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Business News of Friday, 24 November 2000

Source: Daily Graphic

Bank of Ghana to reshape rural banks

The Bank of Ghana will as from next January, begin a project to transform rural banks and micro finance institutions in the country to enable them to provide high quality banking services, promote growth and reduce poverty, among the rural people.

The Rural Financial Services Project, which will be implemented with support from the International Development Agency (IDA) of the World Bank, International Fund for Agricultural Development (IFAD) and the African Development Bank (ADB) in Abidjan, will also build their capacity to enhance rural financial intermediation.

The Governor of the Bank of Ghana, Dr Kwabena Duffour, announced this in a speech read for him by a Deputy Governor of the bank, Mr Vanlare Dosoo at the 11th biennial general meeting of the Association of Rural Banks in Accra at the weekend. He said Apex bank is another aspect of the project established to serve as the pivot around which the operations of all the rural banks will revolve.

Dr Duffour stressed the need for rural banks to redirect their credit operations towards agriculture, rural industry, small-scale food processing, marketing and other productive activities saying, "this is the only way to develop the agriculture base of the economy to support local industry and the export sector". He said, "it is not a very desirable development to allocate as much as 47 per cent of the rural bank's loan portfolio to salaried workers, since loans to workers among others mostly go into consumption expenditures". Dr Duffour said if the pattern is allowed to dominate credit operations of rural banks, it will be extremely difficult to bring any meaningful development to the rural sector which has about 65 per cent of the nation's population.

He commended the association for its achievements since the beginning of the year and said as at August, this year, it has recorded ?184.7 billion as total deposits, representing a growth of 41 per cent over the same period last year.

Total loans and advances granted by the banks, according to him, stood at ?72 billion while investment in treasury bills went up from ?21.4 billion in August 1999 to ?104.4 billion in August 2000, an increase of about 400 per cent.

Dr Duffour said, however, that any self-assessment of the performance of member banks should not be based on the ability of the banks to satisfy capital adequacy ratios and posting of nominal profits. He said, rather, the assessment should be judged on the achievements of their ability to undertake rural development, based on effective rural financing, and poverty alleviation through productive investment and income generation.

Dr Duffour expressed concern about the practice of some commercial who mobilise rural savings for urban investment saying it is to forestall this practice that the rural banks were set up to mobilise rural savings for rural investment.

He said three rural banks in the Brong Ahafo Region which are becoming distressed will have their licences withdrawn if the situation does not improve within the next few years. Dr Duffour also complained about the lack of qualified staff, particularly directors of the banks and said this affects their performance.

He asked them to ensure that those who take positions as directors are accountants so that their representation will have an impact on the board of directors of the banks in decision-making.

Mr Samuel Dufu, President of the association in his welcoming address paid tribute to the central bank saying its continuous support has brought a lot of transformation into the operations of the banks. He said the association welcomes the establishment of an Apex bank since it will enable the banks to provide efficient services to enhance rural development.