Rural Banks in Ghana: What are their Roles in the Socio-economic Development of the Nation?
This article seeks to briefly explore rural banks in Ghana and their roles in the socio-economic development of the nation.
Rural banking in Ghana has over the
years experienced transformation in its operation from a total manual method of
operation to automation in recent times. It is believed that this transformation
has also led to efficiency and high productivity of staff and the rural banking
sector in general.
The clarion call for rural development
started many years ago. Governments in most developing countries have come to
the conclusion that the best method of alleviating people from poverty is to
help them find meaningful employment.
If governments can assist rural people
in rural areas to access credit facilities, and help with logistical
arrangement of their goods, poverty would be reduced significantly. One of the means for people in rural areas to
access funds is through rural banking.
The concept of rural banking was borne
out of the unwillingness of the traditional banks which were established as
profit-oriented banks to open branches in rural communities (Asiedu-Mante,
2011). Thus, setting-up in rural and low
income communities where the banking activities are low and revenue to be
generated from their operations would not be able to cover their operational
expenses, has resulted in these banks shunning the rural communities over the
years.
Olomola (1997) concedes that for
economic development of rural communities, there is the need for provision of
institutional credit to these rural communities to undertake the economic
activities.
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Rural banking is the process of
carrying out banking transactions out in the country where bank branches are
too far away to be of use. Rural banking is peculiar to very small towns and
farmers who live far away from areas of larger population and so cannot make
the journey to these localities whenever there is the need to use banking
services (Ofori-Dwumfuo and Botchway-Anang, 2012).
The concept of rural banking was thus
introduced to bridge the rural-urban gap of financial transactions (Addo,
1998). The concept was tested on the field at Agona Nyakrom, a farming
community in the Central Region. This piloting attempt gave rise to the Nyakrom
Rural Bank. Any wonder in 2001, when the Rural Financial Services Project
Launch Workshop needed a location, Agona Swedru, a neighbouring town of Agona
Nyakrom, where the rural banking concept was first experimented, was chosen to
be the hosting town (Addeah, 2001).
The rural and community banks (RCBs)
have unique characteristics in terms of ownership structure, management structure
and operations features. As opposed to the large commercial banks, RCBs are
community-owned and community-run unit banks. According to Bank of Ghana
(2006), the key roles of RCBs are:
- To mobilize savings in the rural communities and channel them into the provision of credit to rural microenterprises, agro-based firms and cottage industries.
- Monetize the rural communities by way of inculcating in rural folks the culture of formal banking.
- Serve as tools for the growth and development of microenterprises in the rural communities to facilitate rapid rural industrialization for the overall enhancement of the national economy.
- The advent of Information Technology (IT) has brought about automation (or computerization) of many aspects of human existence. From agriculture, economics, health to banking and finance, IT has made significant impact. IMF conference of 1989 confirmed that Information Technology has had more impact on more fundamentals, more quickly, than virtually any other external change in the history of the banking industry (Agboola, 2003).
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