25% corporate tax slowing RCBs expansion

The Association of Rural Banks is appealing to government for a downward review of the current 25 percent corporate tax being paid by Rural and Community Banks (RCBs) across the country.

The upward review of the corporate tax from 8 percent to the current 25 percent rate has been one of the major issues hampering the growth of the rural and community banks, the Association said.

The 25 percent corporate tax hike according to the Association, has affected several of the RCBs in that, it has constrained the improvement of systems and processes and has drastically reduced and slowed branch and network expansion drives.

The increase the Association also disclosed, has led member banks to reduce their investments in corporate social responsibility programmes.

Addressing the media at the launch of the 7th Rural Banking Week Celebrations in Accra yesterday, President of the Association, Mr. Daniel Ohene Owusu, said the Association has not been successful at getting a concession for a downward review of the 25 percent income tax on the RCBs despite several appeals to government by the Association’s National Council.

The RCBs themselves have passionately appealed to government and the Bank of Ghana to endeavour to bring onboard the Association in deliberations on key regulatory and policy interventions which directly affect the sector.

“It’s crucial to engage and involve the Association because, the lack of consultations, creates policy implementation challenges” Mr Owusu noted.

Mr Alex Awuah, Dep MD, ARB Apex Bank

Meanwhile, the ARB Apex Bank has commended the BoG for the bold step taken to sanitise the financial system.

Deputy Managing Director of the Bank, Mr Alex Awuah explained that the sanity has restored confidence in the entire banking system with RCBs having recorded a 16 percent increase in deposits this year. Imporetantly a deliberate smear campaign against the RCBs earlier this year has ultimately failed miserably after initially setting off a run of the deposits of some of them. Here, an official confirmation by the BoG that it would not engage in mass liquidations of RCB s as it had done with microfinance institutions and savings and loans companies proved crucially helpful.

“One key factor to consider is the fact that we’ve been able to deal with the issue of panic withdrawals within the rural and community banking sector effectively. The announcement from the BoG regarding the finalization of the sector’s cleanup has mitigated panic withdrawals” Mr Alex Awuah noted.

The RCBs he disclosed are still committed to meeting the February 2020 deadline for the US$1million recapitalization, as only 21 out of the 144 banks, are left to meet the target.

Rural banking network has been expanding across the country with the number of RCBs currently at an impressive 144 with 850 branches nationwide, 6.5 million customers, employing more than 15,000 permanent staff.

RCBs contribute about 5 percent of the total assets of the banking industry and at the same time, more than twice of the total number of customers of all the 23 universal banks combined.