No unsatisfactory rural bank in 2013

The Efficiency and Monitoring Unit (EMU) of the ARB Apex Bank Limited, mandated to assess and analyse the performance of all rural banks in the country on quarterly basis, has recorded zero unsatisfactory rural banks in December 2013.

The Unit used the ‘SCALE’ Composite Rating System to analyse the performance of 136 rural banks which operated at the end of the fourth quarter 2013 under review. The system looks at the size of the bank, its capital, assets quality, liquidity as well as its earnings.

The rural banks under the above analysis are categorised under Strong, Satisfactory, Fair, Marginal and Unsatisfactory ratings.

Those categorised under ‘strong’ are those whose performance indicators were strong in every respect, while those under ‘satisfactory’ recorded good performance indicators but with a few weaknesses identified.

Those under ‘Fair’ need to be closely monitored as weaknesses may become severe, whereas the ‘Marginal’ ones require constant supervision as the weaknesses may become difficult to correct in the future.

Unsatisfactory banks have high degrees of failure evident and so constant supervision is needed.

During the quarter under review, the Efficiency Monitoring Unit of the ARB Apex Bank Limited recorded 18 RCBs as ‘Strong’, 76 Satisfactory, 30 as Fair, 12 as Marginal and no rural bank was captured under the ‘Unsatisfactory’ category.

The Ag. Head of Projects and Credit at the Apex Bank, Enoch Richard Arkaifie, made these known during a one-day seminar put together by JCR Investments Limited and Nwabiagya Rural Bank recently in Kumasi.

The seminar was on the theme “Enhancing the Value of Rural Bank Shares as an Attractive Asset Class”.

The seminar sought to equip rural banks to strategically position themselves and strengthen internal
controls, as well as putting together a very sound corporate governance to attract equity investments outside their traditional territory of share-holding.

The concept of rural banking was born out of the unwillingness of traditional banks to open branches in rural communities.

The business activities of rural dwellers have always made it difficult for them to access credit facilities.
Monthly loan repayment schedules of traditional banks also made it difficult for rural dwellers who were mostly farmers to access credit facilities.

Rural banking was seen as the solution to addressing the challenges of the rural population in accessing banking facilities for both deposit mobilisation and credit.

Rural banking started in Ghana in 1976 with the establishment of the Nyakrom Rural Bank in the Central Region of Ghana.

As a result of the invaluable financial services rendered in the rural areas, the rural banking concept became popular -- with a number of rural communities applying to the Bank of Ghana to establish rural banks.

From one rural bank in 1976, the number of rural banks has increased tremendously. By the 1980 there were 20 rural banks in the country. This increased to 122 by 1996 and 136 by end of 2013.

The largest establishment of rural banks was seen during the period 1981 to 1985: a total of eighty six (86) rural banks were established.

However, between 1999 and 2000, twenty three (23) rural banks were liquidated.

By Seth Krampah | B&FT Online | Ghana