By Seth KRAMPAH
Rural communities in Ghana about four decades ago, before Ghana’s national rural electrification project, were painted with a broad brush of underdevelopment, poverty and backwardness. This view often permeates discussions on rural banking, where the ‘rural’ tag is seen more as a stigma than a unique brand. B&FT’s SETH KRAMPAH takes a look at this misconception and misleading ideology and advocates through this article that the ‘rural’ tag in rural banking is a unique brand and not a stigma.
In Ghana, rural communities have long been painted with a broad brush of underdevelopment, poverty and backwardness. This view often permeates discussions on rural banking, where the ‘rural’ tag is seen more as a stigma than a unique brand.
However, this perspective fails to recognise the vibrant economic potential that lies within these communities. It is high time to reframe the narrative, seeing rural banking not as a charitable endeavour but as a vital and dynamic component of Ghana’s economic landscape.
Rural areas in Ghana are a mosaic of economic activities, primarily driven by agriculture. These communities are the heart of Ghana’s agricultural sector, producing a significant portion of the nation’s food supply and contributing substantially to its GDP. Beyond agriculture, rural areas are hubs for small-scale industries, local crafts and trade, all of which create a complex and interconnected economic fabric.
The economic potential of rural areas is immense, with opportunities for growth in agribusiness, tourism and renewable energy, among others. Yet, the financial needs of these communities are often overlooked, leading to a gap in banking services that can stymie growth and development.
Rural banking in Ghana has historically been viewed through a lens of necessity rather than opportunity. This perception has been shaped by stereotypes that paint rural populations as economically inactive or solely dependent on subsistence agriculture. Consequently, financial institutions often approach rural banking with a degree of reluctance, seeing it as high-risk with minimal returns.
This approach is not only misguided, but also detrimental to the economic inclusion of rural communities. The ‘rural’ tag should be seen as an indication of unique opportunities rather than a call for charity. Rural banking should be recognised for its potential to drive sustainable development and inclusive growth.
To rebrand the ‘rural’ tag, we must first acknowledge the transformative power of rural banking. Financial inclusion in rural areas can serve as a catalyst for economic development, enabling investment in agriculture, education, healthcare and infrastructure. By providing access to financial services, rural banks empower individuals and communities to improve their livelihoods and contribute to the broader economy.
Innovative financial models tailored to the specific needs of rural populations can unlock significant economic potential. Microfinance, for instance, has proven effective in providing capital to small-scale entrepreneurs who lack access to traditional banking services. Mobile banking, which has seen tremendous growth in Ghana, offers a flexible and accessible way to bring banking services to remote areas.
Success stories in rural banking
The success of rural banking initiatives in Ghana is testament to the potential of these communities. The establishment of rural and community banks (RCBs) in the 1970s marked a significant step toward financial inclusion. These banks have since become critical players in the local economy, providing credit facilities, savings accounts and other financial products tailored to the needs of rural populations.
One notable success story is that of the ARB Apex Bank PLC, headed by Alex Kwasi Awuah as the Managing Director, which serves as a mini central bank for the RCBs.
By providing oversight and support services to the rural and community banks, the ARB Apex Bank has helped improve the operational efficiency and financial health of rural banks, ensuring they can better serve their communities. This model has been instrumental in promoting financial inclusion and supporting rural development.
For rural banking to thrive, it is essential to have a supportive policy and regulatory framework. The Government of Ghana has recognised the importance of rural banking and has implemented measures to encourage its growth.
Regulatory bodies are also playing a crucial role in ensuring the stability and integrity of the rural banking sector. The Bank of Ghana is leaving no stone unturned, sometimes through the ARB Apex Bank, to ensure that rural banks comply with all regulatory directives.
By implementing robust regulatory frameworks, they can protect the interests of rural clients and build trust in the banking system. This trust is essential for encouraging rural populations to engage with formal financial institutions and invest in their own economic futures.
The rural banking sub-sector of Ghana’s banking industry has evolved and is making great impact particularly within their operational territories. Rural banks’ corporate social responsibilities activities in their various communities have been substantial and continue to make more development impact.
Notable examples include the Amenfi State University College at Wasa Akropong by the Amenfiman Rural Bank, Atwima Kwanwoma Presbyterian Senior High School at Pakyi No2 near Kumasi – which was also built by Atwima Kwanwoma Rural Bank, Nana Adu Darko Community Centre by Odotobri Rural Bank at Jacobu, and the very latest which is an ultra-modern community centre at Antoakrom built by Amansie Rural Bank – just to mention but a few.
Challenges and opportunities
Despite the significant progress made, rural banking in Ghana still faces several challenges. Infrastructure deficits, such as poor road networks and limited Internet connectivity, hinder the delivery of banking services. Additionally, financial literacy remains a significant barrier, with many rural residents lacking the knowledge to effectively utilise banking services.
There is the unfriendly macroeconomic challenges like the 25 percent corporate tax which is really suffocating some of the rural banks and the latest corporate governance directive for CEOs to work as CEOs for a maximum period of twelve years, which is supposed to take retrospective effect. Meanwhile the Association of Rural Banks is appealing to the regulator to soften its stance and, at least, let the policy take introspective effect.
However, these challenges also present opportunities for innovation. Financial institutions can invest in education programmes to improve financial literacy, partner with telecommunications companies to enhance mobile banking services, and advocate for infrastructure development that supports rural banking operations
The way forward: Rebranding rural banking
To truly rebrand the ‘rural’ tag as a badge of honour, financial institutions, policy-makers and communities must work together to reshape the narrative. This involves recognising the unique strengths and opportunities inherent in rural economies and creating tailored financial solutions that address their specific needs.
One approach is to leverage technology to bridge the gap between rural and urban banking services. Mobile banking platforms, for example, can extend the reach of financial services to remote areas, making banking more accessible and convenient for rural populations. Additionally, digital financial services can provide a wealth of data that can be used to tailor financial products to the needs of rural clients.
Another important strategy is to foster a culture of savings and investment within rural communities. By promoting financial literacy and encouraging rural populations to engage with formal financial institutions, rural banks can help build a foundation for sustainable economic growth. Community-based financial models, such as savings and credit cooperatives, can also play a vital role in this process.
Celebrating the rural brand
The ‘rural’ tag in rural banking should be celebrated for what it truly represents: resilience, innovation and opportunity. Rural communities in Ghana are not stagnant or backward; they are dynamic and full of potential. By embracing this potential and creating tailored financial solutions that meet the unique needs of rural populations, we can transform rural banking from a perceived stigma into a powerful brand.
In conclusion, rebranding the ‘rural’ tag in rural banking is not just a matter of changing perceptions; it is about recognising and unlocking the economic potential of rural communities.
By shifting our perspective and embracing the ‘rural’ brand, we can drive inclusive growth, foster sustainable development and ensure that no one is left behind in Ghana’s economic journey. The future of rural banking lies in seeing the ‘rural’ tag not as a stigma, but as a badge of honour that signifies resilience, innovation and opportunity.
