At the back of the increasing competition and changes being witnessed in the banking industry, the Executive Director of the Association of Rural Banks, Ghana (ARB), Mrs. Comfort Owusu, has called for rural banking to be given an operational makeover.
According to her, rural banking has been in existence for over four decades. During the period, the banking space has seen many changes due to intense competition in the industry, commoditisation of bank products and services, customer sophistication, and demographic changes among others.
It is in view of this that she said: “There is a need to reposition the rural banking brand as vibrant, reliable and resilient in order to attract non-users”. This includes the youth, the upper-middle class, customers of the defunct institutions and others.
Also, she said the repositioning ties in with the Bank of Ghana’s agenda of rebranding the sector to support rural economic development.
“Toward this end, the Association of Rural Banks intends to develop and implement effective brand and marketing communication strategies, so that the banking public will appreciate what the brand stands for in terms of RCBs’ point of differentiation.”
Mrs. Owusu was speaking at the ‘20th National Managers’ Conference of Rural and Community Banks’ held in Nkwatia-Kwahu, and explained that this will augment the efforts made by the ARB Apex Bank Limited.
She urged all the 145 RCBs to work hard on improving their internal systems and operations, especially in the area of service quality. This, it is believed, will help to avert any communication gap that is likely to dilute the rural banking brand.
This year’s Managers’ Conference is on the theme ‘Rural Banking beyond Financial Sector Reforms and the COVID-19 pandemic’. Mrs. Owusu said the theme is appropriate, given that it will provide a guide on how to leverage strengths to exploit opportunities presented by reform in the area of the gap created by defunct institutions in the banking space, and the need for increased use of technology created by the emergence of COVID-19.
Furthermore, financial sector reforms and the COVID-19 pandemic are topical issues in Ghana at the moment, due to their impact on individuals, businesses and the wider economy, most importantly, and players in the banking industry.
In 2017, the Bank of Ghana embarked on a comprehensive set of reforms to clean up the banking and SDIs sectors of the economy – having identified the prevalence of system-risks across several financial institutions.
These include severely impaired capital leading to insolvency, weak asset quality, serious liquidity crises and poor corporate governance practices among others.
The reform occasioned the withdrawal of operating licences from 420 Financial Institutions made up of banks and SDIs.
The Security and Exchange Commission (SEC) also revoked the licences of fifty-three Fund Management Companies.
Despite RCBs being excluded from the financial sector clean-up exercise, Mrs. Owusu disclosed that they were adversely impacted.
She said there was speculation in the traditional and social media regarding the possibility that the clean-up exercise would be extended to the RCBs. This therefore gave cause for panic withdrawals, and RCBs with weak liquidity positions nearly experienced a run on them.
“Another negative effect experienced by the RCBs as a result of the financial sector reform was locked-up funds with the defunct institutions, especially the Fund Management Companies. We appreciate the effort made by government for repayment,” she stated.
With scores of RCBs still having substantial funds locked up with some defunct Fund Management Companies, given that the Registrar-General is yet to secure a liquidation order from the court, she urged authorities to speed up the process
Making the funds available, she noted, will help improve the liquidity of RCBs to deepen financial intermediation in the rural areas and also support rural economic development.
Additionally, the outbreak of COVID-19 has also affected the rural banking sector; however, “We were able to provide antidotes to ease negative effects of the COVID-19 crisis successfully,” according to Mrs. Owusu.
RCBs recorded fantastic performances in the areas of deposits and asset growth amid the crisis. On a year-on-year basis, the total assets of RCBs grew by 32.4 percent at the end of the third quarter of 2020 while total deposits also increased, by 38.1 percent.
It is on record that some individual RCBs even grew their deposits over 50 percent despite challenges occasioned by the pandemic. This is an indication that the sector’s resilience to shocks has improved significantly.