The concept of rural banking was introduced in Ghana in 1976. The purpose of introducing that concept was to assist to mobilize rural savings and to make loans and other banking products readily available to the people living in the community and employed in the rural areas and to support their wellbeing and development generally.
Before its establishment the key operatives in the rural areas were the branches of commercial banks, cooperative and credit unions and other units in the informal sector such as moneylenders, merchants and “susu” collectors. Associates and relatives were also main sources of rural finance.
Accordingly, some members of staff of the Central Bank were sent to Countries such as Philippines and Mexico to learn about their “fondo” and other village financial systems, after which the first rural bank was opened at Agona Nyakrom in the central region in July 1976. The early 1980’s witnessed the acceleration of the establishment of rural banks, which were licensed by the Bank of Ghana to carry out such functions as mobilization of rural savings, provision of credit and other services, making profits for shareholders, promoting socioeconomic development of rural areas, and being an instrument of national economic development.
ACHIEVEMENTS
- Deposits Mobilization and employment.
Fort- four years of rural banking in Ghana have brought a lot of accomplishment to the banks, customers and society in particular and the economy as a whole. These achievements include;
Inculcating habit of savings: This enables the rural dwellers where the banks are established to develop the practice of savings and has assisted increase in keeping more money in the banking system through Deposits mobilization through various banking products like Demand deposit (current), Savings, Susu, fixed deposits and others. Total deposits mobilized by the rural banks in Ghana as at June 2020 amounts to GH¢4.32billion
Financial intermediation / Loans and Advances: The rural banks have over the years acted as financial intermediaries, which assist to mobilized funds through deposits and on lend to its customers to boost their business and social needs.
Total loans and Advances granted by the rural banks stood at GH¢ 1.7billion as at June 2020. The credit distribution cut across individuals, private enterprises, public enterprises and others including farmers, salaried workers, transport operators and others. The importance of the Loans and Advances granted by the rural banks cannot be over emphasized. It has created economic development through employment, business expansion and growth, increase capital base and other issues that assist social developments as in poverty alleviation. The Loans/Advances includes Microfinance, SME loans, trade finance, housing loans, overdraft and other loans.
Total Assets; as at the end of the second quarter that is June 2020, the 145 Rural / Community banks can boost of GH¢5.09 billion with a total paid up capital of GH¢220.76million.
Purchase of Bank of Ghana and Government of Ghana Instruments;
All the rural and community banks invest part of their deposits in government securities especially Bonds and treasury bills in compliance with the Central Bank’s mandatory deposit requirement. The investment in government securities is part of RCB, s secondary liquidity requirement with the Central Bank.
Tax payment obligation;
RCBs has continuously since inception contributed to payment of its legally required corporate taxes to relevant government bodies and personal taxes (PAYE) to Social Security Insurance Trust (SSNIT) and hence recognized as good corporate citizenry.
Corporate Social Responsibility (CSR)
Rural banks all over the country give back to society by setting aside part of their profits through corporate and social responsibility (CSR). These include granting of scholarship to the brilliant but needy students, building of schools and community centres, construction of KVIP’s, boreholes, donation to Ghana Police Service, schools, governmental agencies, supporting Farmer’s Day celebrations, NGO’s and many more. These unique services performed by rural banks place them above the universal banks.
Awards
It is not gainsaying that the performance of rural banks has attracted civil societies and organizers of financial and other institutional awards. 2019 Club 100 awards attracted 23 rural banks as recipients, CIMG has over the years awarded most of the rural banks as recipients of this prestigious award. Odotobri, Anlo have been recipients of this awards and Atwima Kwanwoma Rural are the current holder of the award and other international bodies have recognized the good works of the rural banks.
CHALLENGES
Forty-four years of rural banking have seen a lot of challenges but with the collective efforts spearheaded by the Association of Rural Banks and ARB Apex Bank it has been subsided and its effect is minimal
Some the challenges are as follows;
- Regulatory policies (Bank of Ghana (BoG)
- 25%corporate tax increased from 8%. This is really suffocating rural banks and has crippled their CSR activities.
- Locked up investments with fund management companies
- Competition in the banking Industry The financial landscape currently has been reduced to the following numbers after a financial sector clean up by the bank of Ghana in August 2018
23 Universal Banks
25 Savings & Loans
15 Finance Houses
137 Micro Finance and over 500 credit union
PROSPECTS
- Job Creation
Job creation is very crucial in every economy because it helps to reduce the high rate of unemployment and its associated problems.
Moreover, when people are employed, it affords them the opportunity to contribute their quota to economic growth. More importantly employment serves as a source of livelihood and self-identity.
Rural Banks in Ghana have provided employment for sizeable number of people thereby helping them to take care of themselves and their dependents and also pay tax to the government. It has been observed that Rural Banks have employed people as General Managers, Credit Officers, Branch Managers, Tellers, Customer Service Officers, Human Resource Managers, Mobile Bankers and others.
Consider the following RCBs and their contributions to job creation.
Name of Rural Bank Number of Staff
Ahantaman …………………………………………………………….322
Amenfiman ……………………………………………………………412 + 80 outsourced staff
Atwima Kwanwoma ……………………………………………….245
Odotobri ……………………………………………….312 including mobile bankers
Otuasekan ……………………………………………………………..235
Kaaseman ……………………………………………………………..235
Fiaseman ……………………………………………………………….343
Bosomtwe ……………………………………………………………..284
- Response to COVID-19
The COVID-19 pandemic has led to massive disruption of economic and social activities around the globe and Ghana is of no exception.
The Government and the Bank of Ghana have introduced several measures to mitigate the negative effects of COVID-19 on households, individuals, businesses and banks.
Rural Banks have also responded positively to the fight against the pandemic. How? Several Rural Banks have announced relief measures such as reduction in lending rates, moratoriums on loan repayments, loan restructuring among others to cushion customers against the devastating impact of COVID-19.
In addition, some Rural Banks across the country have donated personal protective equipment (PPEs) and other medical supplies to health facilities and other institutions in their catchment areas with a view to supporting them to fight the spread of the virus.
For example, to improve water supply, sanitation and hygiene as part of the COVID-19 response. Amenfiman Rural Bank recently constructed mechanized boreholes for eight communities in the Amenfi East and West District. The total cost of the project amounted to GH₵ 320,000. In fact, the water project has benefited the residents in the eight communities in a significant way because they can now have access to clean water to wash their hands regularly as a precautionary measure against contracting the COVID-19.
Consider other examples;
Name of Rural Bank Cost of donated PPEs and
Other medical supplies
Amenfiman Rural Bank GH₵ 70,825.00
Ahantaman Rural Bank GH₵ 37,500.00
Mumuadu Rural Bank GH₵ 50,000.00
Adansi Rural Bank GH₵ 25,000.00
Western Region Chapter (WERBA) GH₵ 10,000.00
- Commitment to rural community development
Unlike the Universal Banks, Rural Banks are constraint by a host of factors such as over-dependence on interest income, limited scope of banking activities, low levels of economic activities in some branch locations, being smaller in size and balance sheet. The above mentioned factors limit the RCBs ability to generate more income.
Notwithstanding the limitations, the majority of RCBs have been making significant contributions to development of communities in their catchment areas as part of their corporate social responsibility.
Consider a few examples:
Atwima Kwanwoma Rural Bank in the Ashanti Region has constructed a Senior High School (Atwima Kwanwoma Presby Senior High) for Pakyi Number 2 community.
The bank makes a cash donation of GH₵ 10,000 every year to support the school. In addition to the cash donation, the bank has been supporting the school with study materials and other logistics. It is noteworthy to mention that school enrolment in the community has increased.
Adansi Rural Bank Limited in Ashanti Region is also at the forefront of making contribution to community development in the bank catchment areas since its establishment in 1980.
In 2019, the bank provided 10 seater water closet toilet facility for the people of Donyina, a community in Kumasi. This has no doubt improved community hygiene and sanitation as well as contributing towards achievement of SDG goal six. Odotobri Rural Bank built a community centre (Nana Adu Darko Community Centre at Jacobu and Ascience Resource Centre at JASTEC also at Jacobu.
The Board and Management of Amenfiman Rural Bank led by the Chief Executive Officer, Dr. Alexander Asmah believe that a strong brand should be a good corporate citizen through investment in community development. They also have the conviction that a community based financial institution should give back to residents in the locality. In this regard, the bank has been using a substantial part of its profits to invest in developmental projects such as education, security, health, water and sanitation among others. In 2019, the bank constructed and handed over a 14 seater water closet facility to the Asankragwa Senior High School at Asankragwa in the Amenfi West Municipality in the Western Region. This facility brought a relief in the Management of the school after many years without a decent sanitation structure.
It is remarkable and refreshing to note that from January, 2020 to date, the bank has invested a little over GH₵ 201,000.00 on CSR projects in its catchment areas. It is of no exaggeration to say that what Amenfiman Rural Bank has done with respect to CSR are too numerous to recount in this article.
