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This research focuses on “Financial Institutions and Rural Development”. A study of Ezzangbo Micro-finance Bank”. the main objectives of this study is to ascertain whether there is/are relationship (s) between financial institutions and the living standard of rural dwellers, whether there are roles played by micro-finance banks on rural development, whether there are factors militating against micro-fiancé banks in the rural development. This work adopted   system theory. The study adopted primary and secondary sources of data, survey design, simple percentage and chi-square for data analysis. The findings include that there are no relationships between financial institutions and the living standard of the rural dwellers, that there are no roles played by micro-finance banks in rural development, and that there are factors militating against in rural development. Finally, the study recommends that financial maters, that financial institutions must abolish politicization in granting loans to rural farmers, that interest charged by financial institutions in rural areas should be reduced to the bearest minimum and that financial institution must charge their passive role in waiting for investors and should rather be searching for investors having an already made dossier of investment opportunities.




Robust economic growth cannot be achieved without putting in place well focused programmes aimed at reducing poverty through empowering the people by increasing their access to factors of production especially capital.In Nigeria, credit has been recognized as an essential tool for promoting development. About seventy percent (70%) of the population are engaged in the informal sector of Agricultural production.

The federal and state governments have recognized that for sustainable growth and development to be achieved, the financial empowerment of the rural dwellers is vital, being the location of the predominately poor n the society. If this growth strategy is adopted, the latent entrepreneurial capabilities of this large segment of the population is sufficiently stimulated and sustained.

Rural transformation is all about seeking to bring about improvement in the living condition of the farmers, the artisans, the tenants and the landless within the simple rustic economies of the rural areas and urban slums. The basis for employment generation and entrepreneurial development in rural areas therefore is to enhance the improvement in the living conditions of the people.

Our concern is on the community (Micro-finance) banks which are established for the deposit and disbursement of funds as loans to the rural dwellers for economic empowerment and emancipation. The micro-finance banks (MFB) as its name suggests ensures that funds are mobilized to the rural areas and directed to productive areas for rural economic development.

Micro finance banks ensures that the latent capacity of the poor for entrepreneurship is significantly enhanced through the provision of micro finance services to enable them engage in economic activities and he more self-reliant, increase employment opportunities enhance household income, and create wealth.Micro-finance banks provides soft loans without  collaterals to finance small and medium scale enterprises aimed at ensuring overall rural development.

Micro finance is about, providing financial services to the poor who are traditionally not served by the conventional financial institutions. Three features distinguish micro-finance bank from other formal financial products. These are:

  1. The absence of asset based collateral
  2. The smallness of loans advanced and/or serving collection
  3. Their simplicity of operations

In Nigeria, the formal financial system provides services to about 35% of the economically active population while the remaining 65% are served by the informal sectors, through non-governmental organization, micro-finance institutions (NGO-MFIS) etc (Ezeali and Nwoba, 2012).

Ezzamgbo micro-finance bank since its establishment in 2009 has continued to provide the Ezzamgbo people with micro-finance services on the basis of:

  • Relationship-based banking for individual entrepreneurs, and
  • Group-based models where several people Come together to apply for loans and other services as a group.

Here, individuals stand the chance of getting up-to N80, 000 while groups stand the chances of getting up-to N300,000 with just a 5% interest rate to be paid per annum (within a year).

Ezzamgbo Micro-Finance Bank has been able to encourage the people to engage in savings and investment by reducing the strict procedures of acquiring loans from the conventional banks. This is seen from the fact that the major criteria for accessing loans is that the applicant must have a savings account with the bank and this they made easy by assisting these people through the filling out of the forms, and by requesting for just two passport photographs or even a drivers license.

The bank has attracted lots of applicants requesting for but only focuses on the “active poor” i.e people who the energy, are willing and are capable to work but loans have the energy, are willing and are capable to work but  have no financial resource. The bank offer them loans without collateral except on third party guarantorship basis. Ezzamgbo Micro-finance Bank has assisted greatly in reducing the poverty level in Ezzamgbo community from 90% in 2009 to 10% as of 2015.

The bank has also been able to create a strong confidence in the people and has increased their trust in micro-finance banking. Ezzamgbo-Micro Finance bank has brought micro finance banking closer to the Ezzamgbo community and thus has provided them with the opportunity to partake in the Ebonyi State government credit Scheme.

It is against his background that this study examines and access the relationship between micro-finance banks and rural development in Nigeria.



One of the purposes for establishing financial institutions in Nigeria is to mobilize excess funds from both the rural and urban centres and direct it to productive sectors for economic growth and development of the country. It is the sole duty of financial institutions to make funds available to the areas where they are needed for economic activities.

However, to make rural life meaningful, there arises the need for the services of special financial insitutions. This is due to the fact that these special institutions assist in mobilizing funds for onward disbursement as loans to rural dwellers (farmers especially) to beef up the rural economy so as to promote rural development.

Though, these financial institutions have continued to exist, they have not achieved much due to the following:

  1. Ignorance on the part of illiterate farmers: There is a very low level of awareness which is due mainly to the poor public enlightenment campaign by banks, apathy, and inability of farmers to provide collateral for loans.
  2. Political interference: The system of granting loans to rural dwellers has been politicized such that loans are denied those peasant farmers for which these credits was made available in the first place. These farmers are denied these loans because they have no relations working in these banks or occupying high positions of public offices etc.

It is on these premises that this study asks the following questions:

  1. How has the Ezzamgbo Micro Finance Bank enhanced the living standards of their rural dwellers?
  2. What specific roles do financial institutions play in rural development?
  • What factors militates against the disbursement of fund by the financial institutions to enhance rural development?




The broad objective of this study is to ascertain the contributions of financial institutions in promoting rural development in Nigeria.

The specific objectives which are:

  1. To ascertain how Ezzamgbo Micro Finance Bank has enhanced the living standards of their rural dwellers.
  2. To examine the specific roles financial institutions play in rural development.
  • To identify the factors that militates against the disbursement of by the financial institutions to enhance rural development.

For the purpose of this study, the following hypotheses be tested:

HA1: Ezzamgbo Micro Finance Bank has not enhanced the living standards of their rural dwellers.

H01: Ezzamgbo Micro Finance Bank has enhanced the living standards of their rural dwellers.

HA2: Financial institutions do not play specific roles in rural development.

H02: Financial institutions play specific roles in rural development.

HA3: There are no factors that militate against the disbursement of by the financial institutions to enhance rural development

H03: There are factors that militate against the disbursement of by the financial institutions to enhance rural development


First of all, this study is significant to undergraduate students for the award of a Bachelor of Science degree and it also will serve as a useful guide to scholars and other researchers especially in the form of references.

This study will help government to formulate and implement policies ways to increase the efficacy of financial institutions in the provision of funds for rural development in Ezzamgbo in particular and Nigeria in general.

This study will of great extent expose to the rural dwellers, the importance and role of Micro Finance Bank to rural development.

More so, this study will benefit Ezzamgbo Micro Finance Bank, in the sense that, it will help to expose the financial institution to the rural and urban dwellers and also build a closer relationship between the financial institutions and state government.

Finally, the results of this study will serve as a useful guide in identifying the relationship between micro-finance banks and rural development.

In Nigeria today, borrowing funds in the form of loans from banks is seen as the reserve of the privileged few. Invariably, Nigerians believe that only the wealthy with necessary collaterals are meant to assess money from banks.

In this research work, the validity of this believes and claims will be tested and the outcome of this study will contribute greatly to the already existing body of knowledge.


This study is primarily centered on Ezzamgbo Micro Finance Bank in Ebonyi State and its contributions to the rural development of its locality or (around its locality).



One major problem encountered in the course of this study is the lack of materials on Ezzamgbo microfinance bank. This is because Ezzamgbo micro-finance bank is a relatively new establishment and as such no intellectual work has been done on the hank.

Anther problem is language barrier. The researcher’s not fluent with the indigenous language of the Ezzamgbo people.

There is also the problem of finance, the inability of some people to answer to questions especially the reluctance of bank staff to give out information concerning their activities and the problem of time constraint.


       This study seeks to understand the relationship between financial institutions and rural development. Based on this, the system theory as enunciated by David Easton has been adopted.

A system according to David Easton is a whole consisting of functional parts or sub system interacting with each other to ensure the efficient working of the entire whole, and that a malfunction in one or more subsystem or unit will affect the other units.

Kountze (2012), on the other hand defines a system as essentially an assemblage of things interconnected or interdependent, so as to form a complex whole. All systems interact with and are influenced by their environment (political, economic, social, ethical, technical etc) and in turn influence its environment. An important element in the system theory is the emphasis on input-outputs analysis.

Specifically, Ezzamgbo micro-finance bank is a system made up of different units such as the (Customer service unit, operations units, cashiers unit etc).

Thus, all the component units of the bank have to perform effectively in order to realize the goals of the organization. A malfunction in any unit of the organization will invariably affect the performance of the bank in its service of boosting rural development.

Also as a system, the bank is constantly influenced by its environment in the form of input injected into it while the bank in turn influences its environment in the form of its output.

From the following, it could be deduced that the request for loans by the rural dwellers when granted by the banks becomes an output while the support from its environment in the form of patronage and goodwill is the input from the environment that helps the bank to survive.


A brief definition of some terms used in this chapter is given here to avoid ambiguity.

MICROFINANCE BANKS: This is a bank that is devoted to extending small loans, referred to as micro loans to individuals, businesses and organizations in low-income regions, including under-developed countries where small amounts of money can go a long way. Micro-finance banks are also referred to as community based banking.

DEVELOPMENT: This is a process of experiencing or effecting positive changes, a state of advancement. Development involves positive change, a movement from one level of growth to another (desired) level.

RURAL DEVELOPMENT: These are actions and initiatives taken to improve on the living standard of the people in non-urban communities.

Rural connotes villages; thus rural development is the process of effecting positive changes in the rural areas. It could be economical or social in nature.


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