Mr. Eric Osei-Bonsu, Managing Director of ARB the Apex Bank Limited, has suggested the enforcement of quality human resource and incentive policies to enable rural and community banks (RCBs) to deepen microfinance for rural development.
He said RCBs need to reposition themselves to offer efficient and effective services to prevent client loss and improve the impact and image of rural banking.
The managing director was addressing the opening of the 9th managers' conference of the ARB Apex Bank Limited and RCBs in Sunyani.
The three-day conference, is under the theme, "Deepening Microfinance to serve the rural economy - The role of Rural and Community Banks."
Mr. Osei-Bonsu said the Apex Bank would develop and support the establishment of rural banks' credit bureau to ascertain the credit
worthiness of existing and potential clients of RCBs, as well as weed out fraudulent and bogus borrowers.
He suggested the designing and implementing of innovative products, including ICT-driven ones, in line with the vision of the Apex Bank,
explaining, "because we believe this will help accelerate rural development."
Rural and Community Banks could also develop and provide new products like micro insurance, weather insurance and micro home loans, as well as a microfinance policy that seeks to address some challenges, he added.
The managing director mentioned some of the challenges as institutional arrangement for the promotion of microfinance, capacity building, credit delivery and management and targeting the vulnerable and the marginalized.
Others are data information gathering and dissemination, regulation and supervision, consumer protection, collaboration and co-ordination, research, monitoring and evaluation.
Mr. Osei-Bonsu noted that the rural banking sector, which commenced in the country in 1976, at Nyakrom in the Central Region, "has been a sleeping giant as far as microfinance is concerned".
"It is in pursuance of the need to propagate the rural banking and microfinance message that the Apex Bank would be embarking on an aggressive
consultancy to the countries in the sub-region to ensure that the benefits enjoyed thus far are replicated effortlessly in the countries which share our aspirations and needs in the region," he said.
On the benefits of microfinance to RCBs, the Apex bank boss mentioned an improvement in loan portfolio since microfinance programmes had high recovery rates as compared with traditional retail banking.
Mr. Osei-Bonsu said RCBs would also have the opportunity to diversify their portfolio to reduce the high incidence of default as well as enabling them to improve or discharge their social responsibilities such as offering
financial literacy programmes before disbursement of loans (credit with education) thereby contributing to client capacity building.
He explained that microfinance would also give the RCBs better positioning to favourably compete with the universal banks within their
catchment areas, as well as attract the attention of external donors to channel financial and non-financial assistance to support RCBs to achieve their key objective of reducing poverty in rural areas.
Mr. Eric Opoku, Deputy Brong Ahafo Regional Minister, in his address, noted that rural banks had positively impacted on the lives of many poor and infantile business ventures since 1976.
"Apart from being one of the most promising ways to make credit available to the poor, they make savings services available and thus making
unproductive cash available for productive use rather than keeping monies under beds and in holes etc," he said.
The deputy regional minister noted that microfinance had become a conduit through which various interventions had been received by
beneficiaries in the districts and many rural dwellings, thereby transforming their socio-economic status, as a result of the presence of
rural banks.
Mr. Opoku said despite the positive dividends there was the need for better collaboration with the various interventions in times of recovery from economic recession.
"It is our belief that rural banks have developed better processes and mechanisms which they could apply to deepen microfinance administration," he said, explaining it would not be out of place if in the near future some microfinance schemes such as MASLOC could be channelled through the rural banks for better impact.
Professor Kwasi Nsiah-Gyabaah, President of the Brong Ahafo Chapter of the Association of Rural Banks, who presided, noted that rural banks faced serious challenges and stiff competition from the commercial banks "which have now penetrated the rural areas and are offering cheap credit facilities to attract costumers of the RCBs.
To remain competitive, retain and attract new costumers, the RCBs need to provide prompt and quality service to customers, as well as capitalize on the potential opportunities in the rural areas to reduce their vulnerability.
He asked the conference to consider the issue of redemption of bonuses to shareholders in terms of levels and regularity of dividend payment as a tool for further investment.
"We have convinced our shareholders that if they purchase shares of our banks, they would be paid dividend in successful financial years," Prof Nsiah-Gyabaah stated. "Yet most of our RCBs gradually renegade on these enticing promises. While management, staff and sometimes directors enjoy their privileges and peps, shareholders fail to receive their dividends.
"There is no fairness in many RCBs in this regard because no matter how poor the financial position of the RCBs, managers and staff always ensure that they receive their salaries."
He said following recent changes in the financial market and the constant upward review of the paid-up-capital of RCBs by the Bank of Ghana, many rural banks would need to take a decision to merge, be acquired or take the risk to be liquidated.
"We need to swallow our pride and forget about the identity cult' and accept the reality either to merge or remain to be acquired," the B/A
Chapter President added.