Role of Commercial Banks in Economic Development of Developing Countries
CHAPTER ONE
OBJECTIVES OF THE STUDY
-The objectives of this research work are tactily stated as follows.
-To determine the contribution of commercial banks towards a positive economic growth and wealth creation.
-To examine ways in which the commercial banks in Nigeria can be made to play better roles towards fund mobilization for economic growth and development.
-To analyse the constraints and short comings facing commercial banks in Nigeria towards fund mobilization for economic growth and development.
-To determine and test the effects of some relevant economic variable and factors on the real gross domestic product(GDP) of Nigeria
CHAPTER TWO
LITERATURE REVIEW
BANKING INDUSTRY PERFORMANCE AND ECONOMIC GROWTH – EXPLANATORY VARIABLES AND CAUSATION
Although there exist an extensive body of literature on the link between finance sector development, economic growth and poverty reduction, there is no consensus on the effect of explanatory variables on economic growth. See for example, King and Levine (1993), Levine and Zervos, (1998), Rajan and Zingales, (1998) and Levine, Loayza and Beck, (1999). The direction of causal relationship between economic growth and the banking industry is one area of contention amongst economists. Schumpeter (1934) for example was a strong advocate of the role of the banking industry in stimulating economic growth. He noted that the banker stands between those who wish to form new combinations and the possessors of productive means. He is essentially a phenomenon of development, though only when no central authority directs the social process. He makes possible the carrying out of new combinations, authorises people, in the name of the society as it were, to form them. He is the ephor of the exchange economy.(Schumpeter, 1934) Harrison et al (1999) however argue that banking activity and profitability are a function of economic growth. Agreeing with this assertion, Bayraktar and Wang (2006), suggest that banking industry openness had a direct and indirect affect on economic growth through a combination of improvement in access to financial services, and the efficiency of financial intermediaries as both of these cause a lowering of costs of financing which in turn stimulates capital accumulation and economic growth. Bayraktar and Wang (2004) demonstrated that the role of foreign banks was both statistically and economically significant in increasing growth and improving the operations of local banks. However, Berglof and Roland (1995) find that soft budget constraints and repeated bank bailouts by governments were a function of poor quality of loan portfolios, the absence of collateral, low bank capitalization, and political pressure to refinance unprofitable firms in transitional economies. Güryay et al (2007) also find that the effect of financial development on economic growth of Northern Cyprus although positive, was negligible.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the role of commercial banks in economic development of developing countries. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the role of commercial banks in economic development of developing countries
Summary
This study was on the role of commercial banks in economic development of developing countries. Four objectives were raised which included; To determine the contribution of commercial banks towards a positive economic growth and wealth creation, to examine ways in which the commercial banks in Nigeria can be made to play better roles towards fund mobilization for economic growth and development, to analyse the constraints and short comings facing commercial banks in Nigeria towards fund mobilization for economic growth and development and to determine and test the effects of some relevant economic variable and factors on the real gross domestic product(GDP) of Nigeria. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from selected commercial banks in Port Harcourt. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
The study made an assessment of banks contribution to economic growth in Nigeria. It approached banks contribution from the financial intermediation role these institutions play. From this perspective it related the savings mobilization and lending functions of banks to the growth rate of the gross domestic product, which was adopted as proxy for economic growth. The result of the analysis led to the conclusion that banks’ contribution to economic growth in Nigeria is insignificant. This led to the deduction that other factors (human resource, standard of education, political stability, power supply and other social infrastructure) may be playing more important role in growing the Nigerian economy
5.4 Recommendation
- Government should urgently address the infrastructural challenges of the country especially concerning energy availability and power supply.
- The decadence in the education sector should be paid immediate attention to improve the quality of human resource in the economy.
- Banks should be encouraged to lend more to the productive sector (real sector) if their impact on economic growth is to be felt.
- A holistic approach should be adopted in tackling the near non-existence and collapse of social infrastructure such as road networks, portable water and medical care
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