CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
It is
universally acknowledged that the banking including play a catalytic
role in t he process of economic growth and development. This
acknowledgement is reinforced by contemporary conceptualism to the
effect that banks are a veritable vehicle for mobilizing resources from
su7plus units and tempting same to deficit unit. Banks constitute
perhaps the most important segment of the financial market and played
and a dominate vote in not mobilizing savings, but also allocating them
for investment purposes.
In Nigeria, domestic savings
rate is relatively low compared to most other developing counties with
the same for capital income level. In the past, investment rates were
high and hence there was no problem for raising funds.
Under the present economic
dispensation, the companions or the drive for savings deposit has been
stepped up by banks and non- bank financial institutions. It is Hoover
not sufficient because the range and type of financial assets available
are equally important. There is a wide range of saving instruments
offered banks and non – bank financial institutions in Nigeria today.
However, most of the voluntary
and non – contractual financial savings consist of savings and time
deposit. Although other types of deposit such as savings certificate,
premium savings bonds play any a miner rate, banks and non – bank
(Moncial Institutions are today competing strongly among them
instruments including additional frame benefits almost banks are now
offering contractual forms of savings aimed at persuading depositors to
invest in long term deposits.
Another area some banks are
foreseeing to mobilize funds today is the montage saving: because large
number of Nigerians need accommodation of their own but fund it
difficult with their meager income. Interest payment a demand deposits
accounts has also some positive impact on the propensity to save. Bank
have also been allowed by the government to open domaliary account for
Nigerian exporters in which proceed of experts can be paid or saved
until when they are needed. Transaction costs related to operating a
new accounts and making deposits and withdrawals are now be coming
relatively easier particularly for small savers. There is also the
pension scheme which seeks to induce depositors to invest small sums of
money over a specified period of time in the hope of receiving a stream
of benefits upon reacting the age of retirement.
Conversely the crisis of
confidence in our banks is a great set bank for the banking system. In
the past the majority of those who patronized the banks did so in order
to find safer place for their money. And for many years bank in the
country were the character of currency store house. But because of the
lack of confidence in banks today s sizeable amount of Nigerians keep
their currency or cash at home and this marks of most of cash unpaired
by the banks. According to withstanding et al (1996:133), this one
depositors resulting to cash drains. In the broadcast sense a cash drain
refers to any kind of cash loss suffered by a bank.
This winders the financial
intermediaries function of intermediation. Most of our industries depend
on commercial bank assistance in form of overdraft short term and long
loans for effective operation.
1.2 STATEMENT OF PROBLEM
Income posses the greatest constraint to
savings mobilization. The generally low level of income among the
people in Nigeria is a limiting factor to savings mobilization. The
inadequate banking facilities in the economy in general and the rural
areas in particular also constitute on obstacle to wide savings
mobilization.
Growing frequency of
incidences of found, insider abuses and malpractice which all combine in
on unholy alliance to erode public confidence in financial institutions
and do painful damage to whatever level of banking habit has been
developed.
Another factor that may affect
savings mobilization is the absence of affective a realistic interest
rate policy that rewards savers with adequate return on their savings.
It is argued that in as mush as the rate of interested adjusted for
inflation various negative. Savings are likely to remain low. Perhaps
the greatest problem in this country is that we run a cash economy. The
handers the financial intermediaries from performing their functions.
The practice constrains banning systems ability to mobilize funds with
the consequence that banks create small mount of deposit in comparison
to amount demanded as loan by the economy.
1.3 OBJECTIVES OF ITS STUDY
The aim of the study is to examine
available ways of achieving greater mobilization of savings and its
efficient and effective channeling for economic growth the research aims
at .
- Recommending measures for improving greater mobilization of domestic resources in our bank.
- Identifying the means throughout which the mobilized funds can
effectively which the channeled to the growth and development of
economy.
- Identifying the effect of interest rate mobilization of domestic savings.
- Identifying the effect of bank distress in deposit acquisition.
Determining the effects of income earned to savings mobilization.
1.4 RESEARCH QUESTION
(1) Has there been an improvement measure towards achieving greater dogmatic resources in our bank?
(2) Does the mobilization of domestic savings contribute in the economic growth of the economy?
(3) Does the interest rate charges on the mobilization of domestic savings positive?
(4) Does the bank distress syndrome have any significant effect to the deposit acquisition?
(5) Does the propensity to save income earned have effect on the mobilized savings of the bank?
1.5 RESEARCH HYPOTHESIS
To determine the validity and volubility of the information gathered the following hypothesis were formulated.
(1) H0: There has been no improvement measure towards achieving greater domestic resources in our bank
H1: There has been improvement measures towards achieving greater domestic resources in our bank .
(2) H0: The mobilization of domestic saving and development of the economy.
H1: Mobilization of domestic savings does contribute in the growth and development of the economy.
(3) H0: The interest rate has no positive effect to the mobilization of Domestic savings.
H1: The interest rate has a positive effect to the mobilization of domestic savings.
4. H0: The bank distress has no significant effect to the deposit acquisition.
5. H0: There is no significant
relationship between income earned of the people and the mobilization of
domestic savings by the bank.
H1: There is significant
relationship between income earned of the people and the mobilization of
domestic savings by the bank.
H1: There is significant
relationship between income earned of the people and the mobilization of
domestic savings by the bank. 1:Hh
(Iii) H0: There is no significant relationship between the mobilization of domestic savings and economic development.
H1: There is a significant relationship between the mobilization of domestic savings and economic development.
1.6 SIGNIFICANCE OF THE STUDY
This study intends to elicit body of
knowledge and understanding of the problem of mobilizing domestic
savings by banks. It is expected. That of the recommendations of this
research are implemented it will help to change the banking habits of
people. It will also help the managers and staff of banking industry in
Nigeria to improve on their fund mobilization strategy.
Researchers / students,
lectures and the generated public will also fund the findings and
recommendations of their research of value various interest areas,
especially those who may wish to carry out further study on the topic in
any other relate filed.
1.7 SCOPE LIMITATION AND DELIMITATIONS
There study examines the mobilization of
domestic savings for economic growth and development. The study covers
on the need for mobilizing domestic savings, the strategies employed by
banks in mobilizing these savings and the problems associated with the
mobilization. It also takes a general view on the ways of improving
greater mobilization of domestic resources by the bank which all in turn
enhances economic growth.
The researcher broadly
examines the research topic as a whole and then narrowed it down on the
effort of the union bank of Nigeria PLC in mobilizing these domestic
funds certain constraints were encounter by the researcher during this
study they include :-
TIME: - Time was a
major constraint, bearing in mind that the work had to be handled done
side other academic responsibilities of the researcher and coupled with
the short time required to submit this work due to a very short
semester.
FINANCE : This
was another factor as the researcher funds the cost of gathered and
analyzing information (both primary and secondary, costs of typesetting,
photocopying materials and binding and other expenses necessary for the
effective completion of this work to be too exorbitant.
1.8 DEFINITION OF TERMS
SAVINGS: This is that part of income that is not consumed immediately but deferred for investment or future consumption.
DOMESTIC SAVINGS: This consist savings from the citizens of the country and not from foreigners.
CBN: Central Bank of Nigeria the apex financial institution in the country.
NIGERIAN BANKING INDUSTRY: This
countries of the banking institutions in the country which include the
commercial banks, Merchant banks, development banks etc. with the
control Bank at the Apex.
UNION BANK OF NIGERIA PLC: This is of the leading banks in the country both by deposit and assets wish 283 branches touching.
BANKER: A banker could be send to be one who works in on institution licensed to carry on the business of banking.
DEPOSITORS: These are bank customers who keep money or value with the bank on contractual terms.
DISTRESS: A bank may be classified distress when it is unable to meet the bank examination rating system.
BOFID: Banks and other financial institutions Decree.
RURAL BANKING : This involves the establishment of banks in rural areas to cultivate banking habit among the rural dovellers.