Rural banks respond to calls for mergers

Rural banks in the country are responding positively to calls for the sector to explore possibilities of mergers with strong banks or risk being liquidated.

The network of rural and community banks reaches about 2.8 million depositors and 680,000 borrowers, making it the largest group of licensed financial service providers in rural areas.

But the relatively high ratio of nonperforming loans and the continued operation of poorly performing banks remain issues facing the network.

A 2010 report by the International Bank for Reconstruction and Development has recommended the ARB Apex Bank should proactively seek sustainable solutions for weak banks with very small capital and deposit bases.

Mergers and acquisitions are obvious options for the rural banks to address the challenge of capital inadequacy.

Speaking in an interview with Luv Fm, the General Manager of Amansie West Rural Bank in the Ashanti region, George Osei Mensah said banks in the catchment are already in talks for mergers, which he believes will be in the interest of shareholders.

“Infact at Amansie West and East, we have three banks, so we'd be taking among ourselves to see how best we can come together and then provide a very formidable base for our banks. When we (be)come one entity, I think we will be able to organize a better capital base to be able to support the bank in the near future”, he noted.

Other rural banks have also indicated their readiness to acquire less performing institutions. One of such is the Nwabiagya Rural Bank.

Board Chairman, Nana Owusu Sarfo Anwoma the second says the bank is recapitalizing to compete favourably with the universal banks. “We are not in to merge with any bank. We don't see our equal in this area to merge with and so we're rather prepared to acquire some rural banks, irrespective of the region where those banks may be sited”, he said.

Story by Kofi Adu Domfeh