THE IMPACT OF MICROFINANCE BANKS IN STIMULATING THE BANKING HABIT OF RURAL DWELLERS IN NIGERIA (A CASE STUDY OF ROYAL TRUST MICRO FINANCE BANK, IJU-ISHAGA, LAGOS.

ABSTRACT

Microfinance banks are banks that provide banking or financial services other than services provided by commercial banks targeted at people living in the rural areas. Microfinance banks have been able to improve the banking habit of the rural dwellers i.e. the degree at which the rural dwellers make use of baking services or patronize banks. In view of even economic development, microfinance banks have played a great role by providing banking and financial services to peasant low income earners, rural dwellers and small scale business.

TABLE OF CONTENTS

Title page                                                                                            i

Certification                                                                                        ii

Dedication                                                                                          iii

Acknowledgement                                                                              iv

Abstract                                                                                              v

Table of contents                                                                                vi

CHAPTER ONE

CHAPTER ONE                                                                                  

1.0       Introduction                                                                            1

1.1       Statement of the Problem                                                       1

1.2       Objectives of study                                                                 1

1.3       Statement of hypothesis                                                         2

1.4       Significance of the study                                                        2

1.5       Scope and limitation of the study                                           2 – 3

1.6       Historical backgrounds of the case study                               3

1.7       Organization chart of the case study                                      3

1.8       Definitions of terms                                                                4

CHAPTER TWO                                                                                                    

2.0       Literature Review                                                                   5

2.1       Banking habit                                                                          5

2.2       Microfinance framework / guidelines                                     5 - 6    

2.3       Overview of microfinance banks activities in Nigeria            6 - 7

2.4       The goals of microfinance banks                                            7

2.5       Participants in microfinance banks                                         7

2.6       The roles and responsibilities of stakeholders                         7 - 9    

2.7       Basic features of microfinance banks                                     9         

2.8       Microfinance banks and economic development                    10       

2.9       Microfinance banks and rural development                            10         

CHAPTER THREE                                                                                               

3.0       Research Methodology                                                           11

3.1       Area of study                                                                         11

3.2       Sample Size                                                                             11       

3.3       Schedule of questionnaire used                                              13 - 14

3.4       Instruments of data collection                                                11

3.5       Method of data analysis                                                         12

3.6       Limitation of data collection                                                  12       

CHAPTER FOUR                                                                                                   

4.0       Data presentation and Analysis                                              13       

4.1       Presentation and analysis of data                                           13

4.2       Data interpretations                                                                13 - 16

4.3       Hypothesis testing                                                                  17       

4.4       Summary of findings                                                                          20 – 21           

CHAPTER FIVE                                                                                        

5.0       Summary, conclusion, recommendation                                 22

5.1       Summary                                                                                 22

5.2       Conclusion                                                                              22

5.3       Recommendation                                                                    22 - 23

            References                                                                              24

            Appendix                                                                                25 – 26

CHAPTER ONE

1.0       INTRODUCTION

The Central Bank of Nigeria in December 2005 published regulatory and supervisory framework for the regulation of microfinance banks and mandated all community banks operating in the country to submit to it plans for conversion latest by September 30^th, 2006 and to finally convert latest 31^st December, 2007.  

The practice of microfinance banking in Nigeria is culturally rooted and dated bank to several centuries. The traditional microfinance institution provides access to credit for the rural and urban dwellers and low income earners. They are mainly of the informal Self Help Groups (SHGs) or Rotating Saving and Credit Associations (RSCA) types. Other providers of microfinance services includes saving collector and cooperative societies.  

In order to enhance the flow of the financial services to the Nigeria rural areas, Government has in the past initiated a series of publicity financed micro credit progarmmes and policies targeted at the poor.    

1.1       STATEMENT OF PROBLEM

This research work will basically treat the impact of microfinance banks in stimulating the banking habit of the rural dwellers in Nigeria.

Furthermore to look into the features of microfinance banking and how it stimulates the banking habit of the rural dwellers in Nigeria.  

1.2       OBJECTIVES OF THE STUDY

The objectives of the study is to know the impact of microfinance banks on the banking habit of people in Nigeria and also to make recommendation on how such microfinance banks can improve their services so as stimulate the banking habit of the people in Nigeria especially those living in the rural parts of the country.

Also to know the rapid enhancement of the development of productive activities in the rural areas, hence, the improvement of the economic status of both the rural people and the promotion of the emergence of an effective and integrated national financial system that responds to the needs of the whole economy.

1.3       STATEMENT OF HYPOTHESIS

Hypothesis I

Ho:      Microfinance banking does not enhance the development of banking habit

Hi:       Microfinance banking enhance the development of banking habit.      

Hypothesis II

Ho:      Microfinance banks services are geared towards the peasants rural dwellers and small scale business with a view of developing the banking habit of people.

Hi:       Microfinance banks services are geared towards the rich, urban dwellers and large scale business with a view of developing the banking habit of people.

1.4       SIGNIFICANCE OF THE STUDY

The study has revealed the importance and the impact of microfinance banks on the banking habit of rural dwellers, most especially the contributions of Royal Trust Microfinance banks on the development of the banking habits of people in its environs.

The result of the study will be useful to the following:

i.                    Government: The result will be useful to the three tiers of government as well as the arms of government in formulating their respective policies as touching the monetary and economic policies.   

ii.                  Communities: Local communities (towns and villages) will find the result of the project useful in the area of determination and creation of small scale community based employment opportunities for the dwellers.

iii.                Individuals and Corporate Bodies: This set of people will find the result of the project useful in the area of mobilization of credit for smooth running of their businesses in the case of corporate bodies and in the area of building savings for self actualization.

1.5       SCOPE AND LIMITATION OF THE STUDY

This research is centered on the impact of microfinance banks in simulating the banking habit of rural dwellers in Nigeria. Royal Trust Microfinance Bank is used as a case study for the purpose of the research work.

This research wok has suffered some set back by ways of saving access to some vital information and documents. Also on the case of the research work, there is a financial problem faced before the completion of this research work.  

1.6       HISTORICAL BACKGROUND OF THE CASE STUDY

Royal Trust Microfinance Bank was incorporated on February 21^st, 1992 as Ifako / Iju Ishaga Community Bank. In the year of incorporation, the bank carried out community banking services. The services performed by the bank include opening of savings, time and demand deposit accounts and Ajo or Esusu daily contributions from market women or sole traders. 

However, this name was changed to Royal Trust Community Bank Limited effective from July 31^st, 2003 as a result of re-engineering and recapitalization processes by the new stakeholders.

The bank later changed to Royal Trust Microfinance Bank due to the recapitalization and restructuring of community banks to microfinance banks by the Central Bank of Nigeria. The corporate address of the bank is at 25, Agbdo Roa, Iju-Ishaga, Lagos.

1.7       ORGANIZATION CHART OF THE CASE STUDY

1.8       DEFINITIONS OF TERMS

The following terms are briefly explained:

i.                    Microfinance Banks: These are banks that provide banking or financial services other than services provided by commercial banks targeted at people living in the rural areas.

ii.                  Banking Habits: This can be described as the attitude of people towards banking or financial institutions. That is the degree at which people make use of banking services or patronizes banks.      

iii.                Rural Dwellers: These are the people living in the rural parts of the country or those that live in villages or certain communities in the country.  

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