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30.11.2004 Business & Finance

Rural banks being integrated into banking system - Acquah

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Accra, Nov. 30, GNA - The Governor of the Central Bank, Dr Paul Acquah has lauded rural banks for the important roles they were playing in their localities, saying they were becoming firmly integrated into the banking and payment systems.

"They are inculcating banking culture among people in the catchment areas; they are contributing to the national development effort by bringing banking services closer to the doorsteps of the rural community," he said, in an address to the 13th Biennial General Meeting of the Association of Rural Banks in Accra.

"They are doing so with a sense of social responsibility and a good deal of banking prudence," he said in his speech faxed to the GNA on Tuesday.

Dr Acquah said rural banks were involved in the clearing system and were collaborating with the Association of Rural Banks in money transmission services dubbed Apex Link - "Ewo Bebiaa".

"They are mobilizing both long and short-term resources in the form of capital and deposits. Much of these funds are being channelled into some productive sectors in the form of loans and advances, with a good portion invested in risk-free Government paper."

The Governor said recent improvements in the performance of rural banks could be seen from the trends in their market share of the banking industry indicators.

Between 2000 and 2003, rural banks' share of shareholders funds increased from 3.3 per cent to 5.4 per cent. Market share of deposits went up from 3.2 per cent to 5.8 per cent while share of outstanding loans and advances moved from 1.9 per cent to 3.2 per cent within the same period.

Dr Acquah said their share of investments in Government paper, mostly Treasury Bills, rose from 3.9 per cent to 9.2 per cent of the total holdings, while total assets of rural banks as a group were now 1,517.6 billion cedis.

"These are positive developments, especially when assessed against the environment in which they serve."

The Governor noted that rural banks had contributed in no small way in breaking the myth about the savings behaviour and credit worthiness of rural dwellers or poor households.

Dr Acquah asked rural banks to do a performance review and measure achievement against the goals they had set for themselves and the goals of the rural banking system.

He told them that at a time of falling inflation and stable interest rates and declining yields on Treasury Bills, it was important to consider what programmes and products to adopt in order to mobilize deposits for productive investment to achieve the overall objective of raising the social and economic well-being of people in the catchment areas.

"The challenge that I see is how to transform the growing assets reported by the rural banks into productive investments and output and gainful employment in rural communities.

"It is also a challenge to ensure that rural banks are well capitalized, the growth of balance sheets are sustained at prudent levels, and that resources are channelled into productive investments where they would make the greatest impact on incomes and employment in the rural communities that rural banks are established to serve."

Dr Acquah said since the key activities in the areas of operation of the rural banks were concerned with micro enterprises, they should specialise in micro-finance activities in order to deliver the required financial products tailored to meet the needs of micro entrepreneurs particularly farmers, fishermen and small-scale industries and those who marketed their products.

"Training of rural bank staff should focus on micro-finance activities and credit risk assessment to ensure the soundness of banks." 30 Nov. 04

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