The 17 percent increase in corporate tax for Rural and Community Banks (RCBs), from 8 to 25 percent beginning January 2016, could diminish their contribution to socio-economic development, especially in rural areas, a rural banking expert, Mr. Joseph Akossey, has said.
“With this high increase, RCBs will not be able to invest much in corporate social responsibility in rural areas which will affect rural development in the area of infrastructure,” Mr Akossey, who is Head of Proven Trusted Solutions, said.
Speaking to on the sidelines to journalists during a joint sales training programme for mobile bankers of a cluster of rural banks in the Eastern Region, Mr Akossey urged government to consider some of these developments in order not to curtail the role rural banks play in the growth of rural economies.
Rural and Community Banks have been investing part of their earnings in corporate social responsibility (CSR) programmes and activities in their catchment areas, which are predominantly rural.
These contributions, which mostly come in the form of scholarships, infrastructural development, cash donations, supply and replacement of medical equipment, among others, in many ways help to enhance the livelihoods of rural dwellers.
Mr. Akossey also advised that RCBs step up efforts to improve their asset quality.
“This is usually important because according to the ARBs EMU report for the first quarter of 2016, the rural banking industry’s Non-Performing Loans (NPLs) ratio went up,” he stated.
It increased from 12.65 percent in 2015 to 12.79 percent by the end of March 2016.
Moreover, 73 percent of the players in the rural banking industry are said to have their NPLs in excess of 5 percent which is a prudential requirement.
Although some rural banks are said to be doing extremely well by way of improving their NPLs, Mr. Akossey noted that many have to put in a lot more effort.
According to the financial stability report for the first quarter of 2016 issued by the Bank of Ghana (BoG), the major banks have NPL ratio of 16.2 percent.
This comparatively means that the Non-Performing Loans (NPLs) of the rural banks were lower.
However, Mr Akossey noted that individual RCBs have to go the extra mile to improve their NPLs since a high NPL has a tendency to diminish profitability, and liquidity, among others.
He advised RCBs to tighten their credit risk management practices as well as loan recovery efforts, to help them get back loans they would otherwise have written off.
He also called for regular training for credit managers and officers to make them abreast of current loan appraisal techniques and be able to monitor loan applicants.
In the area of mobile bankers, he noted that since they form the forefront of rural banks when it comes to deposit mobilization, management of RCBs should endeavor to build their capacity through regular training.
Participating banks in the one-day training workshop included Adonten, Upper Manya Krobo, and South Akim rural banks. Others were Citizens Rural Bank and Dumpong Rural Bank.