BOG warns rural banks

Abokobi, June 25, GNA - The Bank of Ghana (BOG) has cautioned that rural and community banks that show signs of collapse will no more be protected by the Central Bank.

Mr. Emmanuel Asiedu-Mante, Head of the Banking Supervision Department of the BOG, gave the warning in a statement read for him at the Annual General Meeting (AGM) of the Abokobi Area Rural Bank (AARB) on Friday.

He said "the BOG is using this forum to caution that any rural or community bank which, for any reason, shows signs of collapse, will, unlike the past, not be protected in any way by the BOG but will be allowed to fail". It is incumbent on the BOG by the dictates of the banking law to either take over and manage any rural or community bank which shows sign of collapse or appoint an appropriate organisation to do so on its behalf.

Currently, 22 out of 132 rural banks in the country have been closed down mainly due to financial misappropriation, mismanagement and maladministration. An unspecified number of the remaining 111 rural banks have been identified to be showing major signs of collapse.

Mr. Asiedu-Mante said the BOG has since the inception of the rural and community bank concept been very instrumental and committed in ensuring the development and efficient operation of such banks. This, he said, is to transform the rural subsistence economy into sustained medium-scale enterprises capable of improving the living conditions of the rural dweller.

"It is sad to observe that, despite the efforts of the BOG to strengthen the operations of rural and community banks at great financial cost, the conduct of some of directors, staff and shareholders alike have caused some of the these banks to fold up while a few more have shown signs of collapse."

He said the BOG has, by constant supervision through its off-site monitoring and on-site examination, been able to detect early warning signals and dealt with them to avert any impending danger.

Mr. Asiedu-Mante, however, noted that unless directors and staff of rural and community banks commit themselves to improving the internal control systems, all efforts by the BOG to ensure efficient operation might amount to nothing. He, therefore, called on the director to be wary of managers who fail to take their annual vacation "as this has resulted in several fraudulent practices in some banks".

Mr. Asiedu-Mante praised the board, management, staff and shareholders of the AARB for their impressive performance in the last financial year, and pledged the BOG's support for rural and community banks that contribute to the development of their catchment areas.

Mr. Robert A. Boi-Doku, Chairman of the board of directors of the AARB, said the bank made a profit of over 54 million cedis last year, which is 78.8 per cent higher than that of 1998, which stood at 30.2 million cedis. He attributed the increase in profit to prudent investments by the bank and keen supervision by the BOG and the Association of Rural Banks (ARB), adding that, but for serious malpractices which the bank experienced in 1999, the profit margin would have been higher.

Mr. Boi-Doku said despite the improvement in profits, the BOG has advised the bank not to give any dividends this year. Instead, shareholders were compensated with a plastic bucket each worth 3,000 cedis. He assured shareholders that the board has put measures in place to seal a numbers of loopholes in the system and strengthen internal control, adding that new measures for raising revenue for the bank have also been introduced. "As at May 31, 2000, our profit level has increased to 70 million cedis, our treasury bill holding has also risen from 650 million cedis in 1999 to one billion, whilst deposits stood at 745 million cedis, 19.39 per cent higher than that of 1998, which was 624 million cedis."

Mr Boi-Doku said the bank granted loan facilities to the tune of about 300 million cedis to various sectors of the economy and made two million cedis available for a scholarship scheme for brilliant but needy students in the area. Mrs. Eunice Osei-Bonsu, Public Relations and Marketing Manager of the ARB, urged the bank to invest in training for their staff and strengthen the security system at the bank to ward off armed robbers.

The two directors, Mr. Boi-Doku and Mr. Emmanuel Owusu-Sekyere, who stepped down, were maintained in office by a unanimous acclamation after a lengthy argument over whether a vote should be cast or not to decide on two other people who offered themselves for consideration but later gave up.