THE GROWTH OF ALTERNATIVE CREDIT SYSTEMS IN NIGERIA 1990-1993
THE GROWTH OF ALTERNATIVE CREDIT SYSTEMS IN NIGERIA 1990-1993
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Date
1994-04
Authors
MUSA, TIJJANI AHMED
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Abstract
No bank, be it commercial, Merchant, Community or specialised can survive in the
long run without a credible and properly coordinated credit policies. This particular function
is so fundamental to banking that no mission statement of any banking institution can be
meaningful without proper regard to its credit policy objectives.
A community bank has been defined as a self sustaining financial institution owned
and managed by a community or a group of communities for the purpose of providing credit,
deposit, banking and other financial services to its members largely on the basis of their self
recognition and credit-worthiness. The concept of community banking therefore, is hinged
on the provision of credit to the rural and sub-urban populace. As former President Ibrahim
Babangida said in his address on 31st December, 1990, "We are convinced that such a
revolutionary transformation of credit provision in the rural areas, where most of our
communities reside will lead to enormous benefits to the rural and sub-urban populace as
well as to the overall growth of our national economy".
The position of community banks within Nigeria's Finance Industry lies in between
the two extremes of financial institutions, that is the Merchant Banks who deal with big
customers and handle heavy accounts and the Peoples' Bank which initially provided credit
of only N2,000 for any one person at a time. However as the Naira continued to loose its
purchasing power and credit expansion becoming more and more difficult for existing
banking institutions and inspite of the imposition of ceiling after ceiling, year after year by
the regulatory authorities specified limits were therefore only attained by adding accumulated
interest to unpaid balances on borrowers or debtors accounts. Consequently therefore,
commercial banks who could have provided some respite for the needy were severely
handicapped.
Thus while the value of Naira continued to dwindle, the relevance of the Peoples'
Bank as a source of credit also dwindled considerably. The Government observed that the
sophisticated mode of operations of the commercial banks, their legalistic insistence on
collaterals, and then very limited geographical coverage, rendered than inadequate and
incapable of dealing with the unsophisticated rural dweller and the less privileged in the
lower strata of our society. It was therefore the unsatisfactory outcome of these banking
systems that prompted Government to conceive other more appropriate systems of credit
delivery. However what the Government did not tell us is whether the Peoples' Bank as a
source of credit for business development was no longer adequate.
From all that have been said above, one fact is clear, rural dwellers, who constitute
the real productive sector of the largely agrarian Nigerian economy must be adequately given
access to credit. Credit is thus intended to be a very important function of all community
banks.
Description
A PROJECT SUBMITTED TO THE POST GRADUATE
SCHOOL, AHMADU BELLO UNIVERSITY, ZARIA IN
PARTIAL FULFILMENT OF THE REQUIREMENTS
FOR THE AWARD OF THE DEGREE OF MASTER OF
BUSINESS ADMINISTRATION (MBA) OF THE
AHMADU BELLO UNIVERSITY, ZARIA
DEPARTMENT OF BUSINESS ADMINISTRATION,
INSTITUTE OF ADMINISTRATION, AHMADU BELLO
UNIVERSITY, ZARIA, NIGERIA
APRIL, 1994
Keywords
GROWTH,, ALTERNATIVE,, CREDIT,, SYSTEMS,, NIGERIA