Business News of Thursday, 2 September 2010

Source: GNA

Fifteen rural banks marked for liquidation

Accra, Sept. 2, GNA - Mr Okoh Sai, Director Banking Supervision Department of the Bank of Ghana (BoG), on Thursday revealed that fifteen Rural and Community Banks (RCB) have been categorized for liquidation.

He said transactions of about 121 out of the current 136 RCB were considered practical and satisfactory according to a BoG banking auditors report.

"Liquidation in the banking sector is executed not to cause systemic problem but to weed out and reduce risk in the financial sector," Mr Sai stated at a day's Development Dialogue Series seminar in Accra for Sensitisation and Launch of "Rural Banking: The Case of Rural and Community Banks in Ghana," survey report.

The study was commissioned by the World Bank and ARB Apex Bank which focused on the emergence and evolution of rural and community banks; review of Ghana's financial sector; the legal, regulatory and supervision framework governing RCBs.

Mr Sai called on RCBs to strengthen the capacity of their Board members, Shareholders and staffs to understand transactions in the financial sector. "This will ensure that annual general meetings are not used for checking the grammatical errors in audited accounts but to scrutinize the report".

He said RCB's need to establish strong management systems, adopt innovative business portfolios and penetrate into the rural communities in order to face the competition posed by the universal banks' infiltration into their catchment zones.

Dr David Andah, Chief Executive Officer of Ghana Microfinance Institutions Network (GHAMFIN), contributing to the discussion noted that universal banks pulled out of rural communities due to operation challenges in the past leading to the establishment of the first rural bank in 1976.

"Today, due to the hard work of rural and community banks, the enabling financial environment has been created in the catchments zones attracting the universal banks with their enticing packages.

"Staffs and customers of RCB have become their target with succulent incentives coupled with unfriendly regulations and policy by the Bank of Ghana (BoG) is hindering the growth of RCB".

Dr Andah cited some of the BoG unfriendly regulations and policies as fixing of new Minimum Capital for new RCBs at 150,000 Ghana cedis, whilst existing RCB's are to raise their capital to 150,000 Ghana cedis.

He said the directive that RCBs with stated capitalisation below 150,000 Ghana Cedis would not be allowed to pay dividend or open new branches until they attain the threshold, is hindering the growth of RCBs.

Dr Andah appealed to the Government to intervene and assist ARB Apex Bank to resuscitate RCBs "as the full cost recovery regime of ARB Apex Bank obstructs the capacity building efforts of RCBs".

He also called on BoG to review the numerous restrictions imposed on RCBs in view of the invasion of rural areas by the universal banks which has created an uneven playing field.

Mr Ajai Nair, Programme Coordinator, Agriculture Finance Support Facility of the World Bank, explained that the case study describes the history and business model of rural and community banks network in Ghana, analyses its performance, identifies key issues and makes recommendations on the way forward.

Mr Emmanuel Asiedu-Mante, Former Deputy Governor of Bank of Ghana, who chaired the seminar encouraged managements of rural banks not to seek for protection against competition but to adopt innovative and efficient modes of operation to strengthen their position in the market.