CHAPTER ONE

INTRODUCTION

1.1     Background of the Study

Every nation aspires to develop its urban and rural

areas. Policies are formulated to ensure the achievement of the overall development of the nation. For instance, in Nigeria reasonably number live in the rural areas and so the issue of developing the rural people in these areas in question are predominant farmers, who produce the highest percentage of the nations food and yet there is no significant development of the rural areas.

There are no good roads, electricity enough water

supply and other social amenities in recognition of these problems the various national development plans providing for the development of these areas. However, rural development has been given various interpretations by various Nigeria governments. During colonial administration, the attempt in developing rural areas were limited to those that benefits the colonial administration thereby making them up the more attention in building up the transport and communication system to  enhance easier exploitation and movement of natural resources from the rural areas to the cities. The administration neglects the condition of the rural people who produce the bulk of these resources (Agricultural products).

        Since independence, efforts have been made to correct this neglect. The various natural development plans formulated recognized that development of both the urban and rural areas will establish a solid base for long-run economic and social development of the country. However, the development of rural areas was interpreted to mean the development of Agriculture. Believe was that since the major occupation of the rural people is believed to be Agriculture, so the Government should develop the Agriculture as the case may be.

        Consequently, such crucial problems of rural development such as good means of transportation, good means of communication, availability of vehicles to move rural people and their goods to the urban areas. Banking services were not provided in the rural areas, recognizing the importance of banking services in the rural areas, the Government in 1977 introduced the rural banking scheme to:

(a)       Cultivate banking habit among the rural dwellers.

(b)       Mobilize savings from rural areas for the purpose of channeling some to profitable ventures.

(c)       Create credit by way of equity and loan for small scale industries.

(d)       Develop agriculture and agro-allied industries in rural areas with a view to achieving the natural objective of the self sufficiency in food production.

(e)       Reduce the uncomfortabilities  of the young man and woman from the rural areas to the urban areas as regards transportations, mass production of agricultural product.

The Government’s effort on ensuring the development of the rural areas did not end in the establishment of recognizes that agricultural development has not necessarily mean rural development and has therefore recently formulated a national rural development strategy with emphasis on the alleviation of rural problems and the enhancement of the quality life for rural dwellers.

        To implement this, the directorate of food and rural infrastructures (DFRRI) was established in 1986. It can be seen from the various efforts of the Government towards development of rural areas of the nation. A part from the infrastructural facilities, the banking services are needed in order to complete the development programme in rural areas which has failed to yield positive results because of many factors of which finance was the most important.

1.2     Statement of the Problems

People in the rural areas engage mostly in substantial farming thereby needing Government interest over the growth of Agricultural sector in the rural areas.

Contributions of banking sector lending towards rural development have been a subject of debate amongst prominent scholars. One school of thought was quoted as saying that stringent lending policies coupled with high lending requirements of banking sector was the major difficulties encountered in developing the rural areas. Okorie and Miller 2005 further argued that the impact of banking sector lending to rural development will remain a mirage until the bank address the minds of the rural dwellers towards the major problems of the rural populace.

        Another school of thought has it that rural development is possible only through the banking sector participation more especially in lending to the rural populace.

        However, certain problems of banking sector in rural lending may start to enlarge as we probe that assertion of each school of thought. Firstly, banking sector lending intention to the rural as often do not materialized for reasons ranging from unavailability of collateral, the inability of the borrowers to pay back.

        Secondly, the rural banking services of the banking sector are only skeletal due to the absence of good roads and pipe borne water e.t.c.

        Finally, the rural banking habit of the populace is to be cultivated since most of the inhabitants are ignorant of the services of the banking sector and help that could be derived from them.

1.3   Research Question                                   

(1)   Are there requirement for bank lending to the

rural development as regards Agriculture?

(2)       Does rural dweller develop interest in collecting loan from the bank as it is believed that the occupation of the rural dwellers is Agriculture?

(3)       Does rural dwellers pay bank the loan collected from the bank?

(4)       Does rural dweller agree with the provision of collateral as one of the requirements in Bank lending?

1.4   Significant of the Study 

        Rural banking services of the various banking sector are dynamic, rural support system need to stimulate the productivity of both small and large scale farmers, the entire economic activities of rural areas.

        Rural dwellers have easy access to the services and operations of banking sector only are rural if rural branches are opened nearer to them. This can be possible by effectual and well co-ordinated rural banking services which can also help to arrest rural urban drift by encouraging farming in the rural areas which will hopefully lead to the development of Afro-based industries in such areas. As a result of this effort, employment opportunities are opened to favour unemployed citizens. Rural banking services can go a long way in mobilizing and organizing rural dwellers into efficient active co-operative groups and bring about communities by the active involvement of various communities where there are.

1.5     Scope and the Limitation of the STUDY

This study covers the entire contributions of banking

Sector lending in rural development with the case study of union bank Enugu and the extent of the availability and the inability to repay have contributed to the levels of lending.

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