BoG transforms rural banks into community banks to expand credit access for small businesses

The Bank of Ghana (BoG) is introducing reforms to transform Ghana’s rural banking sector into community banks as part of measures to address long-standing barriers preventing traders, artisans, start-ups and other informal businesses from accessing credit.

The Governor of the Bank of Ghana, Dr Johnson Asiama, said the initiative is aimed at redefining financial inclusion by moving beyond access to banking services and ensuring that community-based financial institutions become effective sources of funding for businesses that are often left out of the formal lending system.

Speaking at the celebration of 50 years of rural banking in Ghana, Dr Asiama noted that the nature of financial exclusion has changed, with many individuals and businesses located near commercial bank branches but still unable to obtain loans.

“There are households in Accra right here that can see a bank tower from their front door, they can see a bank tower, but they have never had a loan from it. But access is not the same as service and when national policy opens a financing window or eases a pressure or supports a sector, the benefit too often stops at the doors of the largest institution,” he said.

The BoG Governor acknowledged that digital financial services and mobile money have significantly increased access to financial services, but stressed that the challenge of securing affordable credit remains unresolved for many small businesses.

He said traders, artisans and young entrepreneurs continue to struggle to obtain financing despite operating in communities with a strong presence of commercial banks.

To address this gap, the central bank is widening the scope of community banking by allowing such institutions to be established in areas where underserved businesses require financial support, whether in rural locations or major urban centres.

Dr Asiama explained that the reform will enable community banks to play a more active role in financing the informal sector and improving the flow of credit to businesses that need it most.

“We are creating the room for community banks to be established wherever they are needed, rural or urban, which is why you should not be surprised when you meet the East Lagoon Community Bank or the Cantonments Community Bank, or better still, the Airport Hills Community Bank,” he said.

He added that areas such as East Lagoon may have several bank branches but still lack financial institutions willing to provide loans to small traders, artisans and emerging businesses operating within those communities.

“East Lagoon is not short of bank branches. It is short of banks that will lend to the woman who trades there, the artisan, the carpenter who works right there, and of course the young business that has just opened its doors right there,” he added.

The reforms coincide with Ghana’s rural banking sector marking five decades since the establishment of Nyakrom Rural Bank, the country’s first community-owned bank.

Over the years, the sector has grown into a GH¢26 billion industry, serving more than eight million customers through 147 licensed rural and community banks operating over 1,000 branches nationwide.

Rural and community banks have become important sources of financing for agriculture, micro, small and medium-sized enterprises (MSMEs), and local economic development.

Digital future for community banks

Deputy Finance Minister Thomas Ampem Nyarko described the transition into community banking as a strategic response to Ghana’s evolving economic needs rather than a simple change in name.

He said the next generation of community banks must embrace digital technology, provide financing, promote financial education and support innovation and entrepreneurship.

According to him, improved macroeconomic stability presents an opportunity to strengthen the sector and increase funding support for productive areas of the economy.

Mr Nyarko said government will continue collaborating with the Bank of Ghana, the Association of Rural Banks, ARB Apex Bank and other stakeholders to develop stronger, technology-driven community banks.

“The community bank of the future must therefore be more than a lender. It must become a trusted development partner, a digital financial service provider. The future community bank must be a champion of financial literacy. It must be a catalyst for agriculture, a financier of innovation, and a cornerstone of inclusive growth. That is the future we must build together,” he said.

The BoG’s community banking reforms are expected to deepen financial inclusion by shifting attention from account ownership to access to productive financing for traders, farmers, artisans and micro-enterprises.

The initiative is also expected to support entrepreneurship, job creation and sustainable local economic growth across Ghana.

Prince Antwi

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