Determinants of Banking Behaviour among Rural Households in Ibarapa East Local Government of Oyo State

Abstract

The roles of banks either formal or informal cannot be over emphasized in that they perform intermediate
functions between savers and those in need of credits. Despite the widespread popularity of traditional
financial institutions in the rural sector of Nigeria, studies on rural households' behavior toward banking are
scanty. Therefore, this study was carried out to determine the banking behaviour of rural households in Ibarapa
East Local Government of Oyo State. Random sampling technique was used to select 200 respondents for the
study and questionnaire was used to elicit information from the respondents. Descriptive statistics and Probit
regression tools were used to analyze the data. The results show that there were more male (61.5%)
respondents, the average age was 45 years, 75.5% were married and the average householdsize was 7 persons.
Result of Probit regression shows a positive correlation between income of respondents and their participation
in conventional banks. Also, literate people tend to participate less in unorganized banks such as mobile and
cooperative banks. However, participation of the respondents in Bank of Agriculture (BOA) is very low due to
their poor awareness of the program. It was revealed that high interest rate of banks especially the conventional
st banks was ranked 1 among the challenges to banking. Also, distance to conventional banks, collateral and
high interest rate hampered the respondents' access to loan. The study recommends that microfinance banks
should extend their operational unit to rural areas to bridge the gap between the formal and informal rural
financial institutions. The convectional banks as well, should extend their operation unit to rural communities.