THE Bank of Ghana (BoG) has directed rural banks that have remained undercapitalised and ineffective in their operations over the years to explore the possibilities of merging with strong banks to enhance their operations.
The Deputy Head of the Banking Supervision Department of the BoG, Mr Franklin Belnye, who gave the directive, warned that undercapitalised rural banks which failed to merge with strong financial institutions to enable them operate at optimum level stood the risk of being liquidated.
Explaining, he said, while “capital of major banks increased nearly eight fold from GH¢7 million to GH¢60 million, and that of non-financial institutions increased seven fold from GH¢1-1.5 million to GH¢7 million with firm deadlines for compliance, for rural banks, the increase was only three-fold, with no binding deadlines for compliance”.
Addressing the board of directors, management and shareholders of Nwabiagya Rural Bank and a cross section of the public during their 22nd Annual General Meeting (AGM) held at Barekese, Mr Belnye expressed concern about the weak capitalisation of some rural banks over the years, saying many of them “remain undercapitalised and weak”.
This, he said, was “hampering their capacity for effective financial inter mediation,” warning that, “ this cannot continue forever, so weak banks must explore the possibility of merging with strong banks, or risk being liquidated.”
He said given the rapid transformation in the banking industry, especially the use of Information and Communication Technology (ICT) “rural banks have to make investments in these technologies to be abreast with developments and avoid losing clientele to the competition”.
He advised rural and community banks to continue to open their share capital to new investors, while encouraging existing shareholders to subscribe to more shares.
“This way, they can finance new banking infrastructure such as computerisation, automated cheque clearing and other electronic banking services without dissipating depositor’s funds,” he noted.
Mr Belnye commended the management and board of directors of Nwabiagya Rural Bank for their sense of initiatives and policies that have enhanced efficient and effective operations over the years.
He said it was such initiatives that had contributed immensely for Nwabiagya Rural Bank to be recognised and “ranked among the top rural banks in Ghana in terms of total assets, deposit mobilisation, capital and profit”.
“The bank has also demonstrated social responsibility by providing scholarships to needy, brilliant students and other social amenities in the catchment area,” he noted. He, therefore, encouraged them to increase their capital further by transferring part of the income surplus to paid up capital.
He explained that the “bulwark of any good bank is its capital and the stronger the capital base of a bank, the better”.
He pointed out that notwithstanding the weak capitalisation of some rural banks in Ghana , others were performing creditably, saying “ as at the end of December 2009, total assets of all rural banks stood at GH¢623.48 million, while loans and overdrafts stood at GH¢262.58 million”.
Mr Belnye also noted that deposits of rural banks last year amounted to GH¢455.48, saying “ this growth took place amidst increasing competition from the commercial banks and the proliferation of other players such as savings and loans companies, finance houses and micro-finance institutions”.
Presenting the annual report of Nwabiagya Rural Bank, the Chairman of the Board of Directors, Nana Owusu Sarfo Anwona II , said last year, they put up spectacular performance, making it possible for them to “lift up the major aggregates such as deposits, total assets, paid up capital, loan and advances portfolio”.
He explained that while total assets of the bank increased from GH¢15.09 million in 2008 to GH¢19.74 million last year, total deposits increased from GH¢11.70 million to GH¢14.85 million during the year under review.
During the same period, he said loans and advances grew by 5.2 per cent from GH¢8,715,939 in 2008 to GH¢9,159,209 last year, while profit also increased from GH¢586,255 in 2008 to GH¢1,002,098 in 2009.
Nana Sarfo Anwona said Nwabiagya Rural Bank was also playing her role as a typical rural bank “by contributing to the growth of the country’s domestic capital formation, explaining that 47 per cent of deposits of the bank “ is made up of savings from customers who are predominantly resident in the rural areas”.
its social responsibilities, he said they spent a total of GH¢11,000 as scholarships to 40 students, including 14 who are in tertiary institutions.
He said the beneficiary students were wards of customers and shareholders .
He said a total of GH¢38,753.50 was spent to provide street lights, the construction of aqua privy toilet facilities, heath care and renovation of classrooms among others to communities in its catchment area.
He said last year they supported the Ghana Police Service at Abuakwa with computers and their accessories and also constructed a ward for the Urology centre at Offinso to enhance health care delivery.
On their future plans, Nana Sarfo Anwona said they had acquired a plot at Offinso market to put up a permanent structure to house the bank’s branch, saying with time similar arrangements would be made to house other branches of the bank to enhance efficiency in its operations.
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