Rural banks’ total assets losing grounds to industry competition

Rural and community banks are losing grounds in the total assets of Ghana’s banking industry, says Raymond Amanfu, Head of Other Financial Institutions Supervision Department of the Bank of Ghana.

Total assets of the sector stood at Gh₵1,864.55 million as at March 2014, accounting for 3.86 percent of total assets of the banking industry, compared with the 4.71 percent recorded in the same period last year.

Meanwhile, the top 26 of the 139 RCBs in the country controlled 52.5% and 50.8% of total deposits and credit respectively.

The rural banks must therefore re-strategize to achieve a 10 percent share of the industry by 2017, stated Mr. Amanfu.

According to him, short term liquidity, credit and technological risks continue to pose the greatest challenges to rural and community banks.

“The current competitive microfinance space calls for RCBs to be mindful of liquidity risk. RCBs must have liquidity contingency plans to deal with short term liquidity challenges,” he admonished.

He also wants the rural banks to speed up with technological risk associated with both software and hardware systems.

Mr. Amanfu was speaking at a seminar in Kumasi to expose the rural banks to opportunities to access foreign investment and attract capital from the Ghana Alternative Market (GAX).

The non-profit initiative was sponsored by the Norwegian Microfinance Initiative (NMA).

The Goodwell West Africa Microfinance Development Company is partnering JCS Investments Limited to invest in promising rural banks in Ghana.

The rural banks can attract foreign investment in equity not exceeding 20 percent.

Mr. Amanfu observed the prospects for rural banks are bright but challenging in the current competitive environment.

“The recent increase in the capital of RCBs to Gh₵300,000 should be your target. Strive towards higher level, as banks with greater capital have the ability to withstand shocks,” he admonished.

Story by Kofi Adu Domfeh