Banking the unbanked, majority of which are in the rural areas, is one of the major concerns of the country as it tries to achieve universal financial inclusion. Luckily, the overall performance of the Ghanaian banking sector has gradually begun to reflect an improvement in the performance of Rural/Community Banks (RCBs) across the country.

This is because, provisional data from the RCBs during the first quarter of the year indicate an improvement in the sector’s performance compared with developments in the corresponding quarter of 2020.

According to data from the Bank of Ghana, total assets of RCBs amounted to GH¢6,408.5 million in the first three months of 2021, representing a growth of 3.9 percent over GH¢6,170.9 million recorded in the last quarter of 2020.

Moreover, the sector performed remarkably on a year-on-year basis as total assets grew by 31.7 percent at the end of the first quarter of 2021.

RCBs’ share of total assets in the banking sector

However, the sector’s contribution to the total assets of the Ghanaian banking sector still remains very low as compared to the number of people residing in the rural areas.

According to the Bank of Ghana, total assets of RCBs constituted just 3.9 percent of the banking system assets as at the end of the first quarter of 2021. Low as it may be, the current ratio shows a gradual improvement as compared to the corresponding period a year ago.

In the first quarter of 2020, the total assets of RCBs was GH¢4,865.8 million, representing 3.5 percent of the total assets of the Banking System. Meanwhile, as at the first quarter of 2020, Ghana’s Banking sector was worth GH¢139,702.30 million of which the total assets of Commercial Banks were GH¢134,836.5 million, representing 96.5% of the total assets of the sector.

Mobilization of deposits

Another key indicator of the RCBs that shows an improvement in the first three months of the year was the mobilization of deposits which has been a major challenge for these banks over the years. Deposits provisional data indicate that deposit mobilization by the RCBs further improved in the first quarter of 2021.

According to the Bank of Ghana, total deposits of RCBs increased by 37.3 percent, year-on-year, to GH¢5,594.3 million at the end of March 2021, from GH¢4,075.0 million recorded for the corresponding quarter of 2020.

Consequently, the level of RCBs deposits at the end of the review quarter constituted 5.5 percent of total deposits of the banking system. This was a massive improvement when compared with the share of 5.3 percent in the previous quarter (Q4 2020) and 5.1 percent at the end of the first quarter of 2020.

Loans and advances

Furthermore, Data from the Bank of Ghana show that the general improvement in the Rural Banking Sector perfectly reflected an improvement in the loans that they give to the rural folks. Specifically, Loans and advances made by RCBs stood at GH¢1,805.0 million in the first quarter of 2021. This represents a growth of 20.4 percent from the GH¢1,499.2 million recorded at the end of the first quarter of 2020.