Rural Banks to set up insurance company

Rural and Community Banks (RCBs) are in the process of establishing an insurance company to consolidate their operations, National President of the Association of Rural Banks-Ghana, Dr. Nana Akowuah Boamah has hinted.

The proposal to set up the insurance company is based on premises similar to those which led to establishing rural banks in the country.

These include the need to undertake agricultural insurance against agricultural production losses; the vulnerability of small businesses in the informal sector to risks; as well rural folks who are adversely affected by and vulnerable to a range of risks and constraints which impede socio-economic development among others.

The proposed insurance company is to be owned by all RCBs in the country. Thus the ‘pool’ approach to be adopted will ensure that all RCBs have a stake in the company.

On its capital formation, the ARB has suggested using the net worth of RCBs in the EMU Report for the last quarter of the year ending December 2014 to determine the allotment of shares to RCBs.

“Seventy seven (77) RCBs are expected to become drivers of the proposed company, while the remaining fifty-eight (58) will pay a minimal rate. Based on the required capital of GH?20,000 prescribed by the National Insurance Commission (NIC), the 77 RCBs serving as drivers will contribute an equal equity of GH?223,000 with the other 58 banks contributing GH?50,000 each to raise the required capital.”

A nationwide sensitisation programme for RCBs on this is expected to commence soon. It is intended to explore possible avenues that will help to reduce if not eliminate the subscription dependency of ARB and its chapters.

These came up at the Annual General Meeting (AGM) of shareholders of the Atwima Mponua Rural Bank Limited at Toase, in the Atwima Nwabigya district of the Ashanti Region.

Dr. Boamah observed that many RCBs are yet to meet the initial capital requirement of GH?300,000 as directed by the Bank of Ghana (BoG), and was doubtful that many of them could meet the deadline.

In view of this, he said, the National Council of ARB has sent a position paper for Parliament to intervene in the policy as it is going to have detrimental effects on rural banking and rural dwellers.

“ARB-Ghana’s position is that it would be best if the central bank allows RCBs to initiate steps on their own, with guidance and support from the regulator, to address any capital challenges but not to be tied to stringent deadlines and imminent threat of closure.”

They also asked that they should be made to go back to their old methodology of share mobilisation rallies, whereby key personalities are involved to address gatherings to advocate for buying shares in RCBs.

He urged that critical consideration should be given to this, and action taken in order to forestall any mergers and acquisitions or total closures.