The total assets of the Rural and Community Banks (RCB) in Ghana have hit GH¢ 2.76 billion as at the end of September 2016, available data from Bank of Ghana has revealed.

With a total number of 140 licensed institutions and still counting, the RCB sector constituted 3.37percent of the asset size of the entire banking industry.

Loans and Advances were the major components of Total Assets of RCBs, with a share of 38.38percent whilst Investment was the second largest asset category with a share of 29.96percent as at the end of September 2016.

It is expected that RCBs’ share of the banking industry’s Total Assets will grow at 10percent by 2020, something experts see as a great task, yet achievable if RCBs increase their effort to deepen financial intermediation in their catchment areas.

This was said in a speech delivered on behalf of the Governor of Bank of Ghana, by the head of Other Financial Institution Supervision Department of Bank of Ghana Joseph Kofi Amoa-Awuah at the just ended 19th Biennial General Meeting of the Association of Rural Banks held in Winneba last week.

On the liabilities side, Total Deposits was the main component, funding 75.21pertcent of Total Assets as at September, 2016, and posting year-on-year and year-to-date growth rates of 13.95percent and 0.89percent respectively.

RCBs Net Worth recorded a growth rate of 7.75%, driven mainly by growth in Reserves which accounted for 13.70% of the Total Assets. The Non-Performing Loans ratio of RCBs stood at 12.22% as at end-September, 2016, showing a marginal increase of 0.61% as against 11.61% at end-September, 2015, which is also less than the average NPL ratio of 19.1% of universal banks.

Over the years, RCBs have contributed their quota to national development and deepened financial inclusion in rural Ghana, through the mobilisation of deposits and provision of financial services to the rural folks. The existence of RCBs has improved access to finance to the rural economy by channelling credit to the productive sectors of the rural economy.

RCBs have also been used as a channel for intervention into the rural economy. Examples of such interventions have been the disbursement of Millennium Development Authority (MiDA) funds, Social Investment Fund (SIF), and Community Based Rural Development Project (CBRDP) and many more, targeted at the development of the rural economy.

Following the modern approach to business, where technology has now become the great enabler, all RCBs have computerised their operations and are networked through the assistance of the MiDA computerisation project. By this means, the business processes of RCBs have been automated, and system and controls have been strengthened. RCBs have also become the key source of employment in the rural economy through the direct recruitment of staff to manage their operations and indirectly through their assistance to SMEs to expand their businesses.

Rural Banks as good corporate citizens have continuously supported their communities through social intervention projects that have improved the well-being of the people in their communities, especially in the areas of health and education.

However, in spite of these achievements and contributions by RCBs, there have been numerous challenges that confront rural banks in Ghana. These include liquidity challenges, solvency, management and board problems, and the increasing need for ARB Apex Bank bailouts.

The growing number of distressed Rural Banks is becoming alarming. Bank of Ghana is therefore tightening its regulatory framework and enforcing strict compliance with the provisions of the Banking Act, 2004 (Act 637) as amended, and related Guidelines, Directives and Notices. Last year, the Bank of Ghana granted an approval for the ARB Apex Bank to bailout some distressed RCBs to the tune of Ten Million Ghana Cedis (GH¢10,000,000).

Bank of Ghana’s studies have indicated that that the causes of distressed condition were largely due to fraud and embezzlement, poor management decisions, inadequate capital, incapable directors and weak board oversight and the growing non-performing loans in the books of RCBs.

Bank of Ghana has intensified its off-site reviews of RCBs as well as on-site examination activities to ensure that identified supervisory concerns are addressed expeditiously. RCBs that fail to rectify such issues would be sanctioned per the dictates of the Banking Act, 2004 (Act 673), as amended. Stronger RCBs would be encouraged to acquire or merge with weaker/distressed RCBs .