Rural banking is the most common type of banking obtained in rural areas in Nigeria. This type of banking is obtainable in the remote areas of Nigeria. The majority of banks in Nigeria have their branches in locations that are not exactly located in the rural areas.
This has led majority of rural dwellers to pay certain transportation costs in order to reach some bank branches in Nigeria.
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However it should be noted that banks that want to expand effectively cannot do so by neglecting the aspect of rural banking.
A lot of banks are beginning to realize this and therefore are putting much of their outreach to rural areas. Rural banking in Nigeria still has a long way to go as a lot of rural dwellers cannot bank if they do not cover certain transportation costs in the process of going to the banks.
Advantages Of Rural Banking
- Customer Outreach: It is the wish of majority of banks in Nigeria to reach more customers. One way that they can do this is by establishing more banks in the rural areas as the banking needs of rural dwellers continue to increase in Nigeria. The more these banks create rural branches, the more customers they will be able to reach. The information released by World Bank on rural banking in Nigeria shows that the rate of banking by rural dwellers will increase by 5 times what it used to be in the past 10 years. Nigerian banks can apply this information effectively by creating more branches of their banks in the rural areas. Their customer outreach will then improve when they do this.
- Employment: More banks certainly means more employment as there is need for people to man every bank branch in Nigeria. The creation of more banks in the rural areas will definitely improve employment opportunities for Nigerians. This is also a good way of fighting unemployment in Nigeria. The more these rural branches are created, the more people tend to get employed.
- National Economic Development: The creation of more rural banks will develop the economy of Nigeria as the banking sector remains among major factors for the development of the Nigerian economy. The Nigerian government can encourage the creation of these banks as this will surely help the Nigerian economy.
- Agricultural Development: Yes, rural banking promotes agriculture as the majority of agricultural activities in Nigeria take place in the rural areas. The creation of loans in Nigeria is not enough without bringing these banks closer to those who are in more need of them. It is not enough for the Nigerian government to create agricultural subsidies without taking more measures to bring these banks closer to these farmers who are mostly in the rural areas. Bringing these banks closer will surely promote agriculture in Nigeria.
Problems Of Rural Banking In Nigeria
Rural banking in Nigeria is still facing a lot of challenges. They are:
- Inefficient support of banks by the central banking system: Nigerian banks are not getting the best of support from the Central Bank in Nigeria. According to the information released by World Bank on central banking support on certain countries, the support offered by the Central Bank Of Nigeria to run their banks in the most effective manner is at 48.87% which is yet to meet the pass mark of 50% for banks worldwide. This is a disturbing fact to the need for banks to expand their branches in rural areas.
- General low performance of the banking sector in Nigeria: The performance of the banking sector in Nigeria is generally low. This has an effect on the ability of these banks to expand to the rural areas. The low performance of Nigerian banks has disrupted the development of rural banks in Nigeria.
- Poor Infrastructures In The Rural Areas: The poor infrastructure in rural areas in Nigeria has discouraged a lot of banks in Nigeria from expanding their outreach to rural areas. Roads and electricity are some factors these banks consider before going ahead to establish their branches in the rural areas. These facilities are not yet efficient in the rural areas so that more banks will be encouraged to set up their branches in the rural areas. When infrastructural development takes place in the rural areas, it will lead to a corresponding development in the banking sector as it will encourage more banks in the rural areas.
Solutions To The Problems Of Rural Banking In Nigeria
- Increased support by the Central Bank Of Nigeria: The Central Bank of Nigeria should increase the support given to banks as stipulated by World Bank in order to encourage their activities in the rural areas. Banks in Nigeria cannot fully operate in Nigeria without adequate support from the Central Bank of Nigeria. The Central Bank Of Nigeria should endeavor to meet the World Bank minimum of 50% support to banks in Nigeria. Any banking system in any country that has up to 50% support for its indigenous banks will definitely satisfy the the banking demands of the citizens of that country.
- Provision of adequate social amenities in the rural areas: The government of Nigeria should do more to ensure that there are adequate social amenities in the rural areas as this will go a long way to encourage the banks to establish more branches in the rural areas. When there are adequate social amenities, it leads to a corresponding improvement in rural banking. Roads, electricity and water are good ways of promoting rural banking in Nigeria. This should be done by the government.
- Increased performance of the banking sector: Yes, when the performance of the overall banking sector in Nigeria records adequate improvement, rural banking in Nigeria will definitely experience it. Rural banking in Nigeria is where it is today because of the low performance of the banking sector in Nigeria. It is a noted fact that the banking system in Nigeria will not receive efficient improvement unless the overall banking system in Nigeria begins to improve in the most dramatic manner. This is necessary to improve rural banking in Nigeria.