THE ROLE OF COMMERCIAL BANKS IN THE ECONOMIC DEVELOPMENT OF RURAL AREAS OF NIGERIA (A CASE OF UNITED BANK FOR AFRICA PLC (U.B.A) ONITSHA-ANAMBRA STATE)

TITLE PAGE THE ROLE OF COMMERCIAL BANKS IN THE ECONOMIC DEVELOPMENT OF RURAL AREAS OF NIGERIA (A CASE OF UNITED BANK FOR AFRICA PLC (U.B.A) ONITSHA-ANAMBRA STATE) BY IFEZUE IFEYINWA UKAMAKA 2006/1879/BF A RESEARCH PROJECT WORK PRESENTEDM TO THE DEPARTMENT OF BANKING AND FINANCE SCHOOL OF BUSINESS AND MANAGEMENT TECHNOLOGY FEDERAL POLYTECHNIC, NEKEDE OWERRI- IMO STATE. IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF NATIONAL DIPLOMA (ND) IN BANKING AND FINANCE. AUGUST, 2008 APPROVAL PAGE This project work has been approved by the department of banking and finance, school of business and management technology, federal polytechnic Nekede, Owerri imo state in partial fulfillment of the requirement for the award of material diploma (ND) in banking and finance. ----------------------------- ------------------------------ MR KANU, N.O.N Date (Project supervisor) ----------------------------- ------------------------- MR J.U OSUBOR Date (Head of Department) ---------------------------- -------------------------- (External Examiner) Date ______________________ __________________ Student Date DEDICATION This work is dedicated to the God Almighty for life spared, good health and infinite mercy throughout this programme. And also to my beloved parents and siblings. ACKNOWLEDGEMENT I will ever remain grateful to our heavenly father for his immense blessings, guidance and protections throughout my rigorous academic pursuit I appreciate the love, understanding, support and given to me beloved parents Mr and Mrs John Ifezue, my brothers and sisters, Onyeka, Chinenye, Ikenna, Nkechi and chika. I also acknowledge the contribution and help of my uncle Mr Osita ucheagu. My sincere regard goes to my supervisor Mr Kanu N.O.N for his professional criticisms, Contribution and efficiency in guiding this work inception to completion. My God also bless my HOD Mr J.U osubor. Finally, I wish to express my profound gratitude to my friends, Victor, Chinonso, Chuks, Daniel and Oscar. Especially uchenna mbagwu whose efforts and encouragements are numerous throughout ND programme may God bless and reward all abundantly. Amen. ABSTRACT Banks operate with a number of branches at the urban rural areas. At the rural areas, the rural branches are intended to mobilize savings from the rural people dwellers and bring development to these rural communities this trying to halt rural- urban face drift. The objective of this study is to appraise the performance of commercial banks in rural areas with the view of finding out how they carry out their role. Secondly, to identify the problems facing the commercial banks operating in rural areas. Chapter one will deal with the introduction, brief historical back ground of the study, establishing the purpose of study, statement of the problem, research questions, significance of the study, limitations and finally the definitions terms used in the work. Chapter two will deal with literature review, and easy referencing. It consists of extracts from primary and secondary data. The primary data were collected by the use of questionnaire and interview, while the secondary data were collected from textbooks, journals and other publications. Chapter three will dissents steps taken by the researcher in the order in which they were carried out, high lighting the basis research design, sources of data and qualitative technique used. Data collected were analyzed in chapter four using distribution table and tested using percentage method and the discussions of the findings were made. In chapter five, the summary, recommendation and conclusions were made. TABLE OF CONTENTS Title page Approval page Dedication Acknowledgement Abstract Table of contents CHAPTER ONE 1.0 INTRODUCTION 1.1 background of the study 1.1 Statement of the Problems 1.2 Purpose of the Study 1.3 Objectives of the Study 1.4 Research Questions 1.5 Significance of the Study 1.6 Scope of the Study 1.7 Limitations of the Study 1.8 Definitions of Terms CHAPTER TWO 2.0 LITERATURE REVIEW 2.1 introduction 2.2 Evolution of Commercial Banking in Nigeria 2.3 Structure of Commercial Banks 2.4 Management Structure of Commercial Banks 2.5 Features of Commercial Banks 2.6 Functions of Commercial Banks 2.7 The Roles of Commercial Banks in Economic Development of Rural Areas. 2.8 United bank for Africa (UBA)’s contribution in the Economic Development of Rural Areas using their 2007 Abridged Financial Statements 2.9 Problems of Commercial Banks in Rural Areas. CHAPTER THREE 3.0 RESEARCH METHODOLOGY 3.1 research Design of the Study 3.2 Population and Sample of the Study 3.3 Sources of Data 3.4 Method of Data Collection 3.6 Sample and Sampling Technique 3.7 Method of Data Analysis CHAPTER FOUR 4.0 PRESENTATION AND ANALYSIS OF DATA 4.1 Data Presentation 4.2 Data Analysis 4.3 Test of Research Questions 4.4 Discussion on Findings CHAPTER FIVE 5.0 SUMMARY, CONCLUSION AND RECOMMENDATIONS 5.1 Summary 5.2 Conclusion 5.3 Recommendations BIBLOGRAPHY APPENDIX CHAPTER ONE 1.0 INTRODUCTION Banking system is an essential ingredient in the development of any national economy. The traditional business of banking is financial intermediation between surplus and deficit-spending segments of the economy. Though banking is not yet so common among Nigerians in the rural areas, but banking practice has grown considerably. Days are gone when people have keep their money in their houses and economic transactions were on very small scale. Economic transactions that the banks are imperation to facilitate their success. Commercial banking started in Nigeria before 1892.The Africa Banking Corporation was incorporated by some South African (A.B.C) function for only two years. Its assets and habilities were taken over by the British bank for West Africa in 1894. Commercial banking institution that existed before 1929 can be best described as expatriate banks or supra national banks. The ownership structure and management were foreign dominated. The first four decades of commercial banking in Nigeria was a period in which there was indigenous bank and the few supra- territorial banks that existed were very discriminatory against Nigerian entrepreneurs. This geared the indigenous individuals to own a bank, which would be Nigerian by all standards, pursuing Nigerian missions and would also be Nigerian in its policies. The merchant bank limited was the result of the concerted effort of Dolenty and H.A. subair. The bank failed in 1936. Inspite of the failures, the determination of Nigerians to own, control and manage their own bank continued. Olusanya 1978 defined bank as an institution that solicit for and accept deposits, repayable on demand thereby providing a safe custody for and undertaking a liability on such deposits. There are two forms of banks. They are: central Bank and the commercial Banks. Asuzu 1995 sees the central bank as the government bank that is responsible for the printing and issuing of currency notes and coins. It is also the bankers bank because it regulate the activities of the commercial banks and responsible for the monetary policies of the country. Commercial bank is retail financial institutions specializing in receiving deposit and other valuables, remitting foreign and domestic exchange, collecting cheque, drafts, notes and other obligations on behalf of their customers. It could be seen as the heart of an economy. They hold deposits of millions for persons, government and other business units. They make funds available through their lending and investing activities to their customers. Since commercial banks are the only accessible bank to the general public and people in rural areas, their role in economic development cannot be over-emphasized. On people and it only has meaning if the takes various form and shape. It ranges from political, social, and cultural to economic. But the purpose of this study is for economic aspect. As pointed out earlier, development only has meaning if the people concerned benefit from it. Commercial bank are the only accessible bank to the people and it is only through these banks that people in the rural areas benefits from the services of the banks. The importance of services of the banks lies in the fact that they provide the people in rural communities with essential tools for development in the areas. BACKGROUND OF STUDY Bank in Nigeria have been commended for the detritions quality of services rendered to customers. One hears and receives compliments about the unbusiness- like attitude of banks officials in their day to day interaction with the public Masi (1992), to withdraw money from an account take hours whereas the banks are to anxious to receive deposits from people. Thus, the general consensus from all quarters is that the service being rendered to customers by commercial banks in rural areas is nothing to write home about. They assumed the policy of “take it or leave it” as motto towards their customers. Since the deteriorating services is common among banks in rural areas, they feel comfortable that whatever way they behave to the customers the customers have alternative choice other than to accept it. Wadiri (1980) Nigerian institute of banker” Annual seminar is of the opinion that bank services in this country are characterized almost without exception with service. That the transaction of even most routing invariable involves a long period of waiting. Stressing on this, he pointed out that in some cases, the waiting has to be undertaken in over crowded and ill ventilated banking hall without comfortable seats. Added to this is to irritating indifference and brazen rudeness many customers enduring from bank staff. Ayo (1981) while commenting on how customer from rural areas are being treated by banks official expressed that “one only needs to go to one of these local branches to see how the very few customers the bank get are treated. The number of hours they had to wait before they are attended to and the unfriendly attitude of the cashers in attending to their customers. Write these type of attitude, a local farmer with a very low degree of enlightment coming to the bank for the first time would turn back and never to come back again, as one of the characteristics feature of life in the country side, information would pass round as regard the attitude of the others from going to banks as they are expected of. Erihiri (1980) lamented that, “Another conspicuous omission in our banking industry is the marketing of services to the people in the rural areas” By this the research mean the exposure of the banking industry is capable of offering to the public. Durogaiye (1986) is to view that the quality of services in the countries of all commercial banks in the country to cash a cheque or obtain a bank draft at most commercial banks is often time on all day affair According to Iebueme (1983) principal of the staff training center “in his lecture on professional Bank services in Nigeria at the Nigerian institute of Bankers seminar held from 24th –25th march, declared that “the Nigerian Act 1969 describes a bank as any person who carries on banking business and include a commercial bank, an acceptance house, discount house and other financial institutions” The Banking Amendment Act No.3 of 1970 further defines Banking business as the business of receiving monies from outside source as deposits, irrespective of the payment of interest and the granting of over draft and loans and acceptance of credits or the purchase and securities for account of others or the incoming of the of the obligation to acquire claims in respect of loans prior to their maturity in the assumption of guarantees and other warrantees for others or the effecting of transfers and clearings. Such other, transactions as the minister may on the recommendation of the central bank order, publish in federal government gazette designate as banking business Therefore, banking is a business venture undertaken with motives. For commercial banks, the a acceptance of deposits in current, saving time deposit and payment of such money on demand or at maturity and tending part of the money are imperative in this country Again effiong (1983) declared that, the impact of commercial banks business financial in the rural area determined by a number of factors. We shall examine commercial bank cash flow as a major factor in this regard. The ideal as to relate in flow funds to commercial banks to the pattern out flow in a view to determing the appropriate types of capital that is normally expected to be generated from the commercial banking sectors. 1.2 STATEMENT OF PROBLEM The problem in this study wants to deal with the hindrances encountered by commercial banks on the process of their operation in rural areas. Some of these problems can be state as follows 1) Lack of manpower of commercial banks passes a problem for them in their operations. 2) Lack of cordial bank /customer relationship in rural areas due to numerous branches 3) Illiteracy of customers in rural areas. 4) Inadequate security outfit in the rural areas to secure the bank premises 5) Insufficient volume of business of the attitude of farmers, hunters, market sellers etc to banking 6) Problem of Accommodation encountered by bank staff 1.2 PURPOSE OF THE STUDY The concern of this study is on the role of commercial banks in the economic development of rural areas. Specifically, the study focuses on how these banks carry out their role to enhance economic development especially among commercial banks in rural areas. 1.3 OBJECTIVE OF THE STUDY The central bank of Nigeria set up a programme of rural banking in 1977 with the primary aim of extending facilities in the rural areas. The scheme that came into being in July, 1977 has the following as it main objectives. 1) To assess the problems encountered by commercial banks 2) To examine the reasons why commercial banks isolate themselves opening branches the rural areas. 3) To help fiancé agriculture through their credit activities and to mobilize inscent rural deposit. 4) To help integrate the rural and urban sector of the economy. 5) To determine the impact of rural banking scheme on the rural dwellers. 6) To determine the extent of the rural banking 1.4 RESEARCH QUESTIONS 1) What are the basic problems encountered by commercial banks in rural areas? 2) Why does commercial banks isolate themselves from operating in rural areas? 3) How far have the banks gone in financing businessmen in the rural areas? 4) How far have the banks gone integrating the rural and urban sector of the economy? 5) Where impact has the rural banking on the rural dwellers? 6) What is the extent of rural banking in Nigeria? 1.5 SIGNIFICANCE OF THE STUDY 1) This study tries to examine how the rural dwellers make use of the bank 2) It also helps in finding out the problems of the rural banking. 3) It goes further to find out if the rural banking scheme has succeeded in embarking on the promotion and cultivating the banking habits, creating of credit for small scale ventures and creating rooms for employment for the population. 1.6 SCOPE OF THE STUDY The study will not be complete if the researcher failed to focus the mind of the reader on the need and reason why commercial banks do not open their branches in the rural areas. The scope covers only the united bank of African (U.BA) plc Port Harcourt road branch Onitsha in Anambra state. 1.7 LIMITATIONS OF THE STUDY The study has many limitations that made the study difficult they include 1) Time and financial constraints 2) Lack of research facilities/equipment such as computers 3) Scanty information base in the sense that there was difficult in reaching and reviewing all relevant materials relating to the subject of the study 4) Un corpora ting of the respondence cased by their illiteracy especially the farmers. 5) Lack of security in the rural areas which made it difficult for the researcher to reach certain areas. 1.8 DEFINITION OF TERMS Accessible Easy to approach or enter Dwellers Residues Mobilization prepare for active service, organize for a purpose. Role Person’s or corporation body’s function or duties. Development Make or become larger or organized Rural Area An under-developed place in the country. Economic - Enough to give a good return for by money. Commercial – Engaged in or financed commercial: Bank - Establishment, for safe- keeping of money and valuables CHAPTER TWO 2.0 LITERATURE REVIEW 2.1 INTRODUCTION This chapter will review some related literatures as well as the techniques adopted by commercial banks in the development of the rural areas is Nigeria 2.2 EVOLUTION OF COMMERCIAL BANKING IN NIGERIA Kanu, N.O.N (2003); the evolution of commercial banking in Nigeria, its progress and problems have six major phases Phase 1 The free era or uncontrolled banking 1892-1952 Phase 2 Pre-central banker or era of bank failures 1952-1959 Phase3 Era of bank legislation or consolidation 1959-1970 Phase4 Era of indenisation 1970-1981 Phase 5 The Era of expansion and competitive Banking 1981-1988 Phase 6 THE Era of bank distress and failures 1989-1996 Phase 7 Era of Restructuring and innovations 1989-2003 Source: (a) Nwankwo 1980: 46-53; (b) Enwerenzor 1997:186 (c) KANU 2003: 91. 1) FREE OR UNCONTROLLED BANKING ERA: The evolution of modern day commercial banking in Nigeria started with the history of expatriate banks which dates bank to the 19th century when banking activities were first carried out by elder Dempster and company mainly for their own business transactions. Later, commercial banking activities in a more conventional manner were carried out by African Banking Corporation of South Africa, which was established in 1892. Two years later in 1894 the banking of British were Africa (BBWA) was established and it absorbed the banking business of both elder Dempter Company and African Banking Corporation (Nwankwo 1980:65). Although a branch of banks in Nigeria was established by the Royal Niger Company in Calabar in 1999; the BBWA remained the only bank until 1917. 2 PRE-CENTRAL BANK OR ERA OF BANK FAILURES 1952-1957 The free banking era comes to an end when the first banking ordinance of 1952 was promulgated. This ushered in the first banking legislation in Nigeria. The ordinance was to be immediately effective for new banks while existing bank were given up to three months to apply for and obtain license and up to three years actually to be licensed. All these were for the purposes of protecting the interest of depositors and to banking public in general. Following the publication implementation of the banking ordinance, forty banks were registered in 1952 but many of them failed thereby giving credence to the central bank’s description of the period as an era of wild cart banking. 3 ERA OF BANK LEGISLATION OR CONSOLIDATION 1959-1970 The promulgation of the 1958 central bank ordinance ushered in the era of central banking and also set the stage for an orderly and rapid development of Nigerian financial system Adekanya (1983:141) stated that then banking system after the establishment of the central bank of Nigeria became gilded by strict monetry and fiscal policies. The 1969 Banking decree consolidated all the amendments to the 1958 banking act, plugged all possible loopholes and remained in force till 1991 when the central banking of Nigeria Act 24 and banks and other financial institutions act 25 of 1991 was promulgated 4) ERA OF INDIGENIZATION 1970-1981 The spirit of self-reliance necessitated the promulgation of the enterprises promotion decree in 1972. the decree was known as indigenization decree by which the government sought indigerious participate in the ownership management and control of all sectors of the economy. More specially in 1973 according to Enwereuzor (1999:189) and Nwankwo (1980:53) the federal government in pursuance of its policy of ensuring that Nigeria own and control to commanding height of their economy took enough percutage interest in the three biggest foreign bank bring indigenous ownership in these bank to 60percent. 5 ERA OF EXPANSION AND COMPETITIVE BANKING 1981 The eight-year period of this era witnessed increased number of banks and attendant competition among the various banks. According to CBN (1981:32-34) there were 20 commercial banks in Nigeria with six merchant banks in 1981. This number increased to 29 commercial banks and 12 mardant banks in 1986 when structural Adjustment programme (SAP) was introduction of SAP through deregulation led to increased interest and desire for incense to establish new banks. By 1988 when this era ended, the number of bank had risen to 65 made 41 commercial banks, and mar chart banks 6) ERA OF BANK DISTRESS AND FAILURES 1989-1996 After the massive bank failures of the 1950s the Nigerian financial sector which had hitherto enjoyed boom in its business which was brought about by the rise in oil prices in the 1770s and the deregulation in 1986, found itself again in the biter experience of bank distress and failures Distressed banks in Nigeria were only 8 in 1990. The number rose to 24 in 1993 and a total of 33 terminally distressed banks had their license revoked in 2002 while two banks head been declared distressed as all August 2003. By 1995, holding action was placed on 37 banks made up of 27 commercial banks and 15 merchants banks. There were addition to hundreds of other financial institutions that was under ground with in the same period. By march 1997, about 50 commercial and merchants banks had been adjudged distressed (Alao 1997:2). These and other unexposed cases confirmed the distress virus had eaten deep into the fabrics of the financial sector within this period 7) ERA OF RESTRUCTURING 1996-2000 The level of distress in the financial sector necessitated the need to restructure the financial sector. The restructuring exercise began with the increase in the banks to the uniform level of #500 million with effect from 1st January, 1997 All existing banks were required to reapplies by 31st December, 1998. However, in 2001, minimum paid up capital for both banks was increased to #1billion and #2 billion for new banks. The CBN net were also amended among other provisiors, which was to for stall further distress in the financial sector. Furthermore, the provisions were meant to position Nigeria’s financial sector to meet the demands of the 21st century. 2.3 STRUCTURE OF COMMERCIAL BANKS In Osubor and Okafor (2006) institutional finance, the structure of a bank reveals not only the organizational framework of the banks, but the composition of her assets and habilities. In addition a bank’s structure will also be influenced by its size and ownership. The size of a bank, the number of branches it maintains, and the amount of deposit liability. The ownership structure of commercial banks in Nigeria has steadily changed since 1969 legislation when banks were required to be locally incorporated. The 1972 indigenization decree and the 1975/76 budget, speech of the federal military government clearly changed the ownership structure of commercial banks in the country and this tread continued till date. Commercial banks all over the world have what is known as assets and liabilities. These assets and liabilities of a bank tell us the uses and sources of bank funds or resource. Nigeria commercial banks are therefore no exception to the above statement. However, it is important to note that the composition of these assets and liabilities do differ from country to country. This could be partially due to what a particular country recognizes as assets and liabilities and the problem of nomenclature. 2.4 MANAGEMENT STRUCTURE OF COMMERCIAL BANKS IN NIGERIA According Kanu (2003), the management structure of commercial banks in Nigeria whether of mixed or indigenous ownership is organized along the line of former expatriate banks, which of course is in line with the British banking system. The management structure is made up of: 1. Board of Directors set up by the proprietors of the banks 2. A chairman/chief executives 3. General managers. Area and Branch managers. This order may not be ideal for all banks, some banks management structures differ significantly from the above. For instance, some banks do not have area managers but branch managers while others have both. The size of the bank determines whether it will have area and branch managers or branch managers only. OPERATIONAL STRUCTURE All commercial banks in Nigeria adopt the pattern of British clearing banks in their operational structures. This system is the branch banking system, which is characterized by few large banks with wide network of branches spread throughout the country. In 1980 for instance, Nigeria had only 25 commercial banks with 1100 branches, spread all over the country. By 1993 the number had risen to 120 banks made up of 66 commercial banks and 54 merchant banks with 2479 branches (CBN Annual report 1994: 15 and 50) 2.5 FEATURES OF COMMERCIAL BANKS According to Osubor (1981:25) commercial banks are the nation most important financial institutions. They are unique in the performance of service and are distinguished from other forms of financial institutions or intermediaries because of the following characteristics. 1. Commercial banks hold the nations money supply. 2. They are the only financial intermediaries whose demand deposit circulates money. 3. Commercial banks lending can create additional bank deposit through redeposit of the money by the borrower unless the public choose to holds more currency. 4. They have the sole power to create money through the monetization of debt or through a promise to pay IOU, and also the power to deposits money. 2.6 FUNCTIONS OF COMMECIAL BANKS According to Osubor and Okafor (2000), banks are the major establishment for rapid and suitable economic growth and development of any nation. They perform a number of functions, some of which includes the following: 1 Banks carryout intermediation functions by moving funds from surplus to deficit units from areas of relative surpluses to areas of relatively scarcity. 2 Funds mobilization: By establishing various banks accounts notably savings accounts, time accounts,etc, commercial banks are able to mobilize funds for investment. 3 Making payment on demand: One of the important functions of commercial banks is meeting payment on demand. They operate current and savings accounts and holders of these accounts can demand payment to bearer. 4 Credit Expansion: Commercial banks extend money to worthy customers. It can be in form of overdraft or term loan. Most banks today maintain a minimum lending rate of about 22 percent depending on Central Banks prime rate to commercial banks. 5 Inculcating of Banking habits: Commercial banks inculcate banking habits in the society by creating banking awareness and public enlightenment programmes designed to explain the role and functions of banks. 6 Financing International trade: Commercial banks through her foreign exchange department or international banking department carryout foreign exchange business, open letters of credit and help international travelers. 2.7 THE ROLE OF COMMERIAL BANKS IN ECONOMIC DEVELOPMENT OF RURAL AREAS Without prejudice the commercial banks have made useful contribution in the economic development of rural areas, such as commerce and industry. However, they provide the following service to the customers: 1. Provision of Credit: Commercial banks understand, realize and take active part in providing credit for industrial, commercial, agricultural, individual and the public sector of the rural areas. 2. Expertise Advise and Funds: Commercial banks also provide the present farmers, artisans, traders and other small-scale business located in the rural areas with expertise advice and fund. Hence in 1977, the Agricultural credit guarantee scheme was introduced and many farmers now have access to bank credit. Commercial banks have also acquired improved credit appraisal capability for the term lending, financial, advisory services and also for loan syndication. 3. Redemption of Foreign Exchange: Commercial banks can also help the potential investors in redeeming the foreign exchange. This is because Nigeria banks can act as intermediaries in the nation’s debt conversion. 4. Creation of Money: The power of commercial banks to create money is of great economic significance to rural dwellers. It results in the elastic credit system that is necessary for economic progress at a relatively steady rate of growth. If bank credits were not available, their expansion of our production facilities and operatives would be surely limited under such conditions, productive unit would be forced to maintains larger working balance to meet the fluctuating requirement of funds. Such a practice would be uneconomic since larger sum have to be held idle for some period, while during the seasonal peaks of business activity such might be insufficient. 5. Encouragement of Saving for Investment: Commercial banks perform a very important role to rural areas by providing facilities for the pooling of savings and making them available for economically desirable purpose. The saver is rewarded by the payment of interest on his savings, which are safe, and in a highly liquid form. The pooled funds are made available to businessmen in the area who may use them for the expansion of their productive capacity and to customers of their items as housing and consumers goods and services. Our society enjoys a high degree of affluence that enable us to save substantial portion of our income. A large part of these savings flows into the savings department of commercial banks. 6. Employment Opportunities: The establishment of banks in rural dwellers. And this has helped to reduce the rural-urban drift for search of job. Infact the number of people given employment since the inception of the rural banking scheme is very impressive. ANALYSIS OF THE ABOVE FINANCIAL STATEMENT USING COMPARATIVE ANALYSIS From the above financial statement, it is seen that the total assets of the current year (2007) was higher than that of the base year (2000) but the value of same item in 2006 were higher than some of 2007 items. Example cash and short term funds in 2006 was N46,36377 while that if the 2007 was 158,433251, loans and advances was 45,111,173 in 2006 while in 2007 it was N107,570,578. But in all, the value or total assets in 2007 was N328,615,114 which is higher than that of 2006 which was N174,533,866 that means that there may be increase in the value of some assets in 2007 more than 2006. On the liabilities side, it can be seen that compensation due to insured deposits was higher in 2007, while due to banks while the liabilities due to banks was higher in 2006. United Bank of Africa (U.B.A) Plc incurred taxation payable of N1, 751833 in 2007 while in 2006 N699,109. This might be as a result of increase in the number of depositors or customers. The bank also incur higher deferred taxation in 2007 than in 2006 and in shareholder’s funds, the difference was only N508, 995. 2.8 THE PROBLEMS OF COMMERCIAL BANKS IN RURAL AREAS. In as much as the commercial banks contribute a lot to the economic development or rural areas, they also have some constraints that they encountered and which cannot be over emphasized. These hindered the ability of the commercial banks to carry out fully its set objectives. However, the commercial banks are required by law to lend in short term basis. In addition, the commercial banks are retailers in the banking industry and as a result, the huge capital requirement on long-term basis of an industry is Infact against the sated principle of commercial banks. This makes if impossible for banks to lend or raise loan for petty traders in the rural areas who could not meet the requirement for good lending. LACK OF MANPOWER: Banks also experience lack of manpower in its operations. This is as a result of urban migration, which is characterized with rural areas. Hence, banking is a technical profession that requires a technical expert. It is however a known fact that over 75% of rural areas are illiterates. PROBLEM OF INSECURITY: The bank experience the problem of attack by armed rubbers, as little or no security is made available in the rural areas. GOVERNMENT POLICIES Furthermore, strict and stringent measures imposed on commercial banks by government and the central bank act as a problem to the commercial banks in their operation in the rural areas. As some of these policies made by CBN may be unfavourable to the commercial banks. LACK OF CAPITAL: Commercial banks in rural areas also lack capital. This is because people in rural areas are risk averse. They rather choose to keep their cash idle than investing it in the banks which will enable the banks to have enough capital to lend to its customers. BANKS STAFF AND CUSTOMER RELATIONSHIP: Banks head offices are all in the big cities and it is from there that they send staff to rural branches. In most cases, this results in sending an employee to a strange community with different culture, language and values from his own. Language barriers can easily cause misunderstanding, has in some cases resulted in a bank officers being referred to as disrespectful and pompous. INSUFFICIENT VOLUME OF BUSINESS The prevalent economic activity in most rural communities is agriculture. And agriculture is yet to be mechanized in Nigeria and lead to low turnover. There are no industries or import and export oriented forms in these areas and this hinders the growth of banking business. PROBLEM OF ILLITRACY; In contrast with problem view there is enormous reserve of funds in the rural areas. This is done to the fact that most of them are illiterate. PROBLEM OF ACCOMODATION: As a result of poor accommodation facilities, banks officials have been known to be reluctant in accepting transfer to rural areas due to lack of facilities in the areas. PROBLEM OF ACCESSIBILITY Poor and insufficient communication system is a threat to the control of diffused branch network in the banking industry. This is because in most rural areas, communication system is not even there; talk less of their work ability. These system include telephone, telex or radio message gadgets and bad roads lining the rural areas to the nearest urban area. This also hinders the growth of commercial bank in rural areas. CHAPTER THREE 3.0 RESEARCH METHODOLGY 3.1 Design of the Study: It is well known fact that the greater population of Nigerians lives in rural areas. These rural people know little about banking, Infact, they do not participate in the nations banking system and consequently their participation in overall economic activity of the nation is only marginal. Thus, they are not in a position to raise loans to finance their projects. The productivity of the people especially in agricultural output is very low as a result of these handicaps. It is suggested that if the rural banking scheme is efficiently expanded and if the rural people are adequately motivated to open bank accounts, the nations will witness a very significant increase in overall rural productivity given the large population of the rural areas, the increase will translate into a major increase in the gross national product. 3.2 Population and Sample of the study: In the choice of the population sample for this study, the sample was drawn from a population of the financial institutions in Nigeria from where the samples of different commercial banks are selected. The population sample is homogenous because United Bank for Africa Plc Onitsha is selected from commercial banks in Nigeria. In order to broaden it the researcher used all the various departments instead of just concentrating on the administration section only. 3.3 Sources of Data In the collection of relevant data for this study, both primary and secondary data were used. Primary Data: The primary data for the research was collected through the use of personal interview with the bank officials and customers enable the researcher obtain more information on the stated topic. The interview with the bank officials was a written interview while that of the customers was an oral interview. Secondary Data: In addition to the primary source of data collection, secondary source of data collection was employed too. This was aimed at argumentation of the data from primary source and for the purpose of reviewing related literature on the issue. This involved the extraction of relevant information from textbooks, magazines, journals, newspapers and other publications. 3.4 Method of Data Collection and Analysis: In this study, the researcher applied three method of data collection, which includes: 1. QUESTIONNAIRE: A structured written question form was distributed to the respondents in which they are required to fill and give some useful information needed by the researcher. 2. INTERVIEW: This is a verbal communication between the researcher and the respondents. It is a face-to-face interaction between the researcher and the respondent in order to generate enough information on the study. 3. OBSERVATION: This is any means of gathering data through variety of senses such as seeing, hearing, felling or smelling the object being used. This method is a means of watching, counting, measuring and recording events and people’s behaviour in such a way that the dat5a can be analyzed and interpreted. It is used because it offers the researcher the advantage of recording events as they occurred, reduction of bias and more objective data. 3.5 Technique of Data Analysis: The percentage method of analyzing data was used. The result was presented in table form or narrative form. In some case’s both are used. In the data analysis technique, the researcher applied simple statistical technique, the researcher made use of percentage. This method was used to find the percentage value corresponding to each option in each analyzed data; it helped in easy analysis and a glance comprehension of the respondent opinions concerning the research topic. 3.6 Sample and Sampling Techniques: In this study, the sampling technique used is the percentage random sampling techniques. Every unit of the population has a known probability and chance of being selected. The starting point called random start is normally chosen at random and subsequently every unit selected until the required sample size is obtained. Example : This percentage is expressed thus: R x 100 N 1 Respondent x 100 Sample size 1 Where R represents the number of respondents N represents the total number of the sample or sample size. And 100 represent the total percentage. The selection was done in simple random sampling without replacement. CHAPTER FOUR 4.0 PRESENTATION AND ANALYSIS OF DATA 4.1 DATA PRESENTATION This chapter is specifically for the references of drawing conclusion for this study based on the results of question asked the customers and bank officials of United Bank of Africa (U.B.A) Onitsha branch. Seven questions were designed for the purpose and administered by the researcher. Responses Frequency Percentage(%) Yes 12 40 No 18 60 Total 30 100 S/N Responses Percentage (%) 1 Accepting deposits Yes 25% 2 Giving business advice Yes 10% 3 Granting loan and over draft Yes 50% 4 Maintaining cash holding Yes 5% 5 All of the above Yes 10% Total 100% The data above represents the questions which the researcher used in collecting various information in compliance with the methods stated in the preceding chapter (3). 4.2 DATA ANALYSIS TABLE 1 1. Does commercial bank perform any role in our economic development? Details Respondents Percentage(%) Accepting deposit 25 25% Giving Business Advice 10 10% Granting loan and overdraft 10 5% Maintaining cash holding 50 5% All of above 5 10% Total 100% The above table shows that 100% agreed that the banks perform certain role. Out of this number 25% are of the view that the banks accept deposits, 10% also feel that the banks are there to give business advice while 50% have view that commercial banks are out to give loan and overdraft. 5% of the respondents agreed that commercial banks maintain can holding and lastly 10% agreed that the banks perform all the above functions. TABLE II 2. Are you happy with banking service in your area? No of bank customers yes No Total No of respondents 66% 34% 100% Percentage (%) 66% 34% Table II above revealed that out of 100% customers, 66% said that they are happy with the banking services in their area while 34% said that they are not happy with the banking services in their area. TABLE III 3. How can Banking services be improved? Details Responses No of Responses Percentage (%) Huge interest rate Yes 28 20% Granting loan and overdraft Yes 20 20% Quick services Yes 50 50% Giving business advice Yes 2 2% Total 100 100% The table above showed that out of 100 customers interviewed, 20% of them agrees that banking services can be improved by giving huge interest rate to customers, 28% were of the view that their services can be improved by granting loan and overdraft and 50% go for rendering quick services to their customers while 2% of the customers agreed that it can be done by giving business advice to customers. Table IV 4. Has the services rendered by commercial bank improved the welfare of their customers in rural area? Type of bank customers Responses Responses Percentage Saving account holders Yes No Current account holders 66 34 100% Fixed deposit account holders 66 34 100% In the above table 66% of the bank customers agreed that their living conditions have been improved by the services provided by the commercial banks. Table V 5. Does your bank perform some roles in the economic development of this area? Responses No of responses Percentage Yes 100% 0% No 100% 0% The table above reveals that the commercial banks in the rural area perform some roles in the economic development of the areas. Such roles include accepting deposit, granting loan and overdraft to customers, acting as agent of payment to the customers and also giving business advice to customers. Table VI 6. Does your bank encounter any problem in discharging her duties in that area? Details Responses No of respondents Percentage Accommodation Yes 2 2% Staff No 1 1% Social facilities Yes 2 2% No of bank officers 5 5% In the table above, out of five banks officials interviewed, 2% is of the view that their problem is accommodation, 1% is of the view that they are lacking competent staff while 2% said that their problem is lack of social facilities in the area. Table VII 7. Does the government give any assistance to commercial banks? Assistance Responses No of responses Percentage (%) Aid and grants Yes 20 20% Business advice Yes 20 20% Protect from fraud Yes 40 40% None of the above Yes 20 20% The table above reveals that the commercial banks in rural areas receive some assistance from the government and about 20% of the assistance are in form of aid and grants. Then it is done only where the banks are in trouble. Again, another 20% of the assistance is in form of business advice guidelines. The 40% is in form of protection from fraud in which case they provide police security to guide the banks against thieves. 4.3 TEST OF RESEARCH QUESTIONS From the analysis made, the research question can be tested with this formula using percentage method. Percentage % = F * 100 N 1 Where F = total number of frequency N = total number of respondents TEST FOR QUESTION ONE 1. What are the problems encountered by commercial banks in rural areas? Responses Frequency Percentage Yes 35 70% No 15 30% Total 50 100% Percentage = 35 x 100 50 1 = 70% 15 x 100 50 1 = 30% Decision Rule: The table above showed clearly that 35 respondents representing 70% said yes, meaning that commercial banks encountered a lot of problems in the rural areas while 15 in 30% are of the view that commercial banks encounters no problem in the rural areas. TEST FOR QUESTION TWO 2. Does commercial banks perform any role in out economic developments? Responses Frequency Percentage% Yes 29 58% No 21 42% Total 50 100% Percentage 29 x 100 50 1 = 58% 21 x 100 50 1 = 42% Decision Rule: Out of 58 respondents 29 said that commercial banks perform roles in our economic development while only 21 out of 42 said that No. So we decide that commercial banks perform a lot of roles in our economic development. TEST FOR QUESTION THREE 3. How can the banking services in your area be improved? Responses Frequency Percentage % Yes 35 70% No 15 30% Total 50 100% Percentage 35 x 100 50 1 = 70% 15 x 100 50 1 = 30% Decision rule: 35 respondents representing 70% said yes that the banking services in their areas need to be improved while only 15 respondents representing 30% said no. So we conclude that the banking services need to be improved in rural areas. 4.4 DISCUSSION ON FINDINGS The researcher identified many questions which relates to the role of commercial banks in economic development of rural areas. It was as a result of these questions while the study aims at achieving that gave rise to the question in the questionnaires, which the researcher has just analyzed. It was on these questions that this discussion on findings will be based. The finding showed that many of the customers agreed that services rendered by commercial banks improved their welfare and those commercial banks performs important roles in the economic development of their area. The customers are also of the view that banking services need to be improved especially in rural areas. On the side of the bank officials based on the findings, they are of the view that they encounter a lot of problem in discharging their duties in the rural areas which involves lack of accommodation, lack of social facilities etc, and therefore, need some assistance of the government for proper services. CHAPTER FIVE 5.0 SUMMARY, CONCLUSION AND RECOMMENDATION 5.1 SUMMARY No bank is happy over these increased criticisms although perfections have never been reached in any part of the country. Surely, the bankers are always making vigorous attempts to give efficient services to their customers. The public expect bankers to improve the standard of services in order to ensure even development among urban and rural areas. Therefore, it is only banks that are expected to improve upon their services to satisfy their customers and will continue to enjoy the patronage of the people. The present situation where customers are neglected to the background and treated with non-challant attitude does not augur well for the banks. In this write-up, the researcher high-lighted the contribution which banks can make towards the economic development of rural areas. 5.2 CONCLUSION Conclusively, commercial banks have greater parts to play in the economic development of rural of Nigeria. If there have been enough commercial banks in the rural areas. I believe that Nigeria will not be seen as under developed country. On that note, commercial banks are encouraged to open branches in rural areas. Again, banks are not expected to show favoritisms or particularity in given of loans and overdraft. 5.3 RECOMMENDATIONS The researcher wishes to make the following recommendation which would facilitate the affective carrying out of banking roles in rural areas. Banks should put a stop to lending to only those who have accounts with them. To this, the researcher recommended that any interested person who meets their requirements should be given loan. Poor people should also be given loan. Government should try to define the role of commercial banks to the rural dwellers so as to help them understand clearly what the roles of commercial banks are all about. Through this, rural areas can react positively and not negatively to commercial banks. All commercial banks should actively involve in the saving and investment process. The rural dwellers should continue their various business in rural areas as there should be enough money and should not drift to urban areas so that The economic development of rural areas should be enhances by the commercial banks. Finally in order to alleviate the unemployment problem that is common in our rural areas, commercial banks should try to device a means through which some of our graduates will be absorbed and employed. BIBLIOGRAPHY Adekanye Elements of Banking in Nigeria. Grahen Burn Publishers 1983. Anyanwu A. Research Methodology in Business and Social Sciences. Owerri Canum Publishers Nig. Ltd 2000. Asuzu C.C,N Elements of Banking in Nigeira. Ekwulobia, Theo Onwuka and sons Publishers 1995. Ayo Olusanya A New Approach to Economic of West Africa. Ijebu-ode, Kola Sonya Press Nigeira Ltd 1978. Ifebueme N Principles of Staff Training on Professional Banking in Nigeria. Jos, published by the Nigeria Institute of Bankers 1983. Kano N.O.N Comparative Banking with Cotemprary Issues. Owerri Millenuim Publishers Ltd 2003. Nwankw G.O Bank Management Lagos Malt House press Ltd 1991. Osagie E Element of Economics, Principles, Policies and Essay. Ibadan, Univesity publishing press ltd 1975. Osubor and Okafor Institutional Finance (A fundamental Approach). Owerri Joag International press Lyd 2006. APPENDIX School of Business Studies Department of Banking & Finance Federal Polytechnic Nekede, Owerri- Imo state. Dear Sir/Madam, Request for Response to Questionnaire I humbly request for responses to questionnaire. This questionnaire is purely for academic exercise. It is therefore important that you attempt to be fair as possible in your answers so as to avoid wrong results. Your kind co-operation is highly needed as this will contribute a great deal to the study being carried out. Thanks Yours faithfully Ifezue Ifeyinwa .U. QUESTIONNAIRE 1. Name of Respondents ______________________ 2. Post/Designation _________________________ 3. Name of Organization ______________________ 4. Department/Section _______________________ Please tick (v) where appropriate or detect Yes or No where applicable. 1. Does commercial bank perform any role in our economic development? a) Accepting deposit ( ) b) Giving business advice ( ) c) Maintaining cash holdings ( ) All of the above ( ) 2. Are you happy with banking services in your area? Yes ( ) No ( ) 3. How can banking services be improved? a) Huge interest rate ( ) b) Granting overdraft ( ) c) Quick service ( ) d) Giving business advice ( ) 4. Has the services rendered by commercial banks improve the welfare of the customers? Yes ( ) No ( ) 5. Does your bank perform some roles in the economic development of this area? Yes ( ) No ( ) 6. Does your bank encounter any problem in discharging her duties in this area? Accommodation ( ) b) Staff ( ) c) Social facilities ( ) 7. Does the government give any assistance to commercial banks? a) Aids and grants ( ) b) Business advice ( ) c) Protect from fraud ( ) d) None of the above ( )