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Nigeria’s development of community banking followed the president’s 1990 speech on the budget.
As a result, the first community bank was founded in Kaduna State’s Alheri Local Government Area in December 1990.

According to the definition, a community bank is a bank for the community that is exclusively designed for the growth of the rural community.

The bank functions as a rural development bank in this sense. In addition, it is a self-supporting financial organisation that a community or set of communities owns and manages to offer financial services to that community.

The community banks implementation committee will only consider proposals for community banks that have a minimum equity share capital of N250, 000.

Community banks were founded primarily to support profitable endeavours, particularly in rural areas.
They are designed to make it simpler for rural producers to acquire loans, which will help the Directorate of Foods, Roads, and Rural Infrastructure’s activities run more smoothly.

The Directors of community banks would therefore be required to take a very special interest in learning about, comprehending, and encouraging their clients to increase their productive potential by participating in these activities.

Our experience with rural development has demonstrated, in part, that efforts to strengthen the rural area’s economic foundation are constantly hampered by a lack of and limited access to loanable capital.

The previous administration’s economic strategies had depended on orthodox banks’ rural branches and development banking to solve this issue.

However, it was noted that conventional banks’ sophisticated methods of operation, legalistic insistence on collaterals, and extremely constrained geographic coverage made them insufficient or unable to serve the less-privileged and technologically-advanced members of our society who live in rural areas.

The Babangida administration came up with other, more suitable means of delivering credit as a result of the banking institutions’ disappointing results, leading to the creation of community banking in 1990.

It became a unit banking institution thanks to the law establishing community banks. This signifies that it is against the law to share branches. Community banks offer full banking services, with the exception of restricted foreign exchange transactions.

Additionally, it is only available to smaller financial institutions.
In fact, impoverished, rural, and urban residents’ informal credit systems were controlled by rotating savings and credit associations, or “Isusu,” which also served as a sound foundation for community banks.

Although it may serve as a sound foundation for the development of a rural banking system, the “Isusu” was cumbersome and imprecise. Community banks were designed to take the role of this and teach rural residents disciplined banking practises.

The community banks were hesitant to open branches in rural areas, presumably due to a lack of basic utilities, in addition to the underdeveloped and naive banking habits of the general public.

This non-developmental approach by commercial banks was what inspired the government’s strategy on rural banking initiatives.

The projects required traditional banks to offer rural banking. The purpose of this plan was to force traditional banks to establish offices in developing rural areas.

Economic development refers to the process of enhancing a nation’s wealth or the wealth of its subgroups, such as by raising food output, etc. At the current stage of our growth,

projects and programmes cannot make any substantial progress or impact unless they focus on those overall areas, therefore the change of attention to grass root development is a matter of need.

If not, the masses of people who live in rural poverty will continue to be a burden on the government’s efforts to promote development. In other words, it is crucial that we help the low-income rural population. if society is to experience real economic change.

Therefore, regardless of the extent of that desire, the government intends and desires that every Nigerian who is involved in a productive economic activity have access to loanable funds.
Community banking was established to fill the gap between the traditional banking system and the people’s bank.

Even though the government is making a lot of effort to formulate policies that are intended to improve the economic situation of rural residents, there are some things that work against it.

The goal of community banking is to support rural community development, however from an operational perspective, community banks make little to no effort in this direction.

Customers are given money by commercial banks, and community banks do the same by requesting collateral from them. However, not all people who live in rural areas can afford to put up collateral in exchange for a loan facility.

This bank lacks the necessary capital to satisfy a tenable operational standard since it lacks the same level of banking expertise as foreign banks and is therefore unable to do so.

Due to this insufficient capital, loans can be granted to rural residents insufficiently. People don’t save much, thus there isn’t much money to deposit in banks, which causes extra issues for community banks.

Rural residents believe that banks are just for the wealthy and elite members of society, despite the fact that community banks have trained personnel on staff who can provide the rural population with accurate banking information.

The following statement of difficulties must be given weight for the purposes of this study:

How may rural borrowers acquire loanable cash to expand their economic activities?

ii. Other than requesting actual security, which rural residents would not be able to offer, how else might the loans be secured?

iii. What changes may be made to rural banking practises to promote rural development?

Examining the role of community banks in rural development through a case study of Uli Community Bank in Anambra State’s Ihiala Local Government Area is the main goal of this study.

In addition to this main goal, the study would ascertain whether

(a) Community banks actually carry out their responsibilities, which include providing financial services to rural populations.

(b) Community banks educate rural residents about banking practises, closing the credit gap in their communities.
How may loans be secured without requesting tangible collateral?

(c) The availability of loans has decreased the rate of rural to urban migration.

(d) The availability of loans to rural residents has any impact on the level of employment?

The amount of loans that are available for borrowing depends on how rural residents feel about using public funds.

(e) Community banks are carrying out their command/development performances in terms of raising savings and funding economic growth.

This study will go a long way towards outlining the appropriate functions of community banks in their respective fields of operation. As a result, in Nigeria, the community development/association is seen as the main proponent of a community bank.

Since community banks are relied upon by the poor, it is hoped that the findings of this study will encourage them to increase their efforts and aid in carrying out their duties successfully.

In fact, when discussing community banking, it should be clearly understood by the general public as a tool for grassroots development and a way to instill sound banking practises among rural residents.

Otherwise, the goal of community banking, which is to mobilise savings and finance economic activity, will be hampered.
However, it is important for us to understand how community banks affect rural development.

1. Has the introduction of community banks helped rural residents develop banking habits?

2. Does the collateral issue limit the expansion of economic activity in rural areas?

3. Is there general work at Uli Community Bank near where she lives?

4. In what ways are Community Banks Limited in their ability to serve those who live in rural areas?

This study’s focus is on the role community banks play in rural development, and it takes a close look at how rural residents can obtain loanable funds.

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