Graphic Business News

BoG urged to address liquidity challenges of rural banks

By: Kester Aburam Korankye
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 A section of the audience at the breakfast meeting
A section of the audience at the breakfast meeting

The Bank of Ghana (BOG) has been urged to, as a matter of urgency, address the liquidity challenges facing Rural and Community Banks (RCB's) to strengthen their capacity to support rural farmers.

At the GRAPHIC BUSINESS/Stanbic Bank Breakfast Meeting at the Labadi Beach Hotel on May 15, a commodity broker, Nana Amo, said although the BoG was intervening in the liquidity challenges facing some commercial banks, it was critical for the BoG to also implement strategies that would improve credit quality and better liquidity management of rural banks in the country.

“The Bank of Ghana is losing focus now that everybody is talking about UT, Capital and Unibank while neglecting a huge segment of the financial sector.

“I believe that the rural banks also have problems with liquidity and that it is important for the BoG to go and address the liquidity problems of the rural banks so that they cater to the needs of farmers, especially cocoa farmers in the ru

Rural economy threatened
 He stressed that if care was not taken to address the challenges facing rural banks, “that whole segment of the economy will collapse because they wouldn’t have access to financing either to maintain their farms or to create new farms.” 

The breakfast meeting held on the theme: “Liquidity and solvency management; boosting the health of banking in Ghana,” was the second of its kind to be organised by the two institutions this year for experts to deliberate on key issues affecting the economy.

The acting Managing Director of the Graphic Communications Group Limited (GCGL), Mr Ransford Tetteh, in a welcome address, touted the significance of the meeting, saying it offered the platform for the business community to share views on critical issues relating to business and the well-being of the economy.

He also called on the BoG to find solutions to liquidity and solvency challenges confronting the banks and said, “news of collapse or takeover of banks by the BoG due to liquidity challenges have led to loss of confidence in the banking sector”.

He stressed the need for the central bank to avoid such a ‘danger’, since banks played a critical role in the mobilisation of funds for productive use.

“To boost confidence in the sector required dealing with one of the fundamental causes of the problem — how best to manage liquidity and solvency to keep banks healthy”, Mr Tetteh noted.

He expressed the hope that the breakfast meeting would generate the kind of discourse that would result in actions that promoted good liquidity management by banks, kept them consistently solvent and boosted confidence in the banking sector.

Bank governance critical
However, the Senior Country Partner at Pricewaterhouse Coopers (PwC), Mr Vish Ashiagbor, reacting to the similar concerns raised, said although the BoG had to ensure that the management of banks was done in a transparent manner, “ultimately, the governance of a bank will determine if it will remain in business or not”.

He indicated that the BoG might not know the day-to-day activities of banks and, therefore, called on managers and shareholders of banks to be disciplined to ensure the solvency of banks.—GB