INTRODUCTION

In recent times much has been said as regards the neglect of the rural area in Nigeria in terms of the development and transformation facilities and services such as electricity. Pipe born water, good roads, hospital etc. as well as the provision of banking facilities, to help improve the standard of life and opportunities open to the rural dwellers.

It has been argued that over years, paper development strategies and policies for the rural areas have not been pursued. This has led to a haphazard, not well defined and problem by – problem policy or rural development in Nigeria. The urban areas have been developed at the expense of the rural areas. Some people have equated development of urban areas to the development or rural areas; hence the pre-occupation was with the modernization of the urban centers. This type of the development effort was based on the notion that once the urban areas were modernized, the effect would, as a matter of cause tricks down to the rural areas. Therefore in pursuit of it, no distinction was made between the development of urban and rural areas.

Given the lopsided nature of Nigeria development effort with its urban bias, many scholars, policy makers and government have contended that there is no way we can simultaneous develop and modernize urban and rural areas and that infact one of the obstacles to developments is the existence of undeveloped rural economy.

Consequently, Mobogunji (1980) asserts that after many years of inadequate emphasis, during which pride of place was given to industrializations, it is now becoming generally recognized that rural development represents perhaps the only logical way of stimulating overall development.

This has led to the pursuit of different policies and strategies for the transformation and development of the rural areas. One of such policies is the rural Banking Scheme embarked upon in July 1977. The banking industry especial the commercial banking sub-sector was given this challenge of extending banking services to the rural areas in particular and the Nigeria economy in general. The banking sector has been visualized as having the potentials for promoting economic development of any nation.

Therefore Agu (1986) has pointed out that the mobilization of financial resources is the first step to resource mobilization for development purpose. But the mobilization of financial resources requires an institutional arrangement which encourage and mobilizes saving into productive investment. In this way, the establishment of bank branches in the rural areas and the manner in which they conduct their business activities and perform their development role are particularly important since according to Lipsay (1983) if they do not function monthly, the link between private saving and investment may be broken and the problem of finding fund for investment greatly intensified.

Unfortunately, the above warning by Lipsay was not headed to by commercial banks in Nigeria. As such, inspite of the efforts made by the various government in the rural areas, the people could not fit into the conventional banking system. In order to secure even the modes of loans, they were required to fill several forms, obey certain rules and provide some form or guarantee or collateral. All in, rural people generally were made to feel lost in the modern environment of banking in the country. As a result developments at the grassroots level has been stalled. This was the rational for government continued search for a solution to monitize the rural economy. 

The only institutions that can be used as the magic wand are those financial houses, which are completely rural based, and not outposts of profit maximizing financial institutions, those institutions, which understand the rural people, are very willing to assist in solving their problems without necessarily attaching a lot of importance to profit maximization.

In view of the above, the Federal Government introduced community banking as a strategy to facilitate rural development, as there is a general belief that commercial banks are not fared well in the realization of government objectives as rural development.

Community Banks was conceptualized as a solution to the problem posed by the dearth of credit at a period when the directorate of Food, Road and Rural Infrastructure (DFRRI) was making some attempts at rural regeneration. The question then was, how could the credit need be resolved at the rural level when formal conventional leading institution for reasons of procedure and cost could not effectively manage the situation? Given the usual attitude of Nigerians to government institutions and property, it was through their credit institution based on private initiatives and adopted to the rural culture, institutions and security stood a better chance of success. The community-banking scheme was thus born in the cradle of traditional peer pressure sanction and community ownership.

At present, community-banking institutions is the only entrenched in the wheel of development to monetise the rural and sub-urban economy vis-visa rural development?