How unique are rural and community banks?

Joseph Akossey

The rural banking concept was introduced in 1976 with a view to providing financial intermediation in rural areas.

The first rural bank to be established was Nyarkrom Rural Bank in the Central Region.

It is gratifying to say that the number of rural banks has mushroomed from the initial stage of 1 to over 140.

The RCBs Collectively has over 700 branches spread across the 10 regions of the country. The Regulated Deposit Taking Institutions in Ghana are made up of Universal Banks, Savings and Loans Companies, RCBs, Microfinance Companies among others.

The Rural and Community Banks (RCBs) are unique in various ways and this article will consider these unique features.

The uniqueness of RCBs:

  1. Community based

RCBs are community based financial institutions in that they are owned by resident and non-resident members of the community through the purchase of shares. They are also managed and patronized by the people in the area. Therefore, it can be said that rural banks are established for the communities in which they operate. No wonder the choice of names of some RCBs signal to the people in the area that the rural bank belongs to them. Consider the names of the following rural banks.

Nzema Manle Rural Bank, Juaben Rural Bank, Ahantaman Rural Bank, Kintampo Rural Bank, Nsoatreman Rural Bank, Asawinso Rural Bank, Jomoro Rural Bank among others.

As community based financial institutions, scores of directors of rural banks are natives of the locality. This helps them to take decisions that reflect the needs and wants of the customers that they serve.

In contrast, the universal banks are not community based financial institutions and some are even foreign. Therefore, they are not able to design programmes that meet the direct  needs of the customers in the specific locality they serve.


  1. Operate in areas where the universal banks view to be unattractive.

As already mentioned, there are over 140 rural and community banks in Ghana with over 700 branches spread across the 10 regions. A lot of their branches are located in rural areas where the level of economic activities are low and hence difficult to mobilise more deposits for lending and other investments to generate sufficient income. The universal banks view such areas not viable and therefore prefer to do business a lot more in the cities and urban centres. It is heart-warming to say that RCBs have promoted financial inclusion among rural dwellers. The sector currently has customer base of over five million.


  1. Give back to the community

As community based financial institutions, most RCBs tend to use part of their profits for corporate social responsibility programmes in their catchment areas, mostly in the form of scholarships, cash donations, construction of classroom blocks, supply of medical equipment to health facilities among others.

For example, Atwima kwanwoma Rural Bank in Ashanti Region has constructed a Senior High School (Atwima Kwamwoma Presby Senior High) for Pakayi No 2 community. The bank makes cash donation of Ten Thousand Ghana Cedis (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.

Let’s consider the following RCBs and their investment in CSR for 2017.


Name of Rural Bank                         Investment in Corporate Social Responsibility for the year 2017

Lower Pra                                           GH¢409,475

Nwabiagya                                          GH¢96,905

Amanano                                             GH¢114,671

Adansi                                                 GH¢104,985

Juaben                                                 GH¢55,618

Odotobri                                             GH¢216,140

South Akim                                         GH¢58,390

Amenfiman                                         GH¢159,000

Atwimakwanwoma                             GH¢43,980

Ahantaman                                          GH¢198,027


Another important way that RCBs give back to the community is the fact that, they mobilise deposits from their catchment areas and grant credit to deserving customers in the same catchment areas. This helps to boost economic activity in the communities they serve. In contrast, some universal banks mobilise funds in a particular locality and lend to big businesses outside that locality. This tends to starve businesses, individuals and households with the needed resources to meet their varying economic needs.


  1. Focusing on unserved market segment

Most of the major banks tend to target corporate entities, high net worth clients and other profitable clients. Customers at the bottom of the pyramid are often viewed as not profitable.

In contrast, RCBs focus on low income earners, petty traders, micro enterprise operators, small holder farmers and other economic active poor. This has gone a long way to bridge the gap between the banked and unbanked.

Indeed, it is no exaggeration to say that a susu customer can take small loan of Gh₵500.00 to start a petty trade.

The vast majority of the universal banks might not have time for such a borrower because the transaction might be deemed to be unprofitable in terms of interest income generation. Scores of RCBs have Mobile Bankers who go to the door steps of customers particularly low income earners such as street venders, hawkers, drivers, artisans, just to name a few to collect deposits as low as Gh₵2.00 daily. Most of the universal banks will not waste their time on such low depositors because of high operating cost.


  1. Easy access to key management staff

In view of the structure of RCBs and the fact that they are community based make it easy for existing and potential customers and other stakeholders to have access to the key management staff such as the C.E.O/General Manager and like.

C.E.Os/General Managers of RCBs have a schedule whereby they visit branches in their catchment areas as part of their routine monitoring. Thus affording customers opportunity to meet them to address their problems. It is difficult for ordinary customer of a universal bank to have access to key management staff because they are at the head office far away from the branch.


  1. Flexible lending Methodologies

It is easy and faster to access loan facility from rural and community banks than universal banks. Branch Managers of several RCBs have limits when it comes to lending without requiring prior approval from the head office.

Even where big loans have to be approved by credit committee at the head office or the board sub-committee on credit, it is still faster because they are within the locality.

In contrast, most of the universal banks do not have branch limit when it comes to granting credit to deserving customers. Loans acquisitions have to be referred to the head office for approval. This usually goes with cumbersome risk assessment criteria.

Again, most of the universal banks do asset-base collateral lending and this makes it difficult for individuals and small business operators who do not have property or other assets to serve as collateral to access small loans. On the contrary, scores of rural banks offer less than normal collateral loans depending on the cash lien, personal guarantor etc.

Some RCBs provide group lending scheme and they demand social collateral instead of conventional collateral. In other words, they use mutual guarantee system whereby members in the group guarantee for each other.


  1. Dual supervision

Banks and Specialised Deposit Taking Institutions such as Savings and Loans Companies, Finance Houses, Microfinance Companies and RCBs, are supervised and regulated by the Bank of Ghana. The Bank of Ghana does this through onsite inspection and off site monitoring. However, RCBs are unique in the sense that the ARB Apex Bank which serves as a mini central bank also supervise, inspect and monitor their operations for the purpose of complementing the supervisory role of the central bank.

The staff of ARB Apex Bank Audit department periodically visit individual RCBs to audit their operations as part of their internal control.

The onsite visit of ARB Apex Bank Audit staff helps to improve compliance in the areas of KYC policy, capital adequacy ratio, primary and secondary reserve requirements, and corporate governance practices among others.


  1. Ownership Structure

A greater number of Specialised Deposit Taking Institutions in Ghana are owned by one person, family or a few individuals. This implies that returns on investment benefit a handful of people. In contrast, RCBs are community base financial institutions owned by a large number of people through purchased of shares. This means that, profits go back to the masses who are shareholders in the form of dividend. Recently, I had the opportunity to attend Annual General Meetings of Atwima Kwamwoma and Juaben rural banks and I was excited to see shareholders of different background being present to demand accountability from the Board.



The rural banking sector has a number of distinguished features which make the players unique in relation to the orthodox banks.

The RCBs should therefore leverage on their uniqueness to reach out to the unbanked and also attract customers of other financial institutions. They should also leverage on their uniqueness about the fact that RCBs are community based and belonged to the people to win more customers in their catchment areas.

Moreover, the uniqueness of RCBs should serve as positioning strategy to gain competitive advantage in the banking landscape.

In conclusion, government and other donor institutions should support the RCBs because they are doing very well when it comes to corporate social responsibility and financial inclusion in rural Ghana.

The Author is the head of Proven Trusted Solutions, an employee training and development and marketing research firm.

Contact: 0207725859 / 0244517833

Email:[email protected] / [email protected]

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