The study’s overall objective is to present an appraisal of the effectiveness of rural banking programme using Lagos State as case study.The research adopted the survey descriptive design and with the aid of convenience sampling method, the researcher conveniently selected eighty (80) participant who are resident and rural bank staff as the respondent of the study. Self- structure questionnaire was issued to the respondent of which  seventy-seven (77) responses were retrieved and validated for the study. The study made use of of descriptive analysis and inferential statistics where data from field survey was analyzed using simple percentage, mean and standard deviation presented in frequencies and tables.findings of the study revealed that The function of rural banking scheme on development of rural area includes to provide small loans to the low income earners, to create employment opportunities for rural dwellers, they offer capacity building to borrowers by empowering them different skills such as use of loans and give entrepreneurship and managerial skills.However, the problems  confronting  rural banking programme in Nigeria includes  slow Progress in lending activity,haste and lack of co-ordination in branch expansion, unwillingness to meet credit need of rural farmers, difficulties in Deposit Mobilization and poor saving culture of rural people. The study therefore recommend that broader and a more comprehensive strategy, should be incorporate and utilize an appropriate mix of policy variables to enhance the effectiveness of rural banks.





  • Background of the study

Globally, majority of nations populace reside in rural locale. As stated in United Nations (2022) report, the world population is currently estimated to be over 7.3 billion of which about 56 percent resides in rural areas struck with poverty and low standard of living. At the beginning of this millennium, poverty was estimated to affect 1.5billion people in the world. (UNDP, 2008). intriguingly, Africa’s share of this global poverty is monumental as over 600million Africans which are about 50% of the continent’s populations are living below one dollar a day poverty line. In Nigeria, it was also estimated that 70% of the total population resides in rural areas and over 80% of these rural households are engaged in agricultural pursuit and they depend majorly on farming and related activities as their source of livelihood. (Akinola and Aloba, 2015).

As identified by Adebayo (2016),  one of the major constraints to rural development is the problem of the inadequate financial capital which has a greater influence on level of productivity and general well being of the rural household. Thus the need to introduce programme that is capable of transforming the financial capacity and the livelihood of rural populace. Adebayo and Adeola, (2017) assert that this can only be achievable through bringing financial instituion close to rural people, empower them through credits and encourage them to adopt good saving culture. The duo further  reported that the relevant of the financial institution (banks) in the rural areas are to enhance productivity and promotes standard of living by breaking the vicious cycle of poverty in the rural areas.

In recognition of the fundamental inadequacy of banking facilities in rural areas, the federal government developed the Rural Banking Scheme (RBS). Following the recommendations of the Okigbo Financial Review Commission of 1976, the Rural Banking Programme came into being in July 1977. The objectives of the Programme include cultivation of banking habits in rural areas, mobilization of savings and their use for profitable ventures in rural areas, development of agriculture and agro-based industries, reduction of the drift of young men to the cities and achievement of the national objective of self-sufficiency in food production.. notably, finance has an important role to play as it helps rural households and enterprises in making productive investments, smoothing consumption, managing risks and coping with shocks. Depending on the local and local business focus, some rural banks develop specialty commercial skills in areas of agribusiness. For example some operate solely within the farm credit system-a network of borrower-owned lending cooperatives and specialized organization specializing in business credit and funding for farming, ranching and other agricultural customers. (Kibet, et al., 2019).

Rural banking programme traditionally should service the financial needs of people living in remote areas as they need finance for their socio-economic lives and also to improve their agri-business activities. Given that about 70% of the poor in the developing world still live in rural areas,  rural banking scheme  is essential for achieving the Millennium Development Goals and alleviating poverty among rural people.Howbeit rural banking programme has come under critiques in recent times as some researchers have questioned it effectiveness.

  • Statement of the problem

The central assumptions of introducing rural banking scheme were that increasing the physical proximity of banks to rural people enhances rural savings mobilization and, in turn, increases the flow of funds to the rural sector. Consequently,decades after the establishment of the Rural Banking Scheme (RBS) in Nigeria, there are clear indications that the problems and issues which led to the scheme are still prevalent. These include a low level of rural savings mobilization, inadequate use of banking services, and lack of credit for rural people.Discriminant analysis conducted by Okorie (2018)  showed that four variables were significant in discriminating between rural bank users and non-users. These variables were household income, years of formal education, gender of respondent, and the awareness of the existence of the rural bank branch. Adebayo and Adeola (2008), noted that the absence of rural banks or their unwillingness to meet credit need of rural farmers largely account for the wide influence of informal lending institutions on agricultural production in the rural areas. Adeyemo and Bamire (2015) stated that there have been a large number of informal lending institutions, borne down on low literacy level, loss of confidence in the formal banking system due to distress, elitist banking practices and absence of enough financial institutions in the rural areas. And this has significantly led to gross economic mismanagement. The scarce financial resources which are allocated to rural households for optimum production purposes have been re-distributed to unproductive areas, which result from pressing domestic problems, as farm and family are inseparable. Rural households are characterized by down-trodden hardship which makes it glaring to question the effectiveness of rural banking programme. Upon this premise that this study seeks to appraise appraisal of the effectiveness of rural banking programme.

1.3       Objective of the study

The broad objective of this study is to appraisal of the effectiveness of rural banking programme. Other specific objectives includes:

  1. To examine the objective of rural banking programme .
  2. To explore the function of rural banking scheme on development.
  3. To investigate the extent at which rural banking scheme has impacted rural development.
  4. To ascertain the problems confronting rural banking programme in Nigeria.

1.4       Research Questions

The research is guided by the following question

  1. What is the objective of rural banking programme in Nigeria?
  2. What the function of rural banking scheme on development of rural area?
  • What is the extent at which rural banking scheme has impacted rural development?
  1. What are the problems confronting  rural banking programme in Nigeria?

1.5       Significance of the study

This study will be of immense benefits to the microfinance institutions and banks rural branches enlightening them on the importance of meeting rural populace financial need. These findings have important implications for rural bank designers and implementors in Nigeria and other developing countries. They suggest that the current emphasis on the physical distance, as a critical factor in rural bank development, should be replaced by a broader and a more comprehensive strategy which would incorporate and utilize an appropriate mix of policy variables to enhance the effectiveness of the rural banks in Nigeria.empirically, the study will add to the body of existing literature and serve as a reference material to scholars and student who wishes to conduct further studies in related field.

1.6       Scope of the study

The scope of this study borders on an appraisal of the effectiveness of rural banking programme. The study will further ascertain the objective of rural banking programme,  explore the functions of rural banking scheme on development of rural people, investigate the extent at which rural banking scheme has impacted rural development and ascertain the problems  confronting  rural banking programme in Nigeria. The study is however delimited to residents and rural banks in Lagos State.

1.7       Limitation of the study

The major factors limiting the extent of this research work are time available for the conduct of the research and inadequate financial resources and those encountered in the course of data collection.


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