THE ROLES OF FINANCIAL INSTITUTIONS IN ECONOMIC DEVELOPMENT

THE ROLES OF FINANCIAL INSTITUTIONS IN ECONOMIC DEVELOPMENT

Financial institutions in the world are important role in the development of any.-given economy by way of granting loans to individual and groups of individuals in order to enhance their economic activities.

The roles of the following banks will be explained below:

1. THE NIGERIAN BANK FOR COMMERCE AND INDUSTRY (NBCI): The NBCI was established in 1973 and the main functions to indigenous person's institution and organizations for medium and large term investment in industry and commerce. The bank is therefore constituted to support industrial and service projects by providing them both equity and loan finance and by giving a whole range of allied financial services such as guarantees, letters of credit, management consultancy. Etc.

2. THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (WORLD BANK) The IBRD or World Bank was established in 1945 as a new type of international investment institution to assist member countries in their reconstruction and development efforts after the Second World War. Today, the ban serves as a lending institution for project and programmes, development of its member countries particularly the less developed ones. The bank lends both to the government of member's countries and public and private organizations in such countries if the member countries guarantee the loans.

The World Bank has over the years been involved in a number of development projects in Nigeria. Initially, the banks concentrated on financing infrastructure projects under which a number of projects such as Railways Apapa Wharf and the Kainji-multi-purpose power Transmission projects were executed in recent times. The bank has shifted attention to projects in the economic sector especially in the area of agriculture here the bank pioneered the establishment of various Agricultural Development Projects (ADPS) in the country.

THE ROLES OF SOCIAL INSTITUTION IN DEVELOMENT

The social institutions play an important role in the development of any economy.

1.        THE FAMILY ECONOMIC ADVANCEMENT PROGRAMME (FEAP)

Although the name FEAP gained prominence with the 1997 national budget broadcast by the then head of state (Late General Sani Abacha), its foundation is, traced to the programme of the first lady, Mrs. Maryam Abacha, which some public analysts take the origin of FEAP to the activities of the NAOWA; its immediate foundation derives from family support programme (FSP). Indeed, a section of the blue print FSP which is cited below lends credence to the portion of the FSP blue print reads. "Establishment of cottage and small scale industries that can help absorbs some of the unemployed. This will engage idle hands, stem migration to urban areas, and serve a means of sustaining livelihood for family members. The FSP blue print also talk about facilitating easy loan from financial institutions like the people's Bank commercial and community banks for small an medium scale profit oriented projects.

The FEAP according to its blue print is an empowerment programme designed specially for locally based producers of goods and services and of potential entrepreneurs in the establishment of cottage industries.

              i.      Provision of loans to people at ward level the capital needed to set up and run cottage enterprises.

            ii.      Provision of opportunities for the training of award-based business operations.

          iii.      Encouraging the design and manufacture of appropriate plants, machinery and equipment.

         iv.      Creating employment opportunities at ward levels.

           v.      Improving living standards of the people

         vi.      Encouraging the producers at ward levels to form cooperative society

       vii.      Promoting products and development consciousness

     viii.      Utilizing all available local resources for the benefit of Nigerians

          ix.      Involving states and local government areas in programme founding and implementation.

2.        FEDERAL MORTGAGE BANK

The bank was establishment in 1977 as a federal government fully owed band decree No 7 of 20^th January, 1977.

The bank has the following powers to perform.

              i.      Provision of long-term credit facilities to mortgage institutions, estate and property developers and individuals in the country.

            ii.      The supervision and control of the activities of mortgage institutions in Nigeria.

          iii.      Accept term deposits and savings from mortgage institutions, trust funds the post office and private individuals.

         iv.      Guarantee loans made from private investment sources for building development v. Furnish financial advice and provide or assist in the provision service of management and construction industries in the country etc.

3. INSURANCE COMPANIES

Another source of finance for government economic development programme is through the insurance companies. Apart from their insurance business, which has important bearing on economic development, they are also very important in the areas of mobilization of savings.

In realization of the increasing role of insurance companies in economic development, the government has taken steps to make them invest their surplus funds in Nigeria. With increased indigenous and government participation, it is hoped that insurance companies will pay an increasing role in the economic development of the country.

4. ISSUES IN POPULATION GROWTH

As a result of a rapid growth of population in Britain in the 18'* century Rev. Thomas Malthus became the first economist to give serious attention to the imminent population problems in his work entitled "Essay on the principle of production. As it affect the future improvement of society.

Malthus argued that while population increased in geometrical progression (e.g. 2, 48,16,32,64,128 etc), food production could be increased only in arithmetical progression (e.g. 2,4,6,8,10,12,14 etc) therefore; there would always be tendency for the population to out run the means of subsistence.

Malthus proposed that:

Population is necessarily limited by the means of subsistence. Population invariable increases where the means of subsistence increase, unless prevented by some powerful and obvious checks could be by preventing pressures, like postponement of marriages, moral restraint or birth control or else population growth will be stopped by positive checks like wars, famine, natural disaster etc.

Mathus theory was proved wrong in the Europe because of the opening of new lands, improvement of transpiration system, and improvement of farming methods. However, the theory seems to be relevant to Africa because there is rapid rate of population growth, there is still predominance of subsistence production-limited application of modern technology to farming and a small industrial sector.