Fiagya Rural Bank Limited at Busunya in the Nkoranza North district of the newly-created Bono East Region has taken steps to clean its books of non-performing or toxic assets to help sustain its operations.
The bank has set its system right to ensure efficient management of liquidity, avoid unhealthy fixed deposit rates and make prudent short-term investments by avoiding trading in high earning securities but associated with colossal risks. The move, is on the premise of the bank, targeting firm operational sustainability rather than huge profitability in the short-term.
The bank for instance, will only make short-term investments of GH¢5.8million in 2019. Though government’s Treasury bill rate currently remains unattractive, greater proportion of the bank’s investment will go into it.
The bank closed 2018 with total assets of GH¢28million: it is expected to increase its assets base to about GH¢30million by the end of 2019, representing 30% projected growth. On the backdrop of its strategic steps, the bank is therefore pointing at a significant increase of performing assets as against bad ones.
The General Manager-Fiagya Rural Bank, Kwame Baffo-Emmim who disclosed this to B&FT, said the projection was informed by the trend over the last three years, stressing: “We are very optimistic of meeting this target; meeting most of our growth projections has been consistent in recent years”.
Loans remain the main asset of the bank – but like many other banks, non-performing loans has been a bane to liquidity. The B&FT understands the situation is largely because of poor loan appraisals and failure of businesses to repay loans on schedule. To improve upon its liquidity, the General Manager said, henceforth, the bank will only give out ‘quality loans’ so as to recover them on time.
He noted that the bulk of the bank’s 2019 loan portfolio will be channeled into microfinance rather than commercial loans to only a few individual businesses – which has proven to be more risky in recent times. The loan budget for 2019 is GH¢11million as compared to GH¢8million in the preceding year. Its microfinance scheme will take 35%, trade and overdraft 25%, agriculture 15%, government salary workers 15%, and 10% goes for other loans.
To be able to secure more funds for disbursement, the bank has redoubled its efforts in mopping up deposits. It has engaged the services of more mobile bankers, which have been given strategies to achieve certain targets. Already, the bank has relocated its Techiman and Sunyani branches to more commercially-viable places. This is expected to help consolidate the bank’s deposit gains in 2019. It has budgeted to increase 2018’s total deposits of GH¢15million by 30% to reach about GH¢19.5million.
Mr. Baffo-Emmim revealed that the bank has estimated to generate a profit of about GH¢570,000 by end of the year. The bank realised a profit of GH¢335,000 in 2018 but is optimistic of generating more this year.
As at the beginning of this year, the share capital of the bank stood at a little over GH¢1million. It has set a target on increasing the share capital to at least GH¢1.5million by December-ending. “We are putting in more effort to meet this objective. Our community members have shown interest in buying more shares; for now, the motivation factor is the pride of owning the bank. Attracting dividend on their investments will be an extra joy,” he stated.