Joseph Akossey’s thoughts …How rural banks are driving the growth of MSMEs


The acronym MSMEs denotes Micro, Small and Medium Sized Enterprises.

According to the World Bank, MSMEs play a major role in most economics particularly in developing countries. It further said that MSMEs account for majority of businesses worldwide and are important contributors to job creation and global economic development.

In Ghana, MSMEs have played and continue to play a pivotal role in Socio-economic development and this is evident in job creation, contributing to poverty reduction as well as promoting economic growth. According to available data, MSMEs represent 85% of Ghana’s private sector and contribute about 70% of annual GDP.

Rural and Community Banks also play a critical role in socio-economic development of Ghana. Their prime objective is to provide rural financial intermediation with a view to bridging the financial inclusion gap.

They also serve as a catalyst for socio-economic development through effective corporate social responsibility.

According to data from the ARB Apex Bank Limited, there are 144 Rural and Community Banks spread across the 16 regions in Ghana. They remain the largest bank branch network with over 800 branches. This suggests that the RCBs are found at the length and breadth of the country.

Without a doubt, it can be said that the RCBs have been driving the growth of MSMEs in diverse ways over the years.

This article will therefore consider how rural banks are driving the growth of MSMEs,

Flexible access to credit

According to the World Bank, access to finance is a key constraint to MSMEs growth. The Africa Development Bank (AFDB) has also supported the fact that there is a funding gap in MSMEs development in Africa,

Empirical data has revealed that lack of access to finance is a key barrier to the growth of MSMEs in Ghana. According to World Bank 2019 Report on MSMEs financing in Ghana, the country MSMEs financing gap is approximately 13% of GDP.

Scores of MSMEs especially Micro and Small Businesses find it difficult to access credit from the Universal Banks because they are unable to provide Collateral to secure the loan. Moreover, they are perceived to be high risk profile borrowers and unprofitable.

It is important to point out that the RCBs are contributing significantly to MSMEs financing gap in Ghana especially in the rural areas.

Presently, most of the RCBs have a Susu loan product which is a form of micro- credit specifically designed for Micro-enterprise operators such as market women, petty traders among others to help them grow their businesses.

According to the Efficiency Monitoring Unit of the ARB Apex Bank Limited Report for the 4th quarter ended 31st Dec. 2019, the loan portfolio of the RCBs sector amounted to GH₵1,609.50 billion. A large chunk of the credit went to support the MSMEs sector.

As already mentioned, the RCBs sector is doing well in providing credit to support the growth of MSMEs in their catchment areas but space and time might not make it possible to mention all of them. Let’s consider a few examples;

Manya Krobo Rural Bank was established in 1978. This implies that the Bank has been in existence for over 40 years which is a strong evidence of resilience. It was the first Rural Bank to be established in the Eastern Region and the fifth in Ghana. It is currently one of the leading and dominant brands in the rural banking sector. The bank is part of Ghana Club 100 and this is a demonstration of its outstanding performance. The Management team of the bank is led by Mr. Edmund Tawiah Ohipini (C.E.O), He is an astute Banker with over 30 years’ experience.

Without a doubt, Manya Krobo Rural Bank has impacted and continue to impact on MSMEs in a significant way. The bank’s loan book as at December, 2019 was GH₵ 21,050,094.00 and a large portion of it went to support MSMEs in its catchment areas. It is worth mentioning that most MSMEs customers of the bank have been able to grow and expand their businesses through access to flexible credit facility.

This has therefore resulted in job creation. It is also important to note that Manya Krobo Rural Bank is one of the RCBs that operates robust and vibrant microfinance scheme in Ghana. The bank currently operates its microfinance scheme in 200  communities in part of Eastern and Greater Accra regions. The group membership of the microfinance scheme as of 2019 stood at 1,467. The micro loans extended to customers in 2018 amounted to GH₵ 6, 878, 878 while that of 2019 was GH₵ 7, 442, 814. The bank microfinance scheme has significantly impacted on micro businesses and the group members in the following ways.

First, most of the beneficiaries have been able to expand their businesses.

Second, the scheme has contributed to poverty reduction among members of the community.

Third, the microfinance scheme has inculcated the culture of savings among the target group thereby helping them not to waste their working capital.

Adansi Rural Bank was established in 1980 and is currently one of the leading rural banks in Ghana. The bank’s head office is located at Fomena in the Ashanti Region. The bank is part of Ghana club 100. The Management team is under the leadership of Mr. Akwasi Osei Nkrumah. The Board and Management of Adansi Rural Bank appreciate the fact that MSMEs form the backbone of Ghana’s economy and therefore endeavor to drive their growth. The bank’s total loan portfolio as at December, 2019 was GH₵ 38,611,344. It is worth mentioning that the MSMEs sector dominate the loan book.

Data shows that the bank’s loan extension to the MSMEs sector has been improving significantly from year to year.

According to the General Manager, Mr. Akwasi Osei Nkrumah, most of the MSMEs clients of the bank have been able to grow their businesses as a result of support from his outfit.

In order to impact positively on Micro-businesses, Adansi Rural Bank has established a robust microfinance scheme. Presently, the scheme has 427 groups with 5,157 membership. The loan disbursement for 2019 amounted to GH₵ 12.5 million. The total microfinance portfolio as at December, 2019 was a little over GH₵ 5 million. Indeed, Adansi Rural Bank is doing extremely well when it comes to supporting micro-businesses and reducing poverty in its catchment areas.

Ahantaman Rural Bank was established in 1984 and one of the leading Rural Banks in Ghana. The bank is also one of the largest Rural Banks with branch network of 19. It is worthy to mention that over the years and especially within the last 6 years, the bank has experienced tremendous growth and achievement in all key performance indicators. No wonder, it has consistently featured in the rankings of Ghana Club 100 awards since 2003.

According to the C.E.O, Mr. Benjamin Afful-Eshun, the bank has impacted on MSME sector in a significant way over the years. In 2019, the bank total loan portfolio amounted to GH₵ 36,116,020 and a greater portion of it was extended to MSME clients. It is significant to mention that it has been supporting artisans who are sub-contracted to provide services to some of the companies working with the oilfields to aid them execute their contracts.

Mr. Afful-Eshun emphasized the fact that the vast majority of the bank SME clients have been able to grow and expand their businesses. This has resulted in job creation in the bank catchment areas.

Otuasekan Rural Bank is also one of the leading Rural Banks in Ghana. The Bank is headquartered in Kofiase in Ashanti Region. The Bank has consistently featured in the ranking of Ghana Club 100 due to its outstanding performance.

More importantly, the bank has been driving the growth of MSMEs over the years. According to the General Manager, Mr. John De-Graft Owusu, the Board and Management recognizes the critical role that Micro, Small and Medium Enterprise play in Ghana and therefore is poised to support them with flexible loans and capacity building programme. The bank total loan portfolio as at December, 2019 stood at GH₵ 28,362,826 and a greater percentage went to MSME clients.

According to Mr. De-Graft Owusu, his bank has impacted on MSME clients in the following ways.

First, most of them have expanded the scope of their businesses.

Second, some have hired more employees.

Third, some have transitioned from micro-business to small business.

  1. Capacity development (Business advisory services)

Some marketing and finance experts have argued that aside from credit / finance, MSMEs operators need business advisory services in order to grow.

The argument is based on the fact that some MSMEs have failed because those in charge lack business management, marketing and financial management skills. Therefore, it is imperative that MSMEs operators enhance their competencies and skills so as to manage their businesses effectively. Some RCBs have been providing non-financial support in the form of business advice and other form of business capacity development programmes so that MSMEs clients might manage their businesses very well. Manya Krobo Rural Bank has an arrangement where SMEs clients are visited with a view to offering them business advice on business management, financial management and customer relationship management. The microfinance scheme of the bank also has an element of education where micro-enterprise operators are given education on prudent use of the credit facility and best practices in managing micro business. According to Management of the bank, the education aspect of the Microfinance scheme has enabled many to graduate from very small-table-top businesses to medium scale within sometimes their third cycles.

Adansi Rural Bank is currently using credit with education model for its microfinance scheme. In line with this model, group members who are primarily micro business operators are provided with education in matters on micro business development and growth, financial management, customer service among others. The education aspect of the scheme has helped group members to grow their businesses in terms of sales, revenue, profit and others.

The marketing officers of the bank also provide expert advice to SMEs customers as part of key account Management Strategy.

  1. Relief measures

It has been observed that the MSME sector is at high risk of being disproportionately impacted by the COVID-19 pandemic. In order to minimize the impact, a number of RCBs across the country have announced relief measures such as reduction in lending rates, offering moratoriums on loan repayments, loan restructuring among others. It is envisaged that the above mentioned economic relief measures will help ameliorate the challenges faced by some MSME clients of the RCB sector.


The RCBs are doing extremely well when it comes to supporting the MSME sector. The Government must therefore channel stimulus package meant for the MSME sector through them. Going forward, the Government should reduce the current corporate tax which was revised upwards from 8% to 25%.

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