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The Effect Of Socio-Economic Importance Of The Banking System In Rural Area Development


This research work, assessing the effect of the socio economic and its importance in rural development through the banking system. A case study of Omu-Aran micro-finance bank will be carried out to measure to what extent the rural commercial banks have been able to involve the inhabitant of our rural areas in economic activities in term of awareness and influence on their system of living through banking.

In concluding the research the research, related literature to research will be consulted. This will also be followed by a field work in which questionnaire and personal interview will be administered as a method of obtaining primary data from respondent who will be ion rural areas.

From the data the following finding will become apparent that a tremendous impact has been made by commercial banks on rural communities after the phases of the rural banking programme in Nigeria since inception moreso, profit and industrialization is very importance in the development of the rural areas which implies that government must closely work hand to hand with rural banks.

Finally, policy and recommendation will be reached through the provision of loan facilities to farmers, boost agricultural production there by making impact fat in rural area. And the industrialization serves to make most of the rural bank more profitable.

These project work is divided into five (5) chapters.

Chapter one consist of the introduction or background of the sturdy, statement of the  problem, objective of the study, significant of the study, scope of the study, limitation of the study, definition of terms and historical background of the case study.

Chapter two consist of the literature review

Chapter three consist of the research methodology

Chapter four consist of the data presentation and analysis

Chapter five consist of the summary, recommendation and conclusion.


Title page





Table of Contents


1.1    Background of the Study

1.2    Statement of the Problem

1.3    Objective of the Study

1.4    Significance of the Study

1.5    Scope of the Study

1.6    Limitation of the Study

1.7    Definition of Terms



2.0    Review of Related Literature

2.1    The Concept of Banking

2.2    Concept of Micro Finance

2.3    Microfinance Product and Service

2.4    Micro Financing, and rural Poverty Reduction

2.5    Overview of Micro-Finance Bank in Nigeria

2.6    Roles of Micro Finance Bank in Promoting Entrepreneurship in Rural Areas

2.7    Challenges Facing Microfinance Banks

2.8    Flaws of Micro Finance Institutions in Nigeria


3.0    Research Methodology

3.1    Historical Background

3.2    Sampling Technique

3.3    Sampling Method Adopted

3.4    Hypotheses Formation

3.5    Research Population and Sample

3.6    Research Design

3.7    Research Instrument

3.8    Administration of the Instrument

3.9    Method of Data Analysis


4.0    Results, Finding and Discussions

4.1    Presentation of Result in Tables and Discussions

4.2    Proof of Hypotheses


5.0 Summary, Conclusion and Recommendation

5.1 Summary

5.2 Conclusion

5.3 Recommendations



Banks study a very useful and dynamic role in the economic life of every modern nation.  It has been ascertained from studies that the evolution of the commercial banks in the 18th and 19th centuries paved way for industrial revolution in Europe.  The banking sector therefore, occupied a certain position or remain germane to the development of any nation.

It should be noted that developing countries (Nigeria inclusive) are faced with the hearculean task of sustaining economic growth. It is against this back drop that various sector of the economy, the banking sector in particular in Nigeria witnesses various reforms to help stabilize the economy of the country.

In1990 the federal government gave approval for the establishment of community based bank to cater for the rural dwellers to achieve the nation’s objective of a holistic appreciable development.  The banks are to develop rural areas through mobilization of excess funds in circulation, inculcating banking habit in people and making credit facilities readily available to the people towards their socio economic development.  Apart from mobilization of excess funds from the society for investment purpose by the borrowers, it is also meant to promote commerce through transfer of funds from the surplus or deficit spending unit which lead to an aggregative long-run development.


To this end, the banking sector, therefore could be seen as the nerve centre or the hub on which the economic development of a nation depends.  It therefore behooves  the ruling class to put in place a pragmatic policy that will accord the sector enabling environment to function.


Majority of the people in urban areas have come to terms with the fact that the banking system play a significant role in socio-economic development. However quit a large number of the populations of rural dwellers are obvious of myriad of opportunities that abound in this sector.  While the urban populace harness and tap the potentials in the banking system, the rural dwellers through much persuasion still not really there  yet in terms of socio economic development trough banking system.


This project work is Horne out of quest to asserting the effect of socio-economic importance of the banking system in rural area development.

In view of this, the subjective of study are aptly highlighted below:

  1. To examine the various steps taken towards rural economic development.
  2. To highlight the theoretical framework of the community banking as to fool for grass root social and economic development.
  3. To evaluate the communities banks performance viz-a-viz social economic transformation in their area of operation.
  4. To identify the basis for community banks in Nigeria.
  5. To assess the effectiveness of the management structure and modalities of operation toward achieving desire result.
  6. To look at it’s limitation as business entity.
  7. To appraise the problem and prospects.
  8. To proffer suggestion and recommendation that will be of help to all the stake holders.


The study that has no importance attaches to it will be more or less an exercise in futility.  It is therefore imperative to state that the study intends to unravel various opportunities that micro-finance banks have in stocks for the economic wellbeing of the lest community.  In this regards the study will look at the partnership between the national directorate for employment(NDE) and the micro-finance banks towards provision of loans for agricultural development and small and medium (scale) enterprise (SMEs), so as to create awareness for availability of such loans.

Besides, findings from this study could be of help to the government to measure the performance of the micro-finance bank in handling various loan packages meant for the populace under their jurisdiction. This will also include ascertaining if the loan is actually being given to the right set of people or project or diverted for another things outside the primary purpose.


In general terms, the study is meant to assess the socio-economic importance of the banking system in rural area development.  However, in particular terms the study will specifically concentrate on the underlying policies of the government for the establishment and management of community banks coupled with it’s mode of operation with respect to micro-finance bank, Omu-Aran, Kwara state, Also particular attention is paid to their products-target market and performance viz-a-viz deposit.


For every meaningful and appreciable result to be achieved in a study, then, there will be one constraint or another, this could be in various forms and some may not even be investigated at the outset of the study.  In carrying out this study, encountered constraints are sum up as:

  1. Finance: Adequate Capital needed to carry out holistic study was not there.
  2. Inadequate Information: There was difficulty in getting the needed information from the right source and some rural dwellers are not ready to give out information.
  3. Bureaucracy In Management: The bureaucratic nature of the management of the bank slows down the pace of work.
  4. Secrecy: The attitude of keeping secrecy over some detail, that could be of further help also serves as a constrain.
  5. Discrepancy of Data: In some minor cases, the data obtained from the people contrast sharply with that of the bank.
  6. Lack of Good Record: Getting the historic record of the bank was an uphill task.


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