapter, I have introduced the problem I wish to study. The chapter covered the problems identification, rational of the study, significance of the study, background of the study and definition of the terms.

This chapter is the review of related literature. The literature review deals about the earlier studies done in the area of the research. The aim of this chapter is to provide with a conceptual framework as well as what has been done on the study of the developmental impact of rural banking in Nigeria. The chapter is divided into two sections in order to achieve this purpose i.e. theoretical review and empirical review.

Hypothesis of the study:

The three (3) hypothesis stated for study were based on the low productivity is bane to rural banking performance, the impact of rural bank programme has improved the standard of living of the people through industrialization and increased farm productivity and the rural banking helps to mobilize and organize rural farmers.

Research methodology:

The population of this research was based on United Bank for Africa PL (UBA) and the instrument of data collection was interview and questionnaire distribution to the bank staff and rural dwellers. The method of data analysis is the use of Chi-square.

Data was collected through primary source of data collection was used, which accounted for interviews and questionnaires distributed. Also secondary source of data was also used, which was the gathering of information from Libraries, Journal, Textbooks, Seminars and other publications.


These are the factors that militated against the study they are unfriendly native of the bank staff, time constraints and insufficient funds.


From the analysis and findings, the following are the major conclusions.

1. The rural banking programme has made a meaningful impact in the development of our rural areas, especially in Agriculture and industrial development.

2. The standard of living of the rural community has improved through the aid of the rural banking programme and it has also created awareness and increased the banking habit of the rural dweller.

3. The collateral securities demanded by the operators of the rural banking programmes in considered too stringent to meet by the rural inhabitants who are mostly made up of poor farmers.

4. The unsatisfactory profit from some of the rural banks has a considerable impact on the overall yearly profits of the banks.

5. Agricultural loan priority by banks serve as a medium to step up food production and creates employment opportunities in the rural areas. Infact the rural banking programme has made commercial banks to adjust favourably to change rural support system required to stimulate and support productivity of small and medium agricultural farmers.

6. Provision of infrastructural facilities like good road, good communication system and constant power supply could help in no small way to boost the rural banking programme.

7. Industrialization is one of the major factors that will improve the profit of the rural bank.

Finally as a result of mismanagement of fund and the challant attitude of customers who borrow money from the rural banks, payment of such loans has become unsatisfactory. This is affecting the pace of development in these rural areas.


To enhance an improvement in the pursuit of rural banking scheme, the following recommendations has been made from the findings, summary of the research want and conclusion that arose:

Since industrialization and profitability constitute the bedrock of economic development, the government as well as the private sector should endeavour to diversity resources towards its reality. The commercial bank alone cannot create the much expected impact to pursue industrialization. To make it more realistic, concrete effort should be made to enable the objective of the rural banking programme to be felt.

The nature of collateral security required should not be too stringent, hence most of the rural dwellers find it difficult to meet with it rather a system of monitoring the loan proposal is a profiting one, the bank can go into partnership with rural dwellers to finance the project so both parties in the long run will agree on a convenient percentage to share the profit. This can be achieved by the establishment of a department that will always work out modalities for venture of such nature where the bank can benefit the above commendations for joint venture ship with rural dwellers have the business around them but their major problem remains the means of financing the projects.

The impact of rural banking is gradually after the completion of the first, second and third phases in 1989. However, there is need for the rural dwellers to imbibe continuous banking habits. The government and Central Bank will be able to achieve this objective by setting up an enlightment programme by using mobile campaign vehicle of frequent interval through the assistance of the community leaders who will be able to get cable people that will be able to convince the rural dweller.

From the onset, subsequent government have been making concrete efforts to make agriculture the cornerstone of National Development, but the various Agricultural Scheme already embarked is emphasizing that rural banking is a special avenue to disburse loan to willing farmers which is another way to supplement agricultural input requirement, were it has always been a constraint to potential farmers, however, to achieve this goal, there must be adequate measures to monitor the utilization such loans so that the attitude of people diverting loan to other areas rather than implementing the loan for the purpose by which it is meant for.

The Central Bank of Nigeria under whose umbrella the rural banking programme imbibed should introduce an award scheme to serve as incentive to those area banks that were able to complete their rural bank allocation as scheduled.


The researcher did not investigate into all the possible aspects of the negative effect of development impact of rural banking in Nigeria due to time and financial constraints.

For the purpose of continuity of research in the development impact of rural banking in Nigeria, the following areas should be investigated.

They should investigate the impact of rural banking in increasing the standard of living of the rural communities of the people.

Further scholars should investigate the role of marketing in improving the banking habits of people in the rural areas.

They should evaluate how effective credit allocation among productive activities in the rural areas has been realized.

Finally, future scholars should suggest further measures for improving rural banking in our rural areas.

Developmental Impact Of Rural Banking In Nigeria: (A Case Study Of United Bank For Africa (U.B.A) Plc)

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