The rural banking industry in Ghana has experienced growth over the years. The industry started in 1976 when the first rural bank was established in Nyakrom in the Central Region. Rural banks were established to provide financial intermediation for the rural population.
However, currently some are operating in the cities with a view to bridging the gap between the banked and unbanked segment.
According to the Efficiency Monitoring Unit of ARB Apex Bank Report for the first quarter of 2018, there were 142 rural banks operating across the 10 regions of Ghana. The branch network of RCBs currently stand at over 700. The rural banking sector has a total staff of about 20,000 – and this has contributed to job creation particularly in rural areas. Notwithstanding the fact that the rural sector has made significant improvements over the years, some individuals and institutions still have certain negative perceptions about the brand. The article will consider some of those wrong perceptions and, more importantly, highlight the realities.
Some of the wrong perceptions
- Rural banks service are meant for only rural folks
The above-mentioned perception usually stems from the rural tag and the fact that the rural banking concept was initially meant to promote financial intermediation in rural areas.
It is worth mentioning that RCBs have products and services that can satisfy the needs and wants of individuals, households, businesses and other organisations apart from rural folks.
RCBs offer a variety of deposit products such as savings accounts, current accounts and fixed deposit account and many others, like the universal banks. Currently, RCBs’ customer base is over 5 million and this is made up of rural and urban dwellers, people of middle-class status, SME operators, public sector workers and many more.
- They offer low remuneration and poor conditions of service
Some individuals are of the view that RCBs do not offer their staff attractive remuneration and better conditions of service like other well-known financial institutions. This tends to discourage some brilliant graduates from working with RCBs.
The reality is that scores of RCBs today offer their staff attractive remuneration and good conditions of service. Let me point out the fact that salary levels vary across RCBs due to differences in human resource policy, financial strength, location and a host of other factors. Some RCBs have been able to attract staff from the universal banks and savings loans companies because of better remuneration and conditions of service.
Some RCBs offer their staff incentive packages such as a car loans, housing loans, annual bonus among others. Another rural bank in Ashanti Region also pays Mobile Bankers net monthly salary over GH¢800. The figure does not include commission and other allowances. What is remarkable is the fact that the Mobile Bankers are holders of senior high school certificates.
- RCBs do not have good quality staff
In the past, most RCBs were not able to attract qualified and experienced staff because they were not profitable enough to offer attractive remuneration. According to Mr. Emmanuel Aseidu Mante, a former Deputy Governor of Bank of Ghana, RCBs did not attract good qualified staff in the initial stages of the scheme because they were sited in rural areas, and many qualified and experienced people were reluctant to work in the rural areas. Currently, the situation has changed and the RCBs can boast the hiring of qualified and experienced staff like the universal banks. Some RCBs have Chartered Accountants and Bankers as well as other professionals.
For Example, Sefwiman Rural Bank has two Chartered Accountants and three Chartered Bankers. Similarly, Nwabiagya dhas five Chartered Accountants and five Chartered Bankers. Some CEOs/General Managers of some RCBs hold PHDs. A notable example is Mr. Alexander Asmah, the CEO of Amenfiman. It has been observed that MBA qualification is common in the rural banking sector. The minimum qualification today for getting employment with most RCBs is HND qualification.
It is worth mentioning that the regular training offered by ARB Apex Bank and the Association of Rural Banks has also helped to improve the quality of RCBs’ staff. The quality of board composition in most RCBs has also improved. Consider the following examples: Asante Akyem Rural Bank has on its board Dr. Philip Yaw Amakye, who is a chartered management consultant; Professor Osei Darkwa, who was a formal president of Ghana Telecom University College; Mr. Francis Opuni Sekyere, who is an insurance expert and a top business executive; Mr. Michael Anyamesem (Co-opted Member), who is Ashanti regional manager for the Bank of Ghana among others.
Otuasekan Rural Bank also has the following on its board: Dr. Nana Akowuah Boamah, who is a board member of ARB Apex Bank; Dr. Stephen Prince Atakorah and Mr. Francis Kwasi Amoah, who has a strong background in finance. There are other experienced and qualified persons on the board.
Mumuadu Rural Bank also has on its board Mr. Seth Adom Asomaning, who is a Banker and a lawyer: Mr. Samuel Opoku Agyemang, a Banker by Profession; Mr. Samuel Otu-Boateng, a management consultant; Mr. Joseph Amoafo, a chartered accountant; and Dr. Nicholas Yeboah Aninagyei among others.
- They do not have the capacity to give huge loans
It is worth mentioning that RCBs cannot give huge loans like the universal banks due to their limited capital and balance sheet size. However, some RCBs have the capacity to give huge loans contrary to the perception people have. The amount of loan to grant an individual or institution by a rural bank depends on several factors: such as the capacity of the borrower to make repayment, loan policy, the quantum of deposit, risk tolerance/appetite level, single obligor limit among others. RCBs have higher individual exposures in terms of deposits and loans. Some RCBs have the capacity to grant loan amounting to GH¢1.5m to an individual or institution. A case in point is Ahantaman Rural Bank in the Western Region.
- RCBs do not have the technology to give convenient banking services
Some individual and institutions are of the view that the RCBs do not offer technology-driven products and services which ensure speed and convenience for bank customers. It is heartwarming to say that some RCBs have started to leverage on technology to meet the banking needs of customers. Some RCBs have rolled out ATM platforms and Mobile APPs. The ARB Apex Bank has installed 35 ATMs for some RCBs across the country, and there are plans to roll out 50 more by September. The ARB Apex Bank has also developed the U-Connect for RCBs. On the U-Connect platform, subscribers will be able to transfer funds to customers’ accounts across rural banks as well as to the accounts of commercial banks. It also has some unique features and benefits.
Some individuals and institution also have the perception that customers of RCBs cannot access their funds because of limited branch network coverage. The fact is that introduction of the ATM platform, U-Connect, ACH and Mobile Money among others have gone a long way to deal with the above-mentioned assertion.
- RCBs are Sole-proprietorship businesses (one-man business)
The reality is that RCBs are not one-man businesses. They have shareholders who are the key stakeholders. RCBs are registered as public limited liability companies. They are also licenced and are being supervised and regulated by the Bank of Ghana and ARB Apex Bank. RCBs, unlike one-man businesses, have the necessary structures such as board of directors, key management staff, key committees such as Audit Committee, Loans Committee and Risk and Compliance Committee. RCBs organize Annual General Meetings (AGM) every year to account for their stewardship to shareholders. They also publish their audited financial statements in accordance with the Banks and Specialised Deposit Taking Institutions Act 2016 (Act 930). Some RCBs have institutional investment, and a notable example is Nwabiagya Rural Bank. The current ownership structure of RCBs is illustrated below:
This implies that no single person can own 100% shares.
The ownership structure also implies that the death of a key shareholder in a rural bank does not affect its status as a going concern entity.
- Low service quality delivery
Some people have the notion that the service quality of RCBs is low in comparison with universal banks and other Specialised Deposit Taking Institutions. It is worth mentioning that, increasingly, RCBs are improving when it comes to service quality delivery.
Customers are increasingly becoming sophisticated and demanding, and also enjoy low switching cost – thereby compelling some RCBs to improve. Moreover, RCBs are facing competition from the universal banks, savings and loans companies among others. This fierce competition is also forcing a lot of RCBs to make improvements with respect to customer service. However, there is still room for improvement.
- It is not attractive to invest in RCBs
Some RCBs are profitable and thus investors are likely to get better returns on investment.
I can say with confidence that some RBCs offer better returns on investment than some listed companies on the stock exchange market.
Consider the example below:
In 2016 financial year, the board of Nwabiagya Rural Bank in Ashanti Region recommended dividend per share of GH¢0.060
The board of Ahantaman Rural Bank recommended GH¢0.065 as dividend per share for shareholders for the 2017 financial year.
In 2016 financial year, Atwima Kwawoma Rural Bank also recommended the payment of dividend of GH¢ 0.0950 per share, amounting to GH¢1,356,099. The bank’s profit before tax amounted to GH¢9,330,220.
The investing public should therefore show interest in investing in RCBs.
The impressions and perception about RCBs discussed in this article are of the past, as the result of a complete paradigm shift in the rural banking industry.
The Author is the head of Proven Trusted Solutions, an employee training and development and marketing research firm.
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