Rural banks resist merger-call

ARB Apex Bank is encouraging rural and community banks in the country to undertake merger propositions in a bid to strengthen their financial positions.

The regulator of rural and community banks in the country has noted that many rural banks are facing serious financial challenges and are required to consolidate their operations with other rural banks in order to meet demands of the Apex bank.

Manager, Compliance of Apex Bank, Seth Ankrah said the regulator is pushing Rural and Commercial Banks (RCBs) to merge their operations in order to make rural banks more viable and robust.

“Mergers will continue to be high on the agenda of the ARB Apex Bank. All RCBs are therefore urged to consider merging to take advantage of the synergies of mergers. “As at now, many RCBs have not been able to meet the old minimum capital requirement of GH¢150,000 and rural banks that have failed to meet the capitalisation requirement cannot declare dividends and expand.

“So if there is a bank where the people are not willing to buy shares and the existing shareholders are also not taking additional shares to raise the capital, then we are encouraging them to consider merging their operations with others,” he said.

However, most RCBs are not in sync with the Apex Bank merger proposals as they claim any attempt to unify the operations of rural banks will destroy the principles behind the banks’ establishments.

According to the RCBs, the banks have been founded by and named after communities to provide a mix of micro finance and commercial banking activities structured to satisfy the need of rural areas. Therefore mergers will wipe away the names of the founding communities and make shareholders, who are residents of the communities, lose the sense of belonging and ownership that is critical to survival of rural bank operations.

Mr. Ankrah said the Apex Bank is very much aware of the RCBs’ concerns, but is encouraging them to consider the merger option as it presents a good opportunity for rural banks to tighten their finances.

“It has been difficult for the past four years convincing the RCBs to merge their operations. What is happening is that in most cases the name of the rural bank is taken after the town where it began operations. So they find it difficult to detach the name of the bank from the community.

“Many banks are kicking against the merger proposals, but we will continue to preach to the RCBs the advantages of a merger and advantages of synergies,” he added. Currently, there are about 135 licenced rural and community banks operating across the country.

So far, only three RCBs in the Gomoa area in the Central Region -- including Gomoa Ajumako Bank at Afransi, the Gomoa Rural Bank at Apam, and the Eastern Gomoa Rural Bank at Gomoa Dominase -- have merged their operations in an attempt to raise capital and consolidate their operations under the name Gomoa Community Bank.

The Bank of Ghana has raised the minimum capital requirement of the banks from GH¢150,000 to GH¢300,000. However, many banking professionals have predicted that new capital requirements of the Apex Bank and competition from the universal banks will force many fringe RCBs into mergers.