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THE GROWTH OF ALTERNATIVE CREDIT SYSTEMS IN NIGERIA

ABSTRACT

No bank, be it commercial, Merchant, Community or specialised can survive in the long run without a credible and properly coordinated credit policies. This particular function is so fundamental to banking that no mission statement of any banking institution can be meaningful without proper regard to its credit policy objectives. A community bank has been defined as a self sustaining financial institution owned and managed by a community or a group of communities for the purpose of providing credit, deposit, banking and other financial services to its members largely on the basis of their self recognition and credit-worthiness. The concept of community banking therefore, is hinged on the provision of credit to the rural and sub-urban populace. As former President Ibrahim Babangida said in his address on 31st December, 1990, “We are convinced that such a revolutionary transformation of credit provision in the rural areas, where most of our communities reside will lead to enormous benefits to the rural and sub-urban populace as well as to the overall growth of our national economy”. The position of community banks within Nigeria’s Finance Industry lies in between the two extremes of financial institutions, that is the Merchant Banks who deal with big customers and handle heavy accounts and the Peoples’ Bank which initially provided credit of only N2,000 for any one person at a time. However as the Naira continued to loose its purchasing power and credit expansion becoming more and more difficult for existing banking institutions and inspite of the imposition of ceiling after ceiling, year after year by the regulatory authorities specified limits were therefore only attained by adding accumulated interest to unpaid balances on borrowers or debtors accounts. Consequently therefore, commercial banks who could have provided some respite for the needy were severely handicapped. Thus while the value of Naira continued to dwindle, the relevance of the Peoples’ Bank as a source of credit also dwindled considerably. The Government observed that the sophisticated mode of operations of the commercial banks, their legalistic insistence on collaterals, and then very limited geographical coverage, rendered than inadequate and incapable of dealing with the unsophisticated rural dweller and the less privileged in the lower strata of our society. It was therefore the unsatisfactory outcome of these banking systems that prompted Government to conceive other more appropriate systems of credit delivery. However what the Government did not tell us is whether the Peoples’ Bank as a source of credit for business development was no longer adequate. From all that have been said above, one fact is clear, rural dwellers, who constitute the real productive sector of the largely agrarian Nigerian economy must be adequately given access to credit. Credit is thus intended to be a very important function of all community banks.

TABLE OF CONTENT

Title page- – – – – – – – – i

Approval page – – – – – – – -ii

Dedication – – – – – – – – -iii

Acknowledgement – – – – – – – -iv

Abstract – – – – – – – – – -v

Table of content – – – – – – – -vi

CHAPTER ONE

INTRODUCTION – – – – – – – -1

1.0 Background of the study – – – – -1

1.1 Statement of the problem – – – – -5

1.2 Purpose of the study – – – – – -6

1.3 Significance of the study – – – – -8

1.4 Research questions – – – – – -9

1.5 Scope of the study – – – – – – -10

CHAPTER TWO

LITERATURE REVIEW – – – – – – -11

CHAPTER THREE

Research methodology – – – – – – -39

Design of study – – – – – – – -40

CHAPTER FOUR

Presentation, analysis and interpretation of data – -48

CHAPTER FIVE

Summary of findings – – – – – – -60

Conclusion – – – – – – – – -61

Recommendations – – – – – – – -62

Suggestions for further research – – – – -64

References – – – – – – – – -65

Appendix I – – – – — – – – -68

Questionnaire. – – – – – – – -69

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