Joseph Akossey’s thoughts …. COVID-19 Pandemic: Lessons for Rural Banks


The COVID-19 crisis has disrupted social and economic activities across the globe. Experts have argued that COVID-19 is not only a health crisis but also an economic crisis. As part of the financial ecosystem, the RCBs are also susceptible to negative effects of COVID-19.

Given that RCBs are going concern institutions, there are important lessons to learn from COVID-19 so as to strengthen their resilience to deal with future crises.

  1. Build resilience

Building a stronger and more resilient rural banking sector is crucial, because it makes the players well-positioned to withstand external shocks.

This means that in good times individual RCBs should build strong capital and liquidity buffers so as to strengthen them to withstand external shocks.

One way that RCBs can build strong capital buffers is by ensuring that they grow their reserves, especially their income surplus, when they are making impressive profit.

Currently, the Bank and Specialised Deposit Taking Institutions ACT 2016 requires that RCBs transfer either 50%, 25% or 12% after profit to their statutory reserve fund. After satisfying this statutory requirement, a rural bank has to decide how much to declare as dividend for shareholders, and how much is to be transferred to income surplus, as well as other reserves.

The income surplus plays an important role, in the sense that it caters for losses during bad times. Hence, it is imperative that rural banks transfer enough funds each year to grow it, and not declare big dividends. According to IMF Director Kristalina Georgieva, financial institutions should always think of the unthinkable and act with some foresight. She went on to say that financial institutions should build better before crises erupt, so that they can weather the storm.

Another way that RCBs can build a strong capital buffer is to beef-up their paid-up capital.

Scores of RCBs used to transfer funds from the income surplus to grow their stated capital. However, this does not bring in additional capital to grow the bank’s net worth (shareholders fund). Further, the bank has to pay 8% tax to the Ghana Revenue Authority. Moreover, this depletes the income surplus that is meant to deal with losses. Therefore, RCBs must grow their paid-up capital through the issuance of right issues to existing shareholders, as well as attracting new shareholders through aggressive share mobilisation. This will go a long way to grow their net worth as well as Capital Adequacy Ratios.

I want to acknowledge the following banks for their resilience: Atwima Kwanwoma Rural Bank, Amenfiman Rural Bank, Adansi Rural Bank, Fiaseman Rural Bank, Ahantaman Rural Bank, Mumuadu Rural Bank, Kintampo Rural Bank and Manyakrobo Rural Bank among others.

Currently, Atwima Kwanwoma Rural Bank has the biggest net worth while Amenfiman Rural Bank has the biggest stated capital in the rural banking sector.

  1. Accelerate digital channels

Traditionally, players in the banking industry have been using brick and mortar branch banking to deliver banking services. However, customer sophistication, competition and technological revolution have led to digitisation. This has resulted in the introduction of digital channels such as mobile banking, Internet banking, ATMs among others. In view of the COVID-19 pandemic, people are encouraged to stay at home if possible in order not to contract the virus.

The social distancing protocol being practiced at the banking halls has made in-person banking stressful, because only a few people are allowed to be in the banking hall at a time while the rest have to wait outside. The above-mentioned factors have triggered a shift in consumer behaviour of some bank customers – from in-person banking at the banking halls to the use of digital channels. It is noteworthy that digital banking channels have become basic banking products and are no longer an innovation. The COVID-19 crisis has made digital banking channels ‘new normal’.

Therefore, going forward, our RCBs should think of embracing digitisation to create convenience and comfortability in accessing banking service.

However, in view of the geographical nature of some of the branches and customer demography, RCBs should adopt digitisation on a small scale and not large scale.

They should also start with basic digital banking channels which can easily be adopted by customers.

For example, instead of going for Internet banking, it would be prudent to introduce mobile banking – which is relatively simple – so that some categories of customers such as teachers, nurses and other salary workers among others can withdraw their funds through their app without visiting the banking hall.

Let me say that the future of banking is digitisation, and hence RCBs cannot ignore it entirely.

  1. Strengthen Business Continuity Plans

The Business Continuity Plan is of paramount importance for Banks and Specialised Deposit Institutions such as RCBs. This is because it can help RCBs to function in case of crisis situations such as the current COVID-19 pandemic. This no doubt makes it possible for customers to access normal banking services without hindrance or disruption. No wonder the Bank of Ghana directed banks and SDIs to activate their business continuity plans when COVID-19 emerged in the country. The lesson RCBs should learn from the COVID-19 outbreak is that we live in an uncertain and unpredictable world, and hence must continue to strengthen their Business Continuity Plans so that service delivery will not come to a halt when disaster of a huge magnitude strikes.

Board and management of RCBS should appreciate the fact that the full effect and duration of the COVID-19 crisis is still unknown, and therefore should make their Business Continuity Plans more robust so as to mitigate operational disruptions. It will also help our RCBs to play their Countercyclical part now, and support the economy in its recovery phase.

  1. The Need to Rethink and restrategise

The COVID-19 crisis has triggered changes in bank customer behaviour, expectations and preferences. For example, some business customers are demanding moratoriums on loan repayments and loan restructuring, among others, in order to cushion them. The crisis has also necessitated the need for banks to modify how they conduct certain aspects of their business. The lesson is that Management of RCBs should be ready to re-think their plans and policies in crisis situations, in order to remain competitive and also meet customer expectations. Currently, some existing and potential customers seem reluctant to visit banking halls to transact their banking business such as making deposits, because of the social distancing protocol and fear of contracting the virus. In order not to forfeit the deposits of such customers, RCBs must re-think and strategise, and also find all possible avenues to reach out to these customers.

  1. Position business customers to remain resilient

As institutions engaging in financial intermediation, RCBs depend on customers for survival. Why? It is because customers serve as sources of income, deposits and profit among others. Therefore, when business customers find it difficult to stay afloat in crisis times such as COVID-19, it might have adverse impacts on our RCBs because loan repayments and deposit mobilisation are likely to suffer.

In view of this, our RCBs should do their utmost to properly position their business customers such as SMEs in order to remain resilient enough to absorb external shocks.

RCBs should therefore roll out marketing programmes that will empower their business customers. Example of such programmes are: SMEs Business Management Seminars; periodic visitation of key business customers to monitor business performance, among others.

Board and management of Fiaseman Rural Bank have introduced a SME clinic to build the capacity of SMEs in the bank’s catchment areas. This has helped to make the bank’s SME customers’ businesses robust and resilient. The bank attaches much importance to the growth of SMEs, and as such has established an MSMEs department. Again, I want to take this opportunity to commend the Board and Management under the leadership of Mr. Kaedabi for their hard work which has made the Fiaseman brand very resilient. My commendation also goes to Mr. Bob Kwofi, who is an astute marketer.


Thus far, this article has highlighted important lessons that RCBs can learn from COVID-19. RCBs should not focus solely on the negative effects of COVID-19; instead, they should focus on the opportunities and lessons that can help them to withstand future external shocks.

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