Introduce Group Lending Schemes In Rural Banking

Rural banks are being encouraged to explore microfinance group lending schemes in order to extend services to the informal sector.

Chief Executive of Amenfiman Rural Bank, Dr Alex Asmah, says improved coverage of the unbanked population will facilitate credit access.

Access to credit remains a major challenge to small and medium scale businesses in the informal sector.

Amenfiman rural bank says it has discovered that the microfinance group lending scheme can be a potential remedy for the problem.

Individual microfinancing involves giving out small loans to lower income earning people to do businesses on their own.

Usually, lenders save at the banks to guarantee their loans, or they may get somebody to guarantee on their behalf.

However, a group financing scheme, on the other hand, does not require lenders to bring someone to guarantee their loans. Instead, members of the group guarantee for each other through what is termed 'group solidarity'.

The responsibility then falls on the group if a lender defaults hence group members ensure that a lender pays back the loan.

With group micro-financing scheme, there is no need for a lender to provide a guarantee or a collateral.

The bank provides the support with a dedicated officer who visits the group occasionally to address challenges that may crop up.

- Dr Alex Asmah
Dr Asmah believes it is critical for industry players to look for alternatives to support businesses in the lower middle-income bracket.

“You will very soon realise that we will be able to build the capacity of the customers in our market and be able to move them to small and medium enterprises and very soon we have our own companies," said the Chief Executive of Amenfiman Rural Bank.

Dr Alex Asmah added that “Instead of fighting over companies or corporate institutions with traditional and universal banks, we [rural banks] can build our own market at our own base and grow them gradually”.

Dr Asmah was speaking at the launch of a new branch of Amenfiman Rural Bank at Sefwi-Bekwai in the Western Region which becomes the sixteenth branch opened by the bank across the country.

The opening ceremony attracted many stakeholders including traditional leaders in the Sefwi Traditional area.

Board Chairman of the bank, Dr Tony Aubyn, added that as the bank continues to expand, he hopes to see it increase the unbanked population and contribute to effectively do business with the informal sector.