Bank of Ghana to check abuses in rural banks

Awutu-Bawjiase (Central Region) 5th July '99

The Bank of Ghana (BOG) has adopted stringent measures to check abuses in the rural banking system, to make it more vibrant, efficient and reliable.

As part of the measures, a new rural bank will attract an initial working capital of 100 million cedis, while the existing ones are required to raise their capital levels to a minimum of 30 million cedis.

In addition, rural banks wishing to open new agencies should seek prior approval from the BOG.

They are also required to employ high calibre personnel who can monitor and supervise the activities of the agencies.

Such personnel would also be expected to demonstrate the ability to meet prudential requirements, and obtain local equity participation in the agencies.

Mr E.D. Asiedu-Mante, head of the banking supervision department of the central bank announced these in a speech read for him at the ninth annual shareholders meeting of the Awutu-Bawjiase area rural bank at Bawjiase at the weekend.

He said the adoption of the tough measures had become necessary in view of the varying levels of capital deficiency recorded by many rural banks.

The central bank would maintain the original principal of community ownership of rural banks by ensuring that no single individual, group or company is allowed to subscribe to absolute majority shares.

In this regard, the BOG has prescribed maximum equity ownership of 10 per cent for individuals and 30 per cent for corporate bodies.

Mr Asiedu-Mante said since the success of the rural banking concept depended largely on the ability and calibre of directors and management, the central bank had specified qualifying requirements for prospective rural bank directors.

Prospective rural and community bank directors need to possess a minimum basic educational qualification, professional experience or special expertise.

It is also expected that at least one of the directors must be an experienced banker with knowledge on current issues affecting the industry.

He said this would ensure the ability of rural bank board members to understand and interpret financial statements, as well as make operational, internal and supervisory policies.

The central bank, he added, is still committed to the development and growth of rural and community banks, as an integral part of the banking system in the country.

Mr Asiedu-Mante gave the assurance that the BOG would continue to support the association of rural banks, in the organisation of training programmes for staff and directors.

"We hope that these workshops and seminars would enable rural banks to operate in a prudent manner by ensuring that adequate accounting and internal control systems exist".

Mr Asiedu-Mante mentioned embezzlement, short landing of foreign credit facilities, suppression of cheques and unauthorised credits, among others, as some banking practices which militate against the smooth operations of the rural banks.

He announced that the BOG has instituted specific spot sanctions against board members and staff found involved in such practices, and called for the co-operation of board members in enforcing the sanctions.