Question

Ministry of Finance and Economic Planning in Ghana has recognized the need to support the rural economy in Ghana as a means of improving Inclusive Finance and Economic Growth in the country. You have been selected as a main consultant to assist the government. The ministry expect you to perform the following function.

Question 1

You are to evaluate the existing role of APEX Bank to the Rural and Community Banks in Ghana.

Question 2

Examine the effect of COVID-19 on the activities of Rural and Community Banks including microfinance institution in Ghana.

Question 3

Discuss challenges confronting Microfinancing Institutions in Ghana and provide strategic approach to solve them.

Micro Finance and Rural Banking

The ARB Apex Bank Limited is a “mini”-central bank for the Rural & Community Banks (RCBs). The Bank was registered as a public limited liability company in January, 2000. The shareholders are the RCBs. Ghanaian Economy

Answer 1

Answer 1. The Banks in Ghana has surfaced over the last 20 years as an apparatus to provide small-scale financial services on a mercantile base to the economically underserved — a bracket that comprises of low-income households and micro-traders who are generally regarded as “nonbankable” by the conformist financial groups.

The rendering of the services to the underserved category, the Bank has thus transpired as an organ to box the deficiency by bracing economic expansion and social involvement. The connivance of services included credit facilities, insurances, mortgage financing, leasing and operational remittances. However such rendering of the financial services in the rural bridge-line should not be confound as a comfort tool. Poverty palliation also relies on the poor having access to edible food, proper shelter, basic social services, a stable political atmosphere, and structural market opportunities. The services provided by the bank are generally more pertinent where some levels of economic activity already exist as it may otherwise create an imprudent debt burden for the indigents.

Answer 2 & 3. COVID-19, a virus spread or some say a biological weapon yet another after SARS-02, MERS-12 — a precise-pre-planned conspiracy by the so called “Perfidious Albion’s” has heavily impacted the routine activities of Rural and Community Banks including microfinance institutions in Ghana. Starting from lockdowns, travel bans, limited gatherings, border closures, continuous testing, and large-scale quarantines to restricted public access, micro-financing has become ultra-factorial and complex.

Amongst the concerns, one is, the interdiction of group gatherings, which is affecting all microfinance institutions (MFI’s) in Ghana as microfinance methodology is rooted on a group approach. Also In some countries with no lucid resolution yet, MFIs will have to shelve out disbursements as their loan agents are unable to travel or will have to adjust with the operations for the time being. The risks of virus transmission are yet another important factor to take into account for the activity of the loan agents. Liquidity problems, delayed loan repayments, portfolio risks, etc are further issues faced by this sector along-side.

In order to deal with this, some of the suggestive measures, flippant remedies and some strategic approaches to decode the risks that the MFI’s in Ghana should take are as understated —

1. Approaching the government in easing the Monitory Policy through instillation of corporate term loan schemes.

2. Intercreditor harmonisation.

3. Infusion of addition credit loans with restricted documentations.