The rural banking concept was introduced in 1976 through the establishment of Nyakrom Rural Bank in the Central Region. This implies that RCBs have been part of Ghana’s financial system for more than four decades. They were licensed by the Bank of Ghana to undertake financial intermediation and to promote savings and investment culture in the rural areas.
The primary objective was to make institutional credit, formal financial and banking services easily available to the majority of Ghanaians especially those living and working in rural communities under relatively less intimidating conditions than the traditional banks (Rural Banking in Ghana by Mr. Emmanuel Asiedu-Mante). RCBs were also supposed to serve as catalyst for rural development thereby complementing government effort in improving the socio-economic well-being of rural dwellers.
Presently, scores of RCBs have some of their branches in the cities and urban areas and this move has also contributed immensely to bridging the financial inclusion gap.
Currently, there are 144 RCBs spread across the 16 regions of the country. It is significant to emphasize that a lot has been achieved by rural banks since the first one was established in 1976.
There are certain facts about rural banks that are unknown to many people and this article will consider some them.
Facts about RCBs
- Largest branch network
According to data from the ARB Apex Bank Limited, the RCBs remain the largest bank branch network in the country with over 800 branches. GCB has 185 branches and this position the bank second to rural and community banks in terms of number of branches.
The wide branch network of RCBs means that individual Ghanaians can access their services in most part of the country.
A greater number of the branches are located in the rural areas and this has helped to promote financial inclusion among the unbanked and under-bank segments of the population. For instance, Ahafo Ano Premier Rural Bank in Ashanti Region has two (2) of its branches in rural communities and this has promoted financial inclusion. It is important to state that most of the traditional banks will never consider operating in those areas.
For example, there were instances where some universal banks closed down some of their branches in locations they deemed not economically viable.
Again, scores of universal banks usually focus on big institutions, multinationals and top tier customers (high networth customers) found in the cities with high value transactions.
Although, RCBs are profit-making organizations, yet they focus much on impacting on the lives of the un-served, under-served, unreachable, less privileged and low income segments in various communities. It is therefore clear that without the establishment of rural banks, the vast majority of Ghanaians especially those in rural communities would have been denied access to basic banking services.
- Largest number of retail customers
According to data from the ARB Apex Bank Limited, the rural banking sector has over 6.5m retail customers which is more than combined customers of all the 23 universal banks.
The retail customer base buttresses the point that RCBs have deepened and continue to deepen financial inclusion in Ghana thereby supporting the Government to achieve the objectives of the National Financial inclusion Strategy.
It is worth mentioning that large chunks of customers of RCBs are low-income earners, the vulnerable and less privileged who hitherto could not access credit to meet their varying needs. This has helped to reduce poverty, improve livelihood, and grow micro and small businesses among others. It is important to note that, most of the universal banks search for value and not volume. In other words, they target and serve few customers that offer high value transaction that can translate into high profitability. For instance, a banking survey conducted by PWC in 2017 revealed that, 20 largest depositors constituted 32% of total deposits of a particular universal bank .Such deposit concentration does not impact on the masses.
In order to drive away seemingly unprofitable customers, some universal banks set high initial deposit requirements and minimum operating balance. For example, one is required to have an Initial deposit of GH₵ 50 – 100 in order to open a savings account while one can open a savings account with GH₵ 5 – 10 in a rural bank.
This supports the assertion that, some banks focus on few profitable customers and ignore the majority. In contrast, the RCBs are poised to impact positively on the lives of the majority who are under privileged.
- RCBs were not included in the banking sector clean-up
As part of efforts to build strong and resilient banking and SDIs sectors, the Bank of Ghana in August 2017 began a clean-up exercise which ended in 2019. The clean-up exercise led to the revocation of licenses of 9 universal banks, 23 savings and loans companies and finance houses and 347 microfinance institutions.
It is refreshing to note that the RCB sector was exempted.
In an address by Dr. Maxwell Opoku Afari, the First Deputy Governor of the Bank of Ghana during the 7th national rural banking week celebration, he asserted that the RCBs “were not included in the reform process because of their unique role in rural communities and their criticality to the financial inclusion agenda of the government”.
The Bank of Ghana also pointed out that, going forward the RCBs will be positioned to promote rural economic development.
- Not a sole proprietorship business
Rural banks are not sole proprietorship businesses, instead they are registered public limited liability company which shares are purchased by residents and non-residents in the communities they operate.
To avoid a situation where an individual or a few people assume complete ownership and control of a rural bank, there is a restriction on shareholding. The shareholding limits are:
Individuals not exceeding 30% of total shares, Family not exceeding 40% of total shares, Corporate bodies not exceeding 50% of total shares, Community participation not less than 20% of total shares.
This arrangement ensures that rural banks are truly community owned and not sole proprietorship business or partnership. As limited liability companies, every year rural banks organize annual general meetings where board of directors account their stewardship to shareholders.
- Low service charges
Service charges are one of the sources that Banks and Specialized Deposit-Taking Institution generate income.
Research conducted by the Proven Trusted Solutions has revealed that RCBs offered low service charges to customers as compared to the universal banks.
- Strong commitment to rural community development
Rural banks in Ghana are constraint by a host of factors such as over-independence on interest income, limited scope of banking activities, low levels of economic activities in some branch locations, being smaller in size and balance sheet as compared to the universal banks. The above mentioned factors limit the RCBs ability to generate more income.
Notwithstanding the limitations, scores of RCBs are committed to contribute to economic development of communities in their catchment areas as part of their corporate social responsibility.
Here are examples:
Atwima Kwanwoma Rural Bank in the Ashanti Region has constructed a Senior High School (Atwima Kwanwoma Presby Senior High) for Pakyi Number 2 community.
The bank makes a cash donation of GH₵ 10,000 every year to support the school. In addition to the cash donation, the bank has been supporting the school with study materials and other logistics. It is noteworthy to mention that school enrolment in the community has increased.
Ahantaman Rural Bank in the Western Region which head office is located at Agona Nkwanta is also strongly committed in supporting community development to improve the well-being of people in its catchment areas.
It is important to emphasize that, the bank is a socially responsible organisation and therefore has been allocating a portion of its profit for social intervention programmes over the years. The bank has currently budgeted GH₵ 50,800.00 for COVID-19 support for Ahanta West Municipal Health Directorate. The support is in the form of PPEs, medical supplies and training of healthcare workers. So far, GH₵ 35,950.00 has been spent from the budgeted fund.
Again, last year the bank donated Phototherapy machine to Kwesimintsim hospital to improve healthcare delivery.
Adansi Rural Bank Limited in Ashanti Region is also at the forefront of making contribution to community development in the bank catchment areas since its establishment in 1980.
In 2019, the bank provided 10 seater water closet toilet facility for the people of Donyina, a community in Kumasi. This has no doubt improved community hygiene and sanitation as well as contributing towards achievement of SDG goal six.
As part of efforts to support the fight against COVID-19 pandemic, the bank recently provided PPE and other medical supplies amounting to GH₵ 25,000 to selected health facilities in its catchment areas.
Board and Management of Sekyedomase Rural Bank in Ashanti Region believe that banks impact should go beyond financial intermediation. In line with this, the bank provided food items to some vulnerable people in its catchment areas amid the COVID-19. Further, it donated PPEs to selected health facilities and communities.
So far, the article has discussed the key facts about RCBs such as low service charges, being the largest bank branch network and other.
I would like to urge Management of RCBs to use their unbeatable strengths to exploit marketing opportunities in the banking space. They should also reposition the brand in order to make it more attractive to non-users.