1.1 Introduction
Financial institutions occupy a vital position and play a lendable role in the economy of the nation. Their major purposes are proper mobilization of find as well as provision of capital for industrial development, which is aimed at enhancing economic growth and development. In the early year of banking operation in Nigeria, banks performed their intermediary function by giving loan mainly on individual basis (i.e separately) but as the country entered the threshold of development and more investment opportunities opened up, industrialist started demanding large sums of money which is provided by bank on medium or long term basis.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
Housing is one of the three basic needs of mankind and it is the most important for the physical survival of man after the provisions of food. Decent housing is one of the basic needs of every individual, the family and the community in general. As a pre-requisite to the survival of man, it ranks second only to food. It is also one of the best indicators of a person’s standard of living and his place in the society. The housing an individual lives in is a symbol of his status, a measure of this achievement and social acceptance, an expression, an expression of his personality and the barometer that seems to indicate in a large measure, the way the individual perceives himself and how he is perceived by the larger society.
Jaiyeoba and Amole (2002) examined the appropriateness and socio-economic implications of low-income housing delivery as supportive rather than a provider approach. They stated that what is required is the determination of the extent to which the low-income groups require support. Olusola, Aina and Ata (2002) identified lack of soft loan as one of the major obstacles against urban housing production in Nigeria.
The low-moderate income earning citizens only now have the option of meeting their housing need from the income savings or support from financial institutions. However, the mortgage to income ratio in Nigeria has been established to be the highest in the world in recent times (Bawumia, 2017), rendering financial support from the financial institutions practically inaccessible by the poor majority who do not have collateral security to go for mortgage loans from institutions or do not have enough regular flow of income to make such arrangements in meeting their housing need (Boachie-Yiadom, 2015). It is therefore imperative to carefully examine the role of these financial institutions in the housing delivery in the country since financial institutions are the only ready option for seeking financial support by low income earning citizens in trying to meet their housing need. This is because the problem of the housing deficit is more connected to affordability since in the midst of the acute housing deficit; houses are being advertised for sale in the country on daily basis.
Housing estates is a fundamental and essential feature in the urban environment. Adequate provision of housing estates has a great deal of positive impact on both the economic and social life of the urban citizens and its inadequacy has the reverse effect. The shortage of housing estate is one of the major problems facing the urban centers especially in the developing countries. Thus could be attributed estate development involves large amount of money, which is usually not within the capability of most urban dwellers particularly the medium and low income groups, the rate of housing estate construction often tend to be small and generally depend on financial resources. This institution of financial scarcity is made worse by the rigid attitude of financial institution towards lending for housing development. Their system of granting loan makes it very difficult for the medium and low income groups to benefit from the available facility. The bulk of the mortgage loans go the upper class.
Therefore, in Kwara State where the research was carried out, the activities that was conducted is to know the role of financial institution in housing development in Nigeria.
1.3 Statement of Problems
Investigation revealed that in recognition of the importance of the housing sector, and considering that financial institutions have ready access to cheap sources of funds through retail deposits as well as the infrastructure to process real estate loans efficiently and the skills to manage the risks involved, the Central Bank of Nigeria has encouraged financial institutions to support the development of the housing sector in Nigeria.
In particular, the CBN has through its credit policies, required the erstwhile commercial and merchant banks to allocate a stipulated minimum proportion of their development to the Housing/construction sector Where financial institutions failed to meet the stipulated target, such shortfalls were deducted at source from the defaulting financial institutions deposit with the CBN and passed on to the housing/construction sector through the Federal Mortgage Bank of Nigeria.
Most of the problems financial institutions have in housing development in Nigeria are;
- Low Interest Rate on National Housing Fund
- Low Level of Participation in the National Housing Fund
- Cumbersome Legal Regulatory Framework for Land Acquisition.
1.4 Aim and Objectives of Study
The aim of the study is to examine the role of financial institution in housing development in Nigeria using Kwara State as a case study. In achieving this aim, the following specific objectives were laid out as follows:
- To examine how extent the financial institution has contributed in the housing development in the study area.
- To identify the difficulties encountered by financial institution towards housing development in the study area.
- To examine the relationship between financial institutions and housing development in the study area.
- To ascertain the Low Interest Rate on National Housing Fund and Level of Participation in the National Housing Fund.
- To find out whether financial has made any contribution in housing development in Kwara metropolis.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Has financial institution made any contributions in housing development in the study area?
- Has there been any difficulty, encountered by financial institution towards housing development in the study area?
- Is there any relationship between financial institutions and housing development in the study area?
- Is there any Low Level of Participation in the National Housing Fund?
- Does financial institutions in Kwara state has any Low Interest Rate on National Housing Fund?
- To what extent has the financial institution contributed in the housing development in Kwara state?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between financial institutions and housing development in Kwara State
- H1: There is a significant relationship between financial institutions and housing development in Kwara State
Hypothesis Two
- H0: Financial institution has not made any contributions in housing development in Kwara metropolis
- H1: Financial institution has made contributions in housing development in Kwara metropolis
1.7 Significance of Study
A study on housing estate finance is very financial institution of housing estate finance is valuable and could be utilized to achieve certain academic objectives. It can enlighten the government, students and researchers on the importance of housing estate finance.
The general result obtained from this study is educative, informative and broader the awareness of the public on current sources of housing estate finance in the estate. Estate surveyors and valuers could apply the result of this research work in their future housing estate finance planning and their advisory role to the public.
The study would be utilized in making new housing estate policies and ensuring their implementation. This is because any housing policy that does not place priority on source of finance would ever remain incomplete. It will also serve as a basic for the allocation of finance for housing estate programmers.
This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.8 Scope of Study
The study focuses on the role of financial institution in housing development in Nigeria using Kwara State as a case study. In choosing the financial institutions the researcher has limited his research to those areas of the financial institutions or operations of the institutions that helps in the development of housing in the state. This has been so because the research assumes that financial institutions are saddle with the sole responsibility of enhancing even in the development of housing in Kwara state.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
Certain terms are used in this work which their definitions are relevant for easy understanding for the study.
Housing estate development: is a group of houses in an area of land, built only for dwelling purpose and not for commercial or industrial purpose.
Financial institution: Is defined as informational or formal act of providing money, this sense financial planning, the estimating of cash receipt and disbursement.
Finance: It is defined as the management function of managing the flow of funds in an organization.
Development: The term development is mostly applied in relation of land valuers and estate surveyors sees it as a way of embarking on constructional work that will amount or give rise to utilization of land with its improvement or re-improvement of an already utilized one.
