THE IMPACT OF MICROFINANCE BANKS IN RURAL DEVELOPMENT IN NIGERIA

Background of the study: The ideal of micro-finance banking become necessary due to the inability of the conventional banking schemes to mobilize the dormant funds in rural area and channel them into needy factor. Besides, small business and the rural farmers needed to inculcate banking culture. Their idle funds needed to be mobilized for onward lending to the productive sector hence the need for micro – finance banks arose.

Much effort have been made in the past by successive government to involve rural dwellers in Nigeria in modern banking practice the extend credit to them in terms that are easily attainable earlier on, in obedience to the Central Bank directive the commercial banks opened braches in many communities.

In spite of opening of such branches, it was not possible to make banking attractive to Rural dwellers. This was because banking operations even in the rural braches have continued to be complex, cumbersome and too complicated for the level of education and enlightenment at the rural people participation therefore, was not just possible.

In Nigeria, according to Ezike (1981) the main objective of rural banking is to effectively mobilize saving in the rural area and bring credit close and within the reach of the long-credit starved farmer.

However, like the previous schemes, aimed at small business in the rural and small business in the rural/urban areas and farmers to mention but a few. The rural banking scheme has failed to accomplish its set objectives of providing for the rural people in particular. Against the background, this study is designed to X-ray the role of micro finance banking in the socio-economic development of Nigeria (Arural) with a focus on Rural micro finance bank Arural Edo State.