While other financial institutions are lamenting the negative impacts on their operations resulting from COVID-19, rural banks are fortunate to be on the other side – recording a surge in deposits.
Board Chairman for Okomfo Anokye Rural Bank-Kumasi, Kennedy Obiri-Yeboah, has stated that his rural bank actually experienced an increase in customer deposits after the lockdown was lifted in April this year. According to him, this development will help them reach their highest deposit target of GH¢60million by the end of June, from the previous GH¢55million, before the lockdown.
He indicated that despite the increase in deposits, the rural banking sector was hit hard by coronavirus – as most rural banks lost as much as GH¢5million during the 21-day lockdown period in April 2020. This, he stressed, is due to customers no longer applying for loans, and increase in cost attributed to obeying COVID-19 protocols coupled with a decline in the funeral industry, which is known in the Ashanti Region to generate a lot of economic activity.
Mr. Obiri-Yeboah attributed the spike to the bank’s ability to sustain withdrawals by targetting businesses in viable industries during the pandemic. Touching on the digitisation agenda post COVID-19 due to social distancing protocols, he opined that regardless of the cost involved to rural banks, adopting digital banking platforms is the way to go in these difficult times.
He emphasised that going forward, rural banks should adopt strategies such as more robust and next generation technologies, mass education in the use of digital platforms such as E-banking, and the use of live chats for additional customer support.
Mr. Obiri-Yeboah was speaking during the third edition of the ongoing Webinar Series organised by Krif Media Limited, publisher of Integrity Magazine. It was on the theme ‘The Effects of COVID-19 on Corporate Ghana, with the focus on Rural banks’.
The Chief Executive Officer of Amenfiman Rural Bank, Dr. Alex Asmah, on his part, mentioned that this year Amenfiman Rural Bank had extended credit of over GH¢32million to over 10,000 farmers – using both individual and group lending strategies.
He stated that at the initial stage of the restrictions, there were uncertainties about the future, so most Rural and Commercial Banks (RCB) switched to risk management mode; mainly strategising around possible impacts of the coronavirus pandemic on their banks. Therefore, most rural banks – after building various risk scenarios, came out with strategies to support their customers whose businesses are impacted by the coronavirus.
Furthermore, he commended rural banks for demonstrating resilience in containing the impact of COVID-19 on their business and being able to get their wheels turning such a short time after the lockdown.
“It is worth noting that several rural banks have committed resources amounting to several thousand of Ghana cedis to support their communities and the Health Ministry, in the form of cash and non-cash items such as PPEs toward the fight against the pandemic. In addition, several interventions have also been announced to support their clients in the MSMEs sector and farmers.”
Some of these interventions, according to him, include moratoriums on loan repayments, deferment of monthly loan instalment and interest rate cuts from 150 – 200 basis points, far above the central bank’s expectations.
Executive Director-Association of Rural Banks Ghana (ARBG), Comfort Owusu, was also present at the event and appealed to the Ministry of Finance and Securities and Exchange Commission (SEC) to speed up the process involved in the payment of ‘locked up’ funds with defunct financial institutions whose licences were revoked.
The ARBG, however, is calling on government to support the RCBs sector to be more comfortable in taking the risks involved when funding farmers and MSMEs post COVID-19; and adds that there should be stimulus packages in the form of a special fund for RCBs for on-lending to their customers in the MSME and agriculture sectors.
Rev. Kennedy Okosun, Chief Executive Officer of Krif Ghana Ltd. and Krif Media, commended some rural banks for the critical role they have played in development of the country’s economy, which makes them feature regularly on the Ghana Club 100 list.