Why shareholder funds of rural banks is declining

Shareholder funds of rural and community banks have declined by about 12.31 percent, from GHS500.1 million in January 2019 to GHS445.29 million in September 2019, barley two months to the deadline for the recapitalization of rural banks.

It is believed that funds have been moved from the shareholder funds (the amount of equity in a company, which belongs to the owners) of some of the 144 rural banks to their stated capital to meet their minimum capital requirement.

According to the Bank of Ghana’s provisional report on Consolidated Assets and Liabilities of Rural/Community Banks, the shareholder funds remained in the GHS500 million bracket for the whole of 2018.

However, loans and advances shot up from GHS1.32 billion in January 2019 to GHS1.48 billion in September 2019.

Total deposits also grew marginally from GHS3.42 billion in January 2019 to GH$3.50 billion in September 2019.

The BoG in November 2019 extended the deadline for meeting the minimum paid-up capital of rural and community banks to February 28, 2020.

As at end of July 2019, 114 Rural and Community Banks (RCBs) had met the paid-up capital of GH¢1.0 million, according to the Bank of Ghana.

At the same time, 13 RCBs recorded varied paid-up capital ranging from GH¢500,000.00 to GH¢1.0 million while 17 RCBs showed paid-up capital below GH¢500,000.00.