Suspension of dividend payment stalling increase in stated capital – rural banks lament

Suspension of dividend payment stalling increase in stated capital
Mr. Yaw Sapong Head of Other Financial Institutions Supervision Department (OFISD) of the Central Bank; flanked by Ag. Managing Director of ARB Apex Bank Mr. Alex Awuah (left); and Kwame Owusu Sekyere Esq, Ag. President-Association of Rural Banks, Ghana (right)  

Dividend is the life-blood of every shareholder and an indispensable factor or influence that gives strength to their shareholding or investment.

To contain impacts of the COVID-19 pandemic, the Bank of Ghana in March 2019 directed banks and SDIs to desist from declaring or paying dividends and from making other distributions to shareholders for the financial years 2019 and 2020 – unless the Bank of Ghana was satisfied that such institutions met the regular prudential requirements and were not relying on the additional liquidity released by the regulatory reliefs provided by the Bank of Ghana.

In the said Notice No: BG/GOV/SEC/2020/01, the Bank of Ghana indicated that it would continue to monitor the pandemic’s evolving impact on banks, SDIs and their customers, and would issue further directives as required.

In furtherance of the above, and to further ensure that banks and SDIs are better able to support their customers throughout the COVID-19 pandemic – to absorb any potential operational losses for banks and SDIs from the COVID-19 pandemic – the Bank of Ghana  directed that all banks and SDIs desist from declaring or paying any dividends or distributing reserves to shareholders, and from making any irrevocable commitments regarding the declaration or payment of dividends to shareholders until further notice.

Thus, the President of the National Association of Rural Banks, Kwame Owusu Sekyere Esq, has lamented that suspension of dividend payment has stalled the increase in stated capital for some of the RCBs – and appealed for the Bank of Ghana to allow the provision for payment of dividend in Act 930 to prevail, since “internal capital accumulation has been substantial during the suspension period”.

The national president of the Association of Rural Banks is also making a passionate appeal to government through the Bank of Ghana to intervene and retrieve the locked-up funds of some Rural and Community Banks (RCBs) with some defunct investment companies, and especially with National Trust Holdings Company Limited (NTHC), which is adversely affecting their operational viability and could easily lead to a liquidity crunch with the tendency to lose public confidence.

He stressed that “the contagion effect on rural banking industry will be very apparent” if the situation persists.

The National Present said this at the climax of the 8th Rural Banking Week Celebration held last Saturday at Akyawfrom near Ejisu in Ashanti.

He mentioned that another burden that is suffocating rural banks is the hike in corporate tax from 8% to 25% since 2016; and added that this tax hike is hampering their development role in the provision of basic infrastructure, financial and material support to individuals and institutions.

He has therefore appealed for government to consider a downward revision of the corporate tax rate for the RCBs to enable them live up to their development responsibilities.

He commended the ARB Apex Bank PLC as well as the Bank of Ghana for being very supportive to the ARB in many ways; including the donation of vehicles, significant financial and logistical support, assistance with training programmes, the pursuit of their locked up funds, corporate governance and policy issues among many others.

The Head of Other Financial Institutions Supervision Department (OFISD) of the central bank, Mr. Yaw Sapong who delivered the keynote address on behalf of the Governor of Bank of Ghana, revealed that Ghana’s Banking Sector made a strong showing in spite of the threats posed by the COVID-19 pandemic.

He disclosed that the sector recorded an annual growth rate of 18.15% in total assets, which amounted to GH¢6.7billion. Advances and deposits also increased by 17.43% and 20.71% year on year from GH¢1.70billion to GH¢2billion and GH¢4.84billion to GH¢5.84billion respectively.

The sector’s non-performing loans ratio also declined to 10.98% from 11.11% a year earlier, signalling an improvement in asset quality.

He revealed that the BoG is in the process of reviewing the Apex Bank Model as well as Regulatory and Supervisory Framework to the restructure rural banking concept in Ghana.

He added that the BoG is collaborating with ARB Apex Bank to reposition RCBs to better align with the funding objective of fostering rural and economic development.

He stated that with the licencing of two new branches, the number of RCBs now stands at 147 with nearly 900 branches.

The Ag. Managing Director of ARB Apex Bank, Mr. Alex Awuah, cautioned that the COVID-19 pandemic has not yet abated – hence the need for plans by RCBs to respond appropriately to any associated threats.

He said such plans should help improve liquidity in the banks, since liquidity is the life-blood of any bank’s operations.

“Such robust plans are the only assurance for sustainability and sure pathway for our member-banks to become agile in the face of increasing competition and threats posed by financial technology organisations which offer more affordable and near real-time alternative financial intermediation solutions,” he said.

He stressed the importance of Corporate Governance Directives issued by the Bank of Ghana in May this year, and urged all to embrace them to help ensure sustainability of the banks.

The Ejisumanhene, Nana Afranie Okese IV – who was represented by Nana Kofi Adjei II, highlighted the importance of RCBs to the development of small communities and asserted the role of Ejisu as far as the development of RCBs is concerned.

He cited a number of RCBs located in Ejisu and entreated the various banks to take COVID-19 protocols seriously in order to avert more dire consequences for the industry and the economy as a whole.

The biennial event was marked under the theme ‘The Resilience of RCBs in the COVID-19 Pandemic Era’.


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