This chapter is mainly concerned with the efforts at expanding the economic base of the rural area which are always backwards because of scarcity of and restrictive access to loanable funds. In solving the problem, previous government in their economic policies have lied on development banking and rural branch banking of orthodox banks. The word Community Banking is defined as a self sustaining financial institution owned by a community or a group of communities. Unlike commercial banks, community banks were established mainly to promote productive activities in the rural area. Specially, they are meant to facilities the programmes of directorate of food, roads and rural infrastructural producers.

Community bank has no other branch because it is established to operate within a community alone. It is well known that 75 percent of the country’s resource and ownment are in the rural areas. So our development project and programme can not achieve any appreciable improvement until this is focus on those rural areas.


The federal government of Nigeria 1990 budget speech decided to establish community bank in order to strengthen its programmes of grassroots economic development. The fundamental concept of a community banks is of a self-sustaining financial institution, owned and managed by a community for the purpose of providing credit deposit, banking and the service to its members. It is designed to ensure that a community may establish a community bank for the purpose fo promoting rural development throughout the provision of finance and banking service improving the economic status of small scale producers both in the rural and urban areas, enhancing the rapid development of production activities especially in the rural economic growth in Nigeria. A bank licensed under the community bank decree shall accept from persons various types of deposit including savings and time savings.

Receive or collect money on behalf of its customers, operate equipment leasing facilities which is designed to ensure access of its customer to farm input. Community bank in Nigeria banking system dates back to 1990 when the budget speech was delivered by the president commander in Chief of the Armed Forces, General Ibrahim Babangida.


The statement of the problem include the following: –

1. How can loanable funds made accessible to rural borrowers to enhance their economic activities?

2. How can the loan be secured other than asking for tangible security like collateral?

3. How rural banking habit can be improved to assist I rural development?


The studies conducted by the researcher on the role of

community banks in rural development reveals that the objective of the study includes the following: –

1. To determine how rural dwellers had responded to the services of community banks.

2. to identify the type of customer that patronize community banks.

3. To determine the type of services that are rendered to the public by the community banks.

4. To ascertain the extent to which granting of loan to rural dwellers has any effect on unemployment level.

5. To determine any ther non-banking services that are rendered to the public by the community banks.

6. To examine if the availability of the loan has reduced the level of rural urban migration.


This research work will be of immense help to the

government especially the rural development authority, as it will give them the opportunity to assess their performance in rural development. It will also be a great value to the community banks to assess their performance.

Hence, it will be beneficial to the generality of the public. It will also be of a great importance to people carryout research in related topic. The study is as much as it attempt to achieve the purpose of promoting the rural development by providing financial and banking services, credit and deposit services as well as other facilities. It is also to achieve the festering of the spirit of community ownership and of economic assets and its maintenance on a suitable basis. To the economy at large, this study is of a great value since rural development involves providing those social amenities in the urban area to the rural area. This to some extent restrict the usual movement. Restriction will lead to the promotion of rural financial and banking services and integrated national financial system that responds to the need of the whole economy.


For the purpose of this research work, the definition of

terms used with the UN Standard Industrial classification of economic activities.

1. Economic: Is the study of how a society organizes its money, in order to encourage its nation.

2. Rural Areas: In a little communities that is not as larging like the city

3. Community: Is all the people living in a particular area.

4. Community Bank: Is a self sustaining financial institution owned by a community or a group of community.

5. Loanable: This is the money that can organization such as a bank lend out money.

6. Funds: Is the amount of money that has been saved or that has been made available for a particular purpose.