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19.06.2004 Business & Finance

Offer low interest rates to support agric sector

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Kumasi, June 19, GNA- Mr Joseph Henry Mensah, Senior Minister, has asked the banking institutions to offer lower interest rates to support the agriculture sector.

He said with the Bank of Ghana (BoG) lending rate having gone down, there was the need for the other banking institutions to also reduce their lending rates. Mr Mensah was addressing the second annual general meeting of the ARB Apex Bank on Saturday in Kumasi.

He said he was not happy with a situation where the banks held on to large volumes of capital and would not lend, and gave an instance where the Rural and Community Banks (RCBs) whose total market share of the banking industry in the area of investment in 2003 stood at 9.15 percent but that of loans was pegged at 3.81 percent.

Mr Mensah reminded the RCBs that if they were to succeed in providing support for the rural economies, it was important that they ensured all-year agricultural financing.

The Senior Minister cautioned them against degenerating into exclusive financing of petty commerce, saying, money should not be taken out of the poor and lent to the rich.

He suggested to the ARB Apex Bank to explore the possibilities of spreading the share ownership of the RCBs more widely among farmers, artisans and craftsmen.

This, Mr Mensah said, had become necessary since many of those banks were functioning very much like localised money lender operations run by small groups of businessmen.

"We need to build a new culture of property ownership in corporate institutions as against the ownership of private or family-run businesses", he said.

The depositors and borrowers in the rural banks should be offered some financial instruments whereby, through their transactions, they would acquire ownership interest in the institutions", he added. The Senior Minister welcomed plans by the ARB Apex Bank to construct a specialised training institution for the RCBs to build managerial and technical manpower required to assure a healthy rural banking sector.

Mr E. Asiedu-Mante, first Deputy Governor of the Bank of Ghana (BoG), noted that the development of Information Communication Technology (ICT) posed a serious challenge to the banks in the area of computer-associated frauds.

He therefore, asked the Apex Bank to put in place contingency plan systems and efficient internal control mechanism to match the rate of developments in the ICT as it moved towards networking all the RCBs. The Deputy Governor said the Central Bank would, however, continue to perform its banking supervision functions to supplement the overall control system of the RCBs for the safety, soundness and stability of the entire banking system.

Mr Asiedu-Mante said the introduction of relieving managers concept was a further control measure by the BOG, noting that, the concept had achieved remarkable successes as beneficiary banks had seen a lot of improvement.

It is unfortunate that some banks have resisted such services for some strange reasons, he said.

He stated that the Central Bank has the onerous responsibility to ensure a vibrant banking system and would never run away from that responsibility.

"RCBs should open their doors to legitimate independent checks on their operations to ensure sanity and sound practices for enhanced performance", he added.

Mr Sampson Kwaku Boafo, Ashanti Regional Minister, told the banks to adopt and pursue measures and programmes that would promote economic growth, wealth creation and sustained poverty reduction as envisaged in the Ghana Poverty Reduction Strategy (GPRS). 19 June 04