Aiyinase (Western Region), 15 Sept.,

The head of the Rural Finance Inspection Department of the Bank of Ghana (BOG) has expressed concern over the practice whereby directors of rural banks grant themselves loans without the bank's approval. Addressing the annual general meeting of the Nzema-Manle rural bank at Aiyinase at the weekend, Mr. Stephen Ameyaw said the situation becomes even more serious when some of them refuse to repay such loans. He said directors of rural banks occupy positions of trust which calls for accountability and they should therefore set good examples for others to follow. He said it was only when they set good examples that they would have the moral justification to retrieve loans they extend to customers and thereby reduce the possibility of creating bad debts. Mr. Ameyaw said the BOG takes a serious view of non-compliance of some rural community banks regarding the laid-down procedures for the establishment of rural agencies. ''This non-compliance is a complete disregard of the provision of Section Five of the Banking Law (PNDC Law 225) and the BOG has an obligation to apply appropriate sanctions on banks which violate this provision''. Mr. Ameyaw said rural/community banks should not consider themselves as being subsidized channels of government credit schemes but as highly profitable micro-level financial intermediaries. In this regard, the banks should intensify their efforts at mobilizing financial resources from catchment areas rather than relying on credit facilities available in the BOG to satisfy the credit needs of their customers. Mr. Ameyaw said since the restructuring exercise on rural banks began in 1990, the BOG has undertaken a number of activities aimed at upgrading the financial, organizational and management status of rural banks. Internal controls and management information systems have also been introduced and a more effective method of classifying loans and overdraft has been put in place. Mr. Ameyaw said the rationale behind these measures is to improve the resource mobilization, credit delivery and the general management capabilities of the banks as rural financial intermediaries. Mr. Ameyaw was happy that the positive response to the restructuring exercise has been confirmed by the impressive development in the financial position of the banks since the inception of the reforms. He said despite these achievements, a number of the banks continue to be associated with some fundamental weaknesses in operations which have hampered their long-term viability. Mr. Ameyaw commended the Nzema-Manle rural bank for having reversed its initial poor performance over the past few years through prudent operational strategies adopted by its directors and management. He disclosed that available statistics at the BOG indicates that the bank's total deposit which stood at 424.8 million cedis in June 1996 has increased to 458.8 million cedis in June 1997 while total credits extended to its customers rose from 53.2 million cedis to 154 million cedis for the same period. Reacting to an observation by a shareholder during question time, Mr. Ameyaw said the bank of Ghana will not hesitate to apply appropriate sanctions against rural banks which have started opening agencies in the catchment areas of the counterparts without authorization from the BOG. The practice, he said, is illegal and any rural bank found to have indulged in it faces closure of its agencies.