After cleaning the risks and insolvency in the bank and non-bank financial institutions, the Bank of Ghana (BoG) has now turned its attention to the rural and community banks (RCBs) with a reminder to them to top up their minimum capitals to GH¢1 million by February 2020 or face sanctions.
A directive signed by the Secretary to the BoG, Mrs Frances Van-Hein Sackey, warned shareholders and directors that banks that failed to comply with the requirement would face sanctions.
The directive, which was first issued by the central bank in 2015, has already been extended more than once and the regulator is keen on applying the sanctions this time.
The directive requested all the 144 rural banks operating in the country to raise their minimum capital from GH¢500,000 to GH¢1 million and for community banks to raise theirs to GH¢2 million.
“The bank directs all institutions to meet their respective minimum capital by February 28, 2020,” BoG stated.
Sources within the bank said the particular sanctions would be decided on by the BoG Board. However, the source added that the likely options included revocation of licences and liquidation.
When the Daily Graphic contacted the ARB Apex Bank on the preparedness of the RCBs, its Managing Director, Mr Kojo Mattah, said the apex bank for the RCBs was working with the banks to raise their minimum capitals before the timeline expired.
“We have taken note of the BoG directive and we are working with our members to meet the minimum capital as required,” he said.
The ARB Apex Bank acts as a mini-central bank for the RCBs as it helps them with capacity building, corporate governance policies and generally assists them to meet regulatory and prudential norms.
Before the initial deadline of December 31, 2017, only 51 of the then existing 142 rural and community banks had met the new minimum capital requirement.
The deadline was extended by the central bank following various levels of discussions among stakeholders.
Sources at the ARB Apex Bank told the Daily Graphic that currently, 94 out of the 144 RCBs in the country had met the GH¢1 million new capital requirement of the BoG.
A source at the ARB Apex Bank also said the 50 RCBs that were yet to meet their minimum capitals were planning on how they would comply with the directive.
Mergers and acquisition
Before the 2017 deadline, Gomoa Ajumako, Eastern Gomoa and Gomoa in the Central Region merged into one bank as Gomoa Community Bank in an effort to meet the recapitalisation plan.
In 2018, Bomosadu Rural Bank Limited at Senase near Berekum in the then Brong Ahafo Region also merged with three other rural banks in the region. The three are Wenchi Rural Bank at Wenchi; Bomaa Area Rural Bank at Bomaa and Atweaban Rural Bank at Duayaw-Nkwanta.
The move was largely influenced by the inability of Bomosadu Rural Bank to meet the GH¢1 million minimum capital requirement of the central bank.
With over 850 branches across the country, RCBs play a crucial role in promoting efficient rural financial intermediation and the directive of the BoG can further shrink the number through mergers and acquisitions. Their branches may not be affected.
Highly rated banks
According to records at the Apex Bank, rural banks rated as strong as of 2017 included the Ahafo Ano, Ahantaman, South Akim, Anlo, Atwima Kwanwoma, Fiaseman, Sefwiman, Amenfiman, Manya Krobo and Otuasekan Rural Bank.
The rural banking industry has been constrained by the inability of the banks to make more profit due to the fact that most of their branches are situated in rural communities where economic activities are low, which hinders their ability to mobilise more deposits to trade with.
Unlike the major banks in which the target market is made up predominantly of corporate entities and high net worth individuals, the target market of Rural and Community Banks consists of microfinance clients, salaried workers, small and medium enterprises and other customers at the bottom of the pyramid.