On Friday, 9th July 1976, Nyakrom Rural Bank in the Central Region became the first born of all rural banks. This implies that the rural banking sector is 46 years old.
“Rural and Community banking was conceptualized at a time when access to bank credit for farmers and traders, especially in rural areas was inadequate. It was envisaged as a unique business model where rural banks thrived based on community empowerment, community ownership and community participation in governance.” (Source: Bank of Ghana)
From 30 rural banks in the 1980s, we now have 145 of such institutions with a branch network of over 800 spread across the 16 regions of the country.
Currently, RCBs have over 6.5 million customers which affirms their positive and remarkable impact on financial inclusion.
It is important to note that the rural banking industry has gone through a series of metamorphosis since its inception in 1976.
This article will therefore explore the new era of the industry.
- Introduction of Corporate Governance Best Practices
Good corporate governance has been identified as one of the critical success factors for financial institutions.
It has been observed by Banking and Corporate Governance Experts that corporate failures have had their roots in poor corporate governance. Typical examples include the global financial crises of 2007/08 and the mass corporate failures in Ghana’s banking and securities sector in the last few years where we saw the demise of 420 institutions licensed by the Bank of Ghana and several fund management companies licensed by the security and exchange commission.
To help promote robust corporate governance practices in the rural banking sector, the Bank of Ghana has issued Corporate Governance Directive. “The effective date for the implementation of all sections of the Corporate Governance Directive was March 31, 2022.” (Source: Bank of Ghana)
Per the directive, the maximum tenure of office of Directors is 9 years while that of the office of board chairperson is 6 years. It is worth mentioning that, some Directors have served on the board for over two decades and this directive will be a game changer. Why? It would open opportunities for the infusion of fresh energy and ideas in our banks.
The directive also seeks to ensure that people appointed as directors possess appropriate experiences, competencies, qualifications and good qualities, including professionalism and integrity.
- Strong Management
The operations of rural banks were initially fraught with weak management as a result of their inability to attract and retain qualified and suitable personnel due to several reasons. However, currently the industry can boast of strong management with impressive academic and professional qualifications, and wealth of experience like their counterpart in the universal banking sector. A number of RCBs Managers are chartered accountants, chartered bankers as well as holders of master degrees.
For example, the CEO of Amenfiman Rural Bank, Dr. Alexander Asmah holds MBA (Banking and Finance) and Doctorate of Business Administration (DBA) (Leadership and Global Business).
In a similar way, Mr Frederick Ampomah Amaning who is the Head of Audit of the same bank holds EMBA, ACCA, ICAG, IIA and Diploma in Forensic Auditing with a wealth of banking experience.
According to the Head of Finance and Operations, Mr. Evans Aikins, among other things, the quality of management team of the bank has made a bigger impact on its performance over the years.
- Good quality staff (Human capital)
Aside from quality management, the quality of staff in most rural banks have improved.
In the early stages, when the rural banking concept was introduced in the country, the vast majority of staff were holders of qualifications such as R.S.A. stage II, Middle School Leaving Certificate (MSLC), GCE O level among others.
In recent years, however, the trend has changed and first degree or an analogous professional qualification has become a basic qualification to get employment with most RCBs.
Ever since the ARB Apex Bank PLC was established, the issue of training has and continues to receive serious attention and this has impacted positively on staff quality of RCBs.
- Adoption of digital banking channels
The banking industry in Ghana has undergone a paradigm shift evolving from manual banking to meeting the digital and personalized banking needs of existing and potential customers.
It is heartwarming to mention that some RCBs have deployed modern and value-added technology tools such as ATMs, Mobile Banking, among others to give customers real convenience and comfort.
Customers of such RCBs can therefore transact their banking business anywhere and anytime without the need to visit the brick-and-mortar branch in person. Atwima Kwanwoma Rural Bank in the Ashanti Region has recently introduced AKRBank Mobile App to offer convenient and expeditious banking services to delight its loyal customers.
- Improved service quality
Today, customers are increasingly becoming sophisticated and therefore more demanding and assertive.
The banking space in Ghana has also become highly competitive due to rivalry among existing competitors, new entrants and availability of substitutes.
In view of the above mentioned and many other factors, rural banks are increasingly improving their service quality delivery so as to remain competitive and also delight their customers to foster loyalty and positive word of mouth communication.
It is worth mentioning that, the capacity building programme regularly provided by the ARB Apex Bank PLC and the Association of Rural Banks in areas such as customer care, customer relationship management and customer service management to staff of rural banks has also impacted on service quality delivery. The banking public must therefore expect to receive top-notch services from the RCBs and must also include them in their choice set.
- Agency Banking
This is a World Bank sponsored project to sign up over five thousand agents across the country. With a secure point of sale (POS) devices, customers can access several banking services without necessarily walking into a banking hall. The ARB Apex Bank – RCB Agency Banking Business Suite is expected to further deepen rural financial inclusion and intermediation in the country.