Rural Banks in Ghana: What are their Roles in the Socio-economic Development of the Nation? - The Thesis

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Rural Banks in Ghana: What are their Roles in the Socio-economic Development of the Nation?


A man carrying a whole village and with rural bank tag dangling from the hand
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). 
The above in a nut shell form some of the key roles of rural banks in Ghana with regards to contribution to socio-economic development.


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