More than 90 rural and community banks across the country face serious sanctions including being forced to fold up altogether as they struggle to meet the GH¢1,000,000 capital requirement set by the Bank of Ghana.

Indeed, only 51 of all the 142 rural and community banks in the country have so far met the new capital requirement which comes into effect from January 1, 2018.

The new capital requirement was raised from GH¢500,000 by the Central Bank this year, doubling it to the new figure.

Capital requirement (also known as regulatory capital or capital adequacy) is the amount of capital a bank or other financial institution has to hold as required by its financial regulator.
This is usually expressed as a capital adequacy ratio of equity that must be held as a percentage of risk-weighted assets.

The management of the ARB Apex Bank – which oversees the activities of rural and community banks in Ghana – has, consequently cautioned those banks to comply with the new requirement to prevent the harsh consequences.

Sonzele AGM

At the 27th Annual General Meeting (AGM) of the Sonzele Rural Bank at Jirapa in the Upper West Region last Saturday, the Managing Director of ARB Apex Bank, Mr Kojo Mattah, warned that “the Banks and Specialised Deposits Taking Institutions Act, 2016 (Act 930) has stringent provisions on capitalisation requirements”.

In a speech read on his behalf, he encouraged “the banks which have not complied to vigorously continue to mobilise additional capital to forestall possible regulatory sanctions for non-compliance”.

Those regulatory sanctions prescribed by the Act include mergers and virtual closure where such efforts to salvage the situation are not workable.

Sources say the Bank of Ghana is likely to delay the deadline for complying with the capitalisation requirement for rural and community banks from December 31, 2017 to sometime next year due to the short notice and the big increase from the previous figure.

Relief for shareholders

To the relief of the 10,853 shareholders of the Sonzele Rural Bank, Mr Mattah said the bank had met the capital requirement already, and was, therefore, not in danger of facing any sanctions when the new regime is enforced.

The Chairman of the Board of Directors of the Sonzele Rural Bank, Mr Mathias K. Samwine, announced that the bank made a pre-tax profit of GH¢770,455 for the current year as against the previous year’s profit of GH¢645,263.

The 19.4 per cent increase in profit, he said, was evident in increases in several key performance areas including deposits and investments.

During the period, he said the bank’s net worth also increased from the previous GH¢2,738,754 to GH¢3,380,839.

He said their biggest challenges included the current 25 per cent corporate tax which he described as “killer tax” and the now common and frequent collapse of some micro finance companies within the bank’s operating zones.

Major microfinance companies including the famous DKM have collapsed in recent times in the Upper West Region where the Sonzele Rural Bank has branches in Wa, Jirapa, Nadowli, Lambussie and Han.

The board chairman said the frequent collapse of those microfinance companies “had dampened public confidence in the banking system and thus affected deposit mobilisation”.

The District Chief Executive for Jirapa, Christine Bonbanye Amadu, praised the management of the bank for the steady growth it had achieved over the 34 years the bank had been in operation.

Source: graphic.com