CHAPTER ONE

 INTRODUCTION

1.1     Background of the Study

Economic growth for developing countries has important indications for poverty elimination and world economic development. This has been the goals of world financial institutions such as World Bank and International Monetary Fund (IMF) to study economic development of Abia State and how to quicken the country’s development.

The financial institution plays this importance in the development of the economy through granting of loans and advances thereby providing short-term and medium term capital for investors. The loans and advance may be in the form of direct loans, overdraft or by the discounting of bills with amount borrowed; investors could finance various projects in the area of industry, agriculture and commerce. This therefore helps to speed up economic development (Ebuka 2001). The apex bank helps to develop the financial markets by training indigenous personnel in the art of monetary management and by encouraging the growth of financial institution which operate in these markets. The development of the financial system helps to provide investment outlets in securities such as treasury bills, shares, stock etc. through money and capital markets that provide capital (Pandy, 2004).

So, the developmental roles of financial institutions on economic development of Abia but across the following sectors to includes, traditional financial institution, financial market, financial regulations, theory of economic growth and financial development and other financial institutions. Financial institution  include, commercial banks (Joint stock banks), discount houses acceptance houses (Merchant banks), finance houses, the central banks, saving banks, development bank, insurance companies, hire purchase companies, the national provident fund, the stock exchange, building societies etc.

The banking decree (1961) in Nigeria specialized types of financial institutions which carryout banking business. A common feature of such banking financial institutions is that they accept deposits, but the use of which they put such deposits differs in detail. The four institutions specifically mentioned were commercial bank, discount house, acceptance houses and finance houses.

1.2     Statement of the Problem

In recent times, customers and business men who rely on financial institution for supply of funds are having difficulty because of high interest rates. The process if setting such facility is sometimes rigorous thus incapacitating a fast growth rate in business and economic development. The requirement of collateral security before a facility can be given to a customer is a problem because before one decides to go for a financial help it is obvious he doesn’t have anything or probably he is trying to rise up. In most cases some customers are not properly advised on what business to venture into.

1.3     Objectives of the Study

The main objectives of the research are:

1.     To offer a detailed and realistic study of the ministry of economic over the recent decades.

2.     To review partially the literature concerning growth theory, economic growth and financial institution.

3.     To investigate the contribution of financial institutions to the economic growth using deposit/GDP ratio etc in a developing state setting in ministry of economic.

4.     To study the development of the commercial banks in the ministry of economic in recent decades; and

5.     To find out measures of curbing factors militating against financial institutions.

1.4     Research Hypotheses

H0:   Financial institutions do not help the local entrepreneurs to set up their business.

H1:   Financial institutions help local entrepreneurs to set up the business.

H0:   Financial institutions do not play a major role in economic development.

H1:   Financial institutions play a major role in economic development.

1.5     Significance of the Study

Obviously, the essence of academic research project is to promote intellectual advancement and academic excellences. This research will be of immense benefit to all interested readers, such as the student’s managers, business investors, debtors and creditors. The government, individuals, foreign investors, share holders, prospectus investors. It will also be of added advantage that in adding value to existing related literature and future researchers.

1.6     scope of the Study

This research project is based on the developmental roles of financial institution on economic development of Abia with a particular reference to ministry of economic development, Umuahia Abia State.

1.7     Limitation of the Study

It will be a non-challenge to state here clearly that the major constraints to this research study are the financial constraints, limited time due to academic calendar. It is with notice that due to the above constraints the research could not cover the area of interest and call for optimum support in the future research.

1.8     Definition of Terms

Financial Institution: Financial institution is an institution that provides financial services for its clients or members.

Development:  Development is the act of bringing to a more advanced state, growth and progress.

Economic: Economic is a system of a country or other area, the labour, capital and land resources and the manufacturing, production trade, distribution and consumption of goods and services of that area.

Decision Rule: If the calculated value is greater than the critical value reject the null hypothesis, but if the critical value is greater than the calculated value accept the null hypothesis.

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