topic – bridging financial gaps for rural small - arb apex bank
topic – bridging financial gaps for rural small - arb apex bank
A PAPER PRESENTED BY
MR. ERIC OSEI – BONSU
MANAGING DIRECTOR OF THE ARB APEX BANK
ON THE OCCASION OF THE WEST AFRICA ENGLISH
SPEAKING SUB – REGIONAL
WORKSHOP HELD IN ACCRA FROM 18TH – 20TH
AUGUST 2010 AT ALISA HOTEL, ACCRA.
Members of the Press,
Distinguished guests, Ladies and Gentlemen.
I am indeed gratified by the opportunity
given me to present a paper on “Bridging
Financial gaps for rural SMEs through the rural
and community banks in Ghana”. This topic
fits very well into the general theme of the
workshop “Rural Finance intermediation for
growth and wealth creation in Africa” as it
seeks to identify the various roles and
institutions that could be used and are being
used to address growth and wealth creation
I wish, on behalf of the ARB Apex Bank and
the entire rural banking system of Ghana to
welcome you all to Accra, and for that
matter lead you into the discussion which will
provide you with solutions for your
consideration and possible adoption to
advance the twin issues of growth and
wealth creation forward.
Let me excite you by saying that the rural
banking system is just like the Black Stars of
Ghana which recently won the hearts of
many people all over the world! The rural
banking system is the answer or panacea for
growth and wealth creation as you will soon
realize the huge void that it has come to fill in
the financial sector of this country especially
with the establishment of the ARB Apex Bank
as the mini – central bank of the rural banks.
Let me indicate to you before I delve
into the topic that because of the
exceptional benefits that we have
derived since rural banks were
commissioned in 1976, we intend to visit
you all and discuss and share in the joy
of establishing rural banks along the
same lines that we have in Ghana.
For the purposes of this presentation, we
shall look at
1) How and when rural banking started in Ghana.
2) The challenges and gaps which existed before
the establishment of the ARB Apex Bank.
3) The current functions of the ARB Apex Bank.
4) How the Apex Bank is funding SMEs through the
i. Through its own resources.
ii. In collaboration with government and
iii. The Way forward – how Apex will fill other
HOW AND WHEN RURAL BANKING STARTED IN GHANA
Rural banking started in Ghana in 1976 when the first one
was established at Nyakrom in the Central region of Ghana.
Since then, several rural banks have sprung up in response
to the felt needs of the people in several rural communities
throughout the country.
The rapid growth and establishment of rural banks brought
certain operational, manpower and management and
financial problems in its wake. Among these problems were
losses from operations, deteriorating capital bases, tight
cash flows and low rates of loan recovery among many
The Association of Rural Banks (A. R. B.) which was
established in 1981 to protect and defend the interests of
rural banks, together with Bank of Ghana embarked on
training programmes to correct some of these problems.
THE CHALLENGES AND GAPS WHICH EXISTED
BEFORE THE Rural Finance Project. (RFP)
The Rural Finance Project (RFP) introduced in
1991 contained measures aimed at enabling
rural banks overcome these problems by
conducting restructuring audits and
designing and implementing training
programmes targeted at the felt needs of the
However in 1994, after the RFP had
ended, the Bank of Ghana decided
that it would no longer paternalize
the rural banks and therefore
withdrew the technical banking
services that it provided. Thus cheque
clearing, specie or cash supply and
treasury management services which
it was then providing for the rural
banks were withdrawn.
In conjunction with the Bank of Ghana
and the World Bank, the Association of
Rural Banks (ARB) commissioned Messrs,
Sycip, Gorres, Velayo and co. (SGV &
Co) in 1996 to study the situation of the
rural banks and recommend solutions
drawing on the experiences of the rural
banking system of the Netherlands and
The SGV & Co’s completion report on the Apex
study recommended that an Apex Bank be set up
for the rural banks to provide technical, managerial
and financial support for the rural banks. To
consolidate and improve upon the
recommendations in the SGV & CO report and
present it in a form that could be implemented, the
ARB, in conjunction with Bank of Ghana and the
Government of Ghana, commissioned Messrs J. S.
Addo consultants Ltd. in April 1998 to prepare a
feasibility report and business plan for the rural
banks in Ghana.
The J. S. Addo consultants report
was accepted by the Transition
Apex Steering Committee which
was established purposely to take
the necessary action steps
towards the establishment of the
ARB Apex Bank Ltd
WHAT THE ARB APEX HAS BEEN ABLE TO DO FOR THE
RURAL BANKS AND WHAT IT IS STILL DOING
In keeping with its role and functions the ARB Apex
Bank, has since inception in July 2002, performed
the following functions for the rural banks.
•Specie Supply and Management.
•Support for Deficient rural banks.
•Research and Product Development.
•Computerization of Rural Banks.
As a result of the establishment of the ARB Apex
Bank, rural banks are now represented at the
National Bankers’ Clearing House and their
cheques are no longer delayed and are cleared
the same number of days that it takes for any
commercial bank to clear its cheques.
Cash or specie supply is handled in a way that
enables rural banks to access cash without
difficulties whilst directors, Managers, Project
offices, Accountants, Clerks and Cashiers are
trained on regular basis to strengthen and enhance
performance, knowledge, skills and competencies
of these personnel.
The inspection function has helped to identify
lapses and served as an early warning system,
drawing on the reports of the Efficiency Monitoring
Unit, the unit which performs off – site and on – site
monitoring of the rural banks whose reports are
produced quarterly to inform rural banks about their
As a result of the establishment of the ARB Apex
Bank, rural banks funds can be placed in
investment on – the – spur of the moment through
calls to the Banking Operations Department. This is
made much easier as each bank has an account
with the Apex Bank and accessing it for placements
in treasury bills and other investment papers is done
The establishment of the ARB Apex Bank has
helped in no small measure in enhancing the
image of the rural banks as public
confidence in these unit banks have soared
With regards to the computerization of rural
banks, efforts have been made to provide
the banks with local Area Network (LAN) and
Wide Area Network (WAN) linking the Apex
Bank to their various banks and agencies
and making communication easy and
In terms of product development, the
star product has been the “Apex link”
which has come to fill a void in the
national payment system by providing
the field for funds to be transferred to
every nook and crevice in the country.
In summary, the various facilities
available to the rural banks for bridging
financial gaps for rural small and
medium scale enterprises can be
classified as follows:
A) VARIOUS ACCOUNTS
- Clearing Accounts
- Loan Accounts
-Overdraft Accounts (Credit Lines)
i. Domestic Remittance Products
- Apex link Domestic Funds Transfer
-Home Cash “Efie Ne Fie.”
ii. FOREIGN REMITTANCES
C) OTHER ACTIVITIES
-Computerization of operations of RCBs
-On – site monitoring/inspection, off –site monitoring
and rating of Rural Banks.
- Training, both local and foreign for ARB Apex Bank
staff and the Rural Banks.
- Operational support manifested in several
areas like interviews and recruitments,
attendance to AGMs, specie supply, courier
services conferences and meetings
HOW THE APEX BANK FUNDS SMEs
THROUGH THE RURAL BANKS
The ARB Apex Bank, through the rural
banks fund a number of SMEs within the
catchment area of the rural banks.
It does so through a number of ways.
1. LOANS FOR ON – LENDING TO SMEs AND
MICROFINANCE CLIENTS FROM OWN FUNDS
This type of facility is given by the Apex Bank
to support rural banks’ clients engaged in
SMEs and microfinance and covers up to 36
months. Interest Rate is based on the Annual
Percentage Rate (APR). The computation of
the APR depends on the duration of the loan
and the number of months of moratorium on
principal amount. Generally, the longer the
repayment period, the lower the APR.
2. APEX BANK SUPPPORT IN COLLABORATION
WITH GOVERNMENT AND DONORS
Various sources of funding for SMEs through
the Apex Bank are indicated below.
AMT. DISB'SD. PURPOSE
TO SUPPORT WOMEN
POST HARVEST AGRIC
OIL PALM AND
MASLOCMOWAC CROP PROD.
FARM. - SNR.
OF LOCAL GOVT.
SOLAR (GEDAP) WORLD BANK
PROVISION OF SOLAR
4,397,604.59 SUPPORT RURAL ENTP.
GRANT FOR ROOTS
AND TUBER CROPS
THE WAY FORWARD – HOW OTHER GAPS WILL BE FILLED
The way forward for the ARB Apex Bank is to carry out
various lines of services and commercial business to fill
important gaps in the funding of SMEs.
1. TRADE FINANCE
Most agricultural products which are exported are grown in
the rural communities which is the domain of the rural banks.
But sadly enough, it is only the big commercial banks which
are approached for the finance of export business
especially with the establishment of letters of credit. This is
one area or gap that the Apex Bank intends to fill to address
the huge void in the funding of SMEs, especially those in
2. WEATHER/CROP INSURANCE
The Bank is working towards the introduction of crop
insurance for agricultural based enterprises in order
to protect them from losses arising out of weather
3. VALUE CHAIN FINANCING
The bank has started a collaboration with
ACDI/VOCA an American NGO towards the
promotion of funding for the value chains in the
4. COMPUTERIZATION OF OPERATIONS
The ARB Apex Bank and the entire rural
banking system are undergoing massive
transformation by the introduction of the state
– of – the art facilities riding on the wheels of
ICT to modernize the operations of the unit
banks and enhance service delivery and to
facilitate the benefits which would accrue to
their entire clientele.
5. PARTICIPATION IN THE TRANSFORMATION OF THE
NATIONAL PAYMENTS SYSTEM
The Rural Banking Network is also participating in
the total transformation of the National Payments
systems through the Apex Bank ensuring that all
that is required to enable them be part of the
Cheque Codeline Clearing and the Automated
Clearing House is done.
To this effect, the Millennium Challenge
Account, through its office in Ghana, is
supporting not only the computerization effort
but assisting with the implementation of the
This would, when completed, enable rural
bank clients get better and faster services
and quickly meet the demands of SMEs in
providing not just access to credit but
ensuring that all related gaps are filled.
The Rural Banking System has come a long way
since the first one was established in 1976. The pace
of transformation has been facilitated by the
eminent role the ARB Apex Bank has played in the
very short period of its existence. Not only has it
been able to achieve the objectives for which it
was set – up, it has been able to gradually but
steadily contribute to the development of the rural
communities by ensuring that very important gaps,
especially those related to finance, are filled by the
It is imperative therefore, to pay more
attention to the development and
growth of the rural banking sector by
ensuring that its festal wheel, the ARB
Apex Bank is provided with the cannons
to achieve the desired impact of filling
crucial financing required by the Small
and Medium Enterprises in our rural
Thank you for your attention and may
the good Lord bless us all.