Abstract
This paper focused on the role of Microfinance banks on the socio-economic development of rural communities in Nigeria. The operations of microfinance institutions date back to the pre – independence period in Nigeria when traditional thrift saving systems and activities of local people could not really handle the growing expansion and needs of the rural people and transformation. Also, the failure of conventional banking in Nigeria to meet the socio-economic complexities of the rural communities that consistently experiences rapid growth and changes as well as government desire to reach rural areas in development, gave rise to the emergence of microfinance institutions as a way of providing financial answers to the low income people so as to finance and improve their income generating activities. Key concepts such as conceptual overview and basic issues in microfinance, the role of microfinance banks in the socio-economic development of rural communities among others were analyzed. The paper adopted the demand following and supply leading hypothesis to support its argument. The paper concluded following its findings that small scale business men and women especially those operating within the rural communities are always confronted with the problem of financing their business; getting proper education to sustain the business and enlarge same. Therefore, the paper recommended that government should set up a more practical and result oriented monitoring and evaluation team to facilitate a cordial link between small scale business enterprises and microfinance banks in rural com munities. DOI: 10.5901/mjss.2014.v5n23p742
Highlights
Formal banking operations started in Nigeria before the nation’s independence in different forms as a reaction to rural economic growth and social development. It was intensified during the post-independence era and to this day, rural banking operation services have become more pronounced with the provision of micro credit to rural dwellers intended to boost small and medium scale investment predominantly financed and supervised by commercial banks
The people’s bank will, in both concept and operation, cater exclusively for the need of the ordinary Nigeria, especially the very poor in our society, who would normally not have access to loan assistance as currently operated with its policy of seeking to promote the welfare of our people especially the ordinary citizens, that this administration decided to establish this bank. In his explanation of the benefits associated with community bank facilities, Babangida (1987) further said that those to benefit include privilege members of society who are involved in legitimate economic activities in both the urban and rural communities and who are sponsored by their various trade and professional groups
They resort to borrowing from money lenders, friends and even cooperative societies, perhaps with high interest rates, whereas, the microfinance banks should offer more appealing services
Summary
Formal banking operations started in Nigeria before the nation’s independence in different forms as a reaction to rural economic growth and social development. The collapse of the barter system of exchange before now and subsequent monetization of the economy in recent times, have motivated the need for some form of mobilization of savings through either formal or informal method among rural community dwellers to boost socio-economic development. This has given credence to a type of banking transaction known as rotational saving which is common in rural communities and urban centers. The impact of the microfinance banks to determine its success or failure transcends financial provision to the rural dwellers to providing adequate small scale business knowledge for sustainability
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