Micro, Small and Medium Enterprise financing:…Rural Banks (RCBs) lead the way


Financing Small and Medium-Scale Enterprises (SMEs) to expand has been the major objective for governments, policymakers, financial and non-financial institutions. The upsurge in the interest of finding sustainable financing for SMEs have made RCBs very important especially in the rural areas where they  are mostly the only financial institution available and willing to finance such enterprises. SMEs play a significant role in the economic development of every developing nation including Ghana.

Many SMEs are predominantly family run businesses or very small enterprises with limited financial muscle to operate. Most SME entrepreneurs depend on ‘’own savings ‘’ and loans from acquaintances.   Even though the growth of SMEs is recognised as the fulcrum for the growth of a nation’s economy they  are limited by access to credit especially from major banks because of their lack records keeping, credit history and collaterals. The lack of credible records keeping make it difficult for them to separate proceeds  of the business from personal finances, a tendency that often lead to diverting business funds for other purposes including personal uses.

Rural Enterprise Financing

Recognizing the lack of access to appropriate financial products and services as one the factors preventing

MSEs growth, RCBs have increased their efforts to advance more funds to these SMEs by bringing their banking services to their door steps by opening branches in every part of Ghana that hitherto most traditional banks would not consider. RCBs have built up their capacity with the help of the ARB Apex Bank and the BoG to create avenues and initiatives aimed at advancing credit to MSEs and low-income individuals especially through microfinance. Rural and Community Banks are poised to fill in the gap as they are best positioned to offer such help based on their intimate knowledge of the operations of small businesses.  The RCBs are better able to offer financial intermediation to these SMEs as their locations all over the rural and small towns in Ghana enable them to acquire unique knowledge about the terrains in which these SMEs operate and therefore are to offer them credits without requiring them to provide collaterals.

Rural and Community Banks play a vital  in addressing several problems faced by the SME sector today. They are not only providers of critical credit to these SMEs but have also become partners in the growth of these enterprises through a process of hand holding of entrepreneurs. As SMEs operate with a woefully low capital Rural Banks therefore, become the financial bulwarks of the SMEs. They provide financial and other credit facilities, supporting and nurturing them to grow and find their feet to provide employment and produce for the domestic market and for exports. Most RCBS Banks have thus established project  departments that provide advice to these SMEs as well as give them specialized project loans to improve their operations.

Women In Enterprise Loans

RCBs through Women in Development concept introduced by the Freedom from hunger project have ensured a greater participation in the affairs of their SME clients by convergence of credit services and non-credit services. Many RCBs have created products specifically suited to the requirements of SMEs that have endeared them to these SMEs. Most RCBs have also established women’s group loans known as Women In Development Microfinance loans to cater for the credit needs of the rural women which has empowered them to establish or expand their micro enterprises such as oil processing, gari making among others.

As the availability of timely and adequate credit is a key requirement for this sector, RCBs have created a single window facility for providing loans to SMEs.

These include a centralized loan processing department to specifically cater to such clients. These departments handle the appraisal, documentation, approvals, disbursement monitoring and repayment.

SME loans are high risk loans, however, despite the risks, the financing of these enterprises is a must for ensuring inclusive growth and the success of Ghana’s drive for industrialization and RCBs have taken the bull by the horns and in the forefront. In view of this RCBs with the help of the ARB Apex Bank have over the years built up their risk assessment and risk management capabilities to provide for any instances of failures as a part of their risk mitigation process. Most RCBs have put in place a credible, proactive and a functional monitoring mechanism to review advances to SMEs in order to minimize any incidences of bad loans and thus failure of the SME.

SME Financing

RCBs play a vital role in the growth of SMEs to solve the twin problems of unemployment and rural and small town developmental challenges. With Ghana’s resolve to change the drivers of the economy from a primary goods exporter to an industrialized one it needs a well-funded and robust micro, small and medium sector and RCBs have risen to the challenge. As SMEs provide growth, create local demand and consumption RCBs also take pride in servicing these SMEs as major financiers of the industrial drive of Ghana. RCBs over the years have been supporting their SME clients by building long term and sustainable business relations, offering them training in credit management and financing their operations. Most RCBs have increased their branch network in a drive to establish their presence in areas where other banks would not find attractive. This has helped enhanced their contribution to savings mobilization and credit availability in the economy of their catchment areas and Ghana as a whole. As at December 2020 RCBs have been able to mobilize deposits of GHC 5,319.27 million representing a growth of 37% over the December 2019 deposit mobilization of GHC3,877.16 million posted by all Rural and Community Banks.

This means RCBs are highly liquid despite the slowdown in the economy affecting the banking sector as a result of the COVID-19 pandemic. Consequently, RCBs are able to meet the expectations of SMEs through dispensing loans to them at lower interest rate. By December of 2020 despite the COVID pandemic leading to a slow growth in the economy RCBs were able to advance SME loans of GHC640.51 representing 34% of the total loans of GHC 1,840.51 million. In 2019 RCBs advanced GHC 1,609.50 million out of which GHC 531.80 million were advanced to SMEs.


Rural and Community Banks are committed to financing Small and Micro Enterprises (SME) for mutual growth and development. SMEs need the right financial products to take advantage of economic opportunities brought about by Ghana’s push to industrialize. Rural Banks have available funds and the ability to finance SME to invest in expanding production. SMEs that need finances but do not have the collaterals requested by the bigger traditional banks are better served and nurtured by the rural banks for growth.

——————————————————————————————————————-The writer has extensive experience in Rural Banking in Ghana. He is currently a staff of Lower Pra Rural Bank, Shama and a researcher in current trends in Human Resources Management and Development and Rural Banking. He may be reached on [email protected] Cell: +233 050 636 3388

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