Rural and Community Banks (RCBs) that are yet to meet the GH₵1 million stated capital requirement set by the Bank of Ghana (BoG) by year-end will be given an extended period to recapitalise, BoG Governor, Dr. Ernest Addison, has hinted.
With barely two months to the deadline only 58, out of a total 142 RCBs in the country, have so far met the new capital requirement.
Speaking at a durbar to climax the 6th Rural Banking Week Celebrations in Kpong, Dr. Ernest Addison, indicated that though the figures churned by rural banks are relatively low to give backing to their financial mediation function, his outfit will be more flexible with them on the recapitalisation directive.
His comment was in response to an appeal from the Association of Rural Banks (ARB) that the financial sector regulator reconsiders reviewing the deadline for all RCBs to recapitalise to enable its members who are yet to meet the required capital ‘re-organise themselves and work to drive up their capital base.’
The BoG raised the stated capital of RCBs from the current GH¢500,000 to GH₵1 million as part of efforts to grow the sector’s capital base to protect depositors as well as provide enough fiscal space for operational efficiency.
It was also to put rural banks in a better position to live up to its core mandate of providing the needed financial services support to micro small and medium enterprises in rural parts of the country.
Avenues for new capital
As struggling rural banks look for ways to increase their deposits and capital base, Dr. Addison urged managers of such banks to resort to alternative means including, but not limited to, listing of the Ghana Stock Exchange, mergers and acquisitions as well as tapping funds from wealthy indigenes both home and abroad.
He added: “This should be backed by strong corporate governance structures that will ensure transparency and help to optimise yields.”
He further assured that the central bank will ensure that RCBs are sound to intermediate financial resources in the rural sector as the rural banking concept has come to stay.
According to the BoG boss, the activities of rural banks have contributed significantly to the growth of the rural economy in terms of employment creation, income generation and improved livelihoods of rural dwellers. RCBs, he added, have become reliable tool for poverty alleviation.
He said, if properly positioned, rural and community banks could enhance industrialisation to open up the rural economy by bringing financial services closer to rural folks and roping in the unbanked into the formal banking system.