Gov’t urged to support RCBs to stimulate rural economy … JCS assesses rural banks to list on the GAX  

Patricia Safo, CEO, JCS Investment Limited

The rural and community banks have a key role in making a positive contribution toward reduction of poverty. They also act as one of the key channels to distribute funds to businesses in their localities and encourage the spread of sound entrepreneurial activity.

It is believed that rural and community banks (RCBs) can play a key role in the country’s economic development and ultimately act as a catalyst in stimulating the rural economy by supporting micro and SME businesses based in the rural areas.

It is therefore in this regard among many others that the CEO of JCS Investment Limited, Patricia Safo, is advocating strongly and urging government to collaborate with relevant entities to develop a blueprint to as matter of urgency strengthen rural and community banks.

According to her, JCS Investment Limited among others is currently working with selected rural and community banks as part of a comprehensive plan to move the RCBs to the next level, by listing on the GAX and working with key stakeholders to improve operations and add value.

The outcomes of this initiative may include the support of Ghana’s Beyond Aid agenda, which offers a framework for sustainable, long-tern development.

JCS Investments Limited has identified some key activities that can go toward developing this initiative, which may include listing RCBs on the GAX, encouraging business advisory firms to work closely with the RCBs to help them adapt to their newly-listed status and ensure they have transparent systems, and helping the RCBs to raise capital for on-lending and to increase their portfolio sizes.

Other key activities may include establishing Positive Gender Lens investment targets, allocating funds to Renewable Energy Projects with lending to both domestic and commercial SMEs (and encouraging energy-efficiency and sustainability), as well as expanding and improving the overall portfolio and balance of activities in RCBs.

The listing of Rural Banks on the Ghana Alternative Market (GAX) is one of the steps JCS Investments Limited and others is championing to bring value to both existing and new shareholders, which will eventually create opportunities for people who are interested in subscribing to shares on the GAX.

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These shares will represent ‘work in progress’, with the underlying objective of establishing a new Impact Asset Class as a category of listed shares. This will also create visibility for RCBs and provide a channel for both local and international investors committed to investing in businesses offering not only economic returns but also optimal social returns.

JCS Investment Limited is currently promoting the listing of RCBs on the GAX to open-up new opportunities. It is hoped that the initiative will also encourage RCBs to increase the percentage of their allocated raised capital directed toward Positive Gender Lens investments. This initiative, according Ms. Patricia Safo, should contribute positively toward the promotion of business initiatives by women in areas where these banks are located.

Additional benefits arising from promoting Positive Gender Lens investments will also include a reduction in rural to urban migration. The key role played by women in traditional settings may also contribute to family members returning to their communities. Women running successful businesses will be under less economic pressure to leave their home areas and migrate to the big towns.

Ms. Safo was very emphatic that on the global stage investment in sustainable ventures and use of renewable energy are important in meeting the challenges facing the planet. A core component on the SGS could also be part of the revised portfolio-mix targetting a gradual increase of investments in SMEs in that sector successfully.

The ARB Apex Bank Limited is a mini-central bank that offers support services to the rural and community banks, and has endorsed this initiative by JCS Investment Limited and offered its endorsement. According to the MD of ARB Apex Bank, Kojo Mattah,  there are some public relations benefits to listing shares or bonds, as they are listed  for exposure to the general public  and available for trading as well. “Should an RCB list its shares, this also gives current shareholders a market on which they can liquidate some or all of their shares,” he stressed.

This, he said, will also provide price transparency to shareholders as well as to potential buyers of the shares; and listed shares may also prove to be more readily-accepted as collateral should the security holder needs it.

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JCS Investments Limited, working with its investment partner over the last 20 years, has gained in-depth experience relating to the operation of Rural Banks in Ghana. Projects include, for example, an investment in First National (now GN Bank) followed by a successful exit. First National was attractive because of its wide network of branches, including many in rural areas. JCS subsequently invested, by way of equity, in Nwabiagya Rural Bank and has now completed a partial exit (as part of a phased process of withdrawal).

The company is presently working closely with Innovative Micro Finance and seeking to promote rural economic development and Positive Gender Lens investments in the Northern Region. JCS believes that RCBs can provide an additional channel to deliver essential financial services. The aim is to work with RCBs of good standing. This initiative can contribute to poverty reduction and help in bridging the gap between urban areas and the rural economy. As part of its policy of rural economic business-building, JCS also works closely with a number of farmers and processors operating in the rural economy. The reality is that many are still unable to raise the much-needed capital to move their businesses forward.

The proposal to work with selected rural banks and promote listing on the GAX builds on a solid foundation. It is therefore hoped that fund managers and key stakeholders, including government agencies, will support this positive initiative to drive the growth of worthwhile businesses that will contribute to the ‘REAL’ economy that stands to affect ‘REAL’ people that still constitute a larger percentage of the population residing in rural areas.

JCS has already been in consultation with some of the key stakeholders, including Apex Bank, GAX and the USAID Financing Ghanaian Agriculture Project.

Ms. Patricia Safo is of the view that recognition should be given to this important asset class, and the overall benefits could exceed expectations because it has the potential to add value and increase economic activity in areas where RCBs operate.

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